From Mark Gongloff at the HuffPo:
What exactly does Larry Summers have to do to stop being offered important jobs? Hold up a liquor store?Previously:
Kill a guy?
That is the question many are asking, or at least should be asking, about Summers' reported candidacy to be the next president of the World Bank.
There are lots of reasons to hope President Obama does not pick Summers for the job, but let's start with the latest, one that hasn't gotten a lot of widespread attention yet: The revelation from Noam Scheiber of The New Republic, in his new book about Obama's economic team called The Escape Artists, that in December 2008, Summers blocked from President Obama's view a suggestion by former economic adviser Christina Romer that his first economic stimulus package should ideally be $1.8 trillion.
The final stimulus package passed by Congress was less than half that size, at an estimated $787 billion.
Scheiber's smoking gun is an early draft of a 57-page memo that Larry Summers sent to Obama in December 2008 -- the same memo made famous in Ryan Lizza's recent New Yorker story -- about Obama's shift from idealism to pragmatism.
The early draft that Scheiber got his hands on includes a section written by Romer that suggests a stimulus package of $1.8 trillion would raise economic growth and bring down unemployment more quickly than a smaller one.
In the draft, Romer writes that a $1.8 trillion stimulus package would totally erase the economy's "output gap," or the gap between actual economic growth and potential economic growth, by the first quarter of 2011. A wide output gap helps keep unemployment high, and Romer said in the memo that a big-enough stimulus package would bring unemployment down to 5.1 percent by the first quarter of 2011.
When Summers sent his final memo to Obama, Romer's suggestion of a $1.8 trillion stimulus bill was gone. In fact, of the four possible package sizes Summers offered the president, the biggest was $890 billion.
Summers notes in the memo that "purely mechanical assumptions" suggest the stimulus package should be bigger than $1 trillion, but dismisses this as impractical because it would "spook markets or the public."
You could argue, as Larry Summers and Matt Yglesias have done, that any stimulus package of $1.8 trillion would have been a non-starter, not only with a hostile Congress, but also with those in the administration -- particularly Treasury Secretary Timothy Geithner and then-budget chief Peter Orszag -- who were worried that a bigger stimulus bill might spook financial markets.
Maybe Summers was concerned that Obama would think he and Romer were nuts if they had presented him with such a number.
And certainly Romer's analysis was not infallible. She thought a $900 billion stimulus package would bring unemployment down to 6.6 percent, an estimate off by a wide mark -- the jobless rate was about 9 percent during the first months of 2011....MORE
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