Discussion: (0 comments)
There are no comments available.
| International Finance
A Review Essay
View related content: Economics
When Ron Suskind published his book “The Price of Loyalty: George W. Bush, the White House, and the Education of Paul O’Neill” in January 2004, he received rave reviews from many on the left. In researching that book, Suskind found the perfect source, Paul O’Neill, who had been fired from his post as Treasury Secretary. Suskind milked that source for an astonishing amount of inside dirt. The book was manna from heaven for those inclined to dislike President Bush.
Suskind’s latest effort, “Confidence Men: Wall Street, Washington and the Education of a President” uses a similar algorithm to generate a glimpse of the current administration, this time relying on disgruntled insiders and former senior Obama administration officials. While the reception of Suskind has been quite different at The Washington Post, the New York Review of Books and The New York Times, Suskind is, after two such books, at least vying to become that most valuable of journalists, the fellow that everyone in any administration feels they must confide in, else their history will be written by rivals.
Reviews of “Confidence Men” have raised quibbles about the accuracy of his work, but a skeptic might wonder if the quibbles are not designed to neutralize the negative impact that the book might have on President Obama. When The New York Times and the New York Review of Books reviewed “Confidence Men,” assertions of inaccuracy were prominently featured. However, when the same outlets reviewed “The Price of Loyalty,” not a single factual error was cited. Apparently, some would have us believe that the supposedly fastidious journalist who damned George Bush was above reproach, while the same fellow became a propagandist when he turned to the study of President Obama. This view especially strains credulity given that Suskind himself is clearly sympathetic to Obama and hostile to Bush. “In the give and take with his critics, Suskind has for the most part responded effectively to the major assertions against him, even providing a tape- recorded interview to support his quotation.” -Kevin Hassett
In the give and take with his critics, Suskind has for the most part responded effectively to the major assertions against him, even providing a tape-recorded interview to support his quotation. Accordingly, the purpose of this review will not be to weigh in on these disputes, but rather to first provide the reader with a summary of the evidence Suskind presents, and then to discuss the lessons for economists involved in policymaking that one might draw from this inside view of the White House. The reader can decide for himself whether Suskind’s account sounds plausible.
For my part, having myself been an insider in three presidential campaigns, and a friend and/or associate of many of Suskind’s targets in both books, I can say that the account for the most part rings true, and that the problems economists face when affecting economic policy in Washington extend well beyond the Obama administration.
The book was penned at a time that was perhaps a political nadir for President Obama. The recovery was stagnant, the health care bill immensely unpopular, and even the president’s most ardent supporters were demoralized. Given that context, the question of why a president with such promise could have so disappointing a start to his presidency was on everyone’s mind. The main theme of Suskind’s book, which is quite charitable and even at times affectionate toward the president, is summarized aptly by Suskind’s quote of former North Dakota Sen. Byron Dorgan, who, when he heard that Obama had chosen Timothy Geithner to be Secretary of Treasury and Larry Summers to be chairman of the National Economic Council (NEC), said to Obama: “You’ve picked the wrong people. I don’t understand how you could do this. You’ve picked the wrong people.”
Suskind devotes the book to making this case, but on the policy substance he fails to do so in a way that would satisfy an economist. The fact is, the administration engaged in economic policymaking at a time of extreme uncertainty, and while one might easily find fault with administration policies and assert that alternatives would have been better, economic science has not advanced to the point that one can conclude with confidence that Suskind is correct that these gentlemen advocated specific policies that undermined President Obama’s (or the nation’s) success.
The truth that emerges from the book is not so much that specific policies ended up being bad, but rather, that the entire policy process spun out of control and became a farce. This seems accurate, and, as a glimpse of that development, the book is priceless. The case that the policymaking process failed President Obama is fairly solid. And for that, these two central figures clearly bear some share of the blame.“The truth that emerges from the book is not so much that specific policies ended up being bad, but rather, that the entire policy process spun out of control and became a farce.”-Kevin Hassett
Suskind is especially brutal toward Summers. While one might normally turn away from such things, a list of a subset of his many assertions regarding Summers furthers the discussion when I later turn to broader lessons about how policy is made in Washington.
If you believe Suskind, Summers has evolved into a larger than life villain.
Suskind portrays Summers as an arrogant has-been, writing that “as he has aged, he has become less troubled by being uninformed. This is at least what his friends say.” He backs this assertion up with quotes from Summers’ colleagues, including this tidbit: “‘Like Rome,’ an old friend of Larry’s said, ‘he has spread himself too thin and must ever be on guard to put down even the slightest challenge or insurrection in intellectual territories which he claims but can’t hold.’”
In Suskind’s portrayal, Summers’ arrogance is Olympian, even though he has purportedly been too famous or busy to keep up with literature. Typical is the recollection of economist Andrew Metrick, who recalled to Suskind that Summers once explained to him, “I can win any argument. I can win arguing either side. But then I sit back and think, ‘Which side did I win more soundly and fairly?’ That’s usually the right answer.”
Such a superhero would certainly be the perfect fellow to place in the office next to the president, but Summers’ colleagues were almost appallingly willing to dispute the accuracy of Summers’ self assessment. Suskind quotes current Chairman of the Council of Economic Advisers Alan Krueger as saying: “Larry would frame an argument as A versus B, and that would sound right unless you were someone with deep enough mastery of an area to know that position D represented the real counterpoint and the best policy position was probably C.”
Suskind invites us to consider Summers as an individual who exists somewhere in the continuum between Henry Higgins, the arrogant professor, and Hulk Hogan, the preening bully, and lets us know that his own assessment places him pretty close to the latter.
Having such a character loose in the halls of power presents many problems, but perhaps the most damaging was Summers’ rivalry with President Obama’s OMB director Peter Orszag. At one point, Suskind describes a scene where President Obama, apparently cognizant that Summers was not acting as an honest broker, invited Orszag to write a memo regarding policy options in the event of a fiscal crisis.
When Summers found out, he “stormed over from the White House to Orszag’s office, and his face was red with rage. It looked like he was about to burst a blood vessel… he told him that he, Peter, knew the rules, no matter what the president had said. Everything was supposed to go through NEC.”
It might seem like a stretch that someone who works for the president might encourage others to disregard his orders, but Orszag confirms the possibility on the record, stating, “Larry just didn’t think the president knew what he was deciding.”
Orszag’s access to the president appears to have been a constant distraction to Summers. When he learned that President Obama had decided to reappoint Ben Bernanke as chairman of the Federal Reserve, Summers lost it again. “Summers was outraged and petulant. He started to list demands to Rahm: A round of golf with Obama. He wanted to walk into major events, such as signature speeches or the State of the Union, with the Cabinet … And he wanted a car and driver … Orszag would lose direct access to Obama; he’d have to go through Summers.”
While President Obama is portrayed as loyal to Summers to the end, even presenting him with a silver putter upon his departure, Summers is described almost abusive toward Obama, complaining about the policy disorder by saying that: “We’re home alone. There’s no adult in charge. Clinton would never have made these mistakes.” “The problem, and Suskind presents numerous examples of this, is that managing the executive branch requires attention to countless issues.” - Kevin Hassett
The problem, and Suskind presents numerous examples of this, is that managing the executive branch requires attention to countless issues. It is too much for any one individual to micromanage. In an organization that is beset by rivalries and jealousies, it is nearly impossible to effectively delegate responsibilities. The gigantic staffs available to the Cabinet secretaries become irrelevant, and policy design is left to the legislative branch, where chaos and logrolling determine the composition of bills, rather than sound economic reasoning.
A president is most effective, in my memory, when he forwards to Congress detailed legislation designed by his policy experts, and importunes Congress to pass it without “cherry picking.” It is a hard and fast rule in Washington that if you don’t hear the words “no cherry picking” at the onset of a legislative policy initiative, then you can expect cherries jubilee.
And cherries jubilee is what Obama got. From the stimulus to health care reform, Congress was clearly in charge, and clearly out of control.
Take the health care initiative as an example of the dysfunction.
Suskind provides information that will be interesting to historians when he reveals the extent to which Orszag was the driving force behind Obama’s decision to pursue health care reform. If the eventual view of historians is that health care bill defeated Obama, then they will blame Orszag.
Orszag, Suskind reveals, had some pretty good instincts. He was immersed in the literature emanating from Dartmouth identifying wasteful government health spending, and was convinced that reducing the enormous geographic variation in the costs of treatment for identical maladies could radically improve the U.S.’s fiscal condition. Getting ahead of that curve could well offset the negative budgetary impact of a generous economic stimulus.
When Orszag was summoned to Chicago after the election to discuss the OMB position, Suskind writes that “on the plane to Chicago, he considered an ultimatum: he would accept the job offer only if Obama could look him in the eye and say that health care reform would top year one’s domestic agenda.”
Orszag got the job. Obama told him, according to Suskind, that he “wanted Orszag to assume an expanded portfolio as OMB chief, serving as the administration’s budget czar and also as the driving force behind health reform.”
The problem is that the OMB job is painfully tedious, and no human being, even the supernaturally energetic Orszag, could possibly manage to oversee a significant health care reform while running that office. Suskind writes that Orszag “protested to Emanuel in an email: ‘Listen, I can’t run health care, but someone needs to.’’
But nobody wanted the job. When the president gathered all the major players for a summit to further the process of health reform design, Geithner asked his then deputy, Alan Krueger, to fill in for him, saying, “I’ll just make a quick appearance, show everyone I was there, and then slip out. I don’t have time for this today.”
The process got so out of hand that “Tom Daschle teamed up with John Podesta, in essence, to run a policy process outside the White House.” That might have been a terrific outcome if the objective is to maximize lobbying profits for a couple of specific firms in Washington, but it is hard to see how it serves the American people to have the professionals employed by the government outside of the process.
Turning to Geithner, Suskind tries to make the case that he is part of a cabal of acolytes of Robert Rubin that corruptly intervened to protect Wall Street. The case is far from convincing. Indeed, Geithner comes out as a surprisingly attractive personality who was earnestly trying to do the right thing in a very difficult situation. In retrospect, for example, his policy instinct to rely on the stress tests looks to have proven itself. One can even see how the man himself could have earned Obama’s confidence enough that he is one of the last of the original principals still employed in this administration.
Most revealing was the moment when Geithner, stung by all of the many attacks coming his way, reflected upon entering a meeting with several key White House and Treasury strategists, “‘It’s a tough job; I’m doing everything I can.’ He told them he’d just heard from his mother. ‘She said, ‘Tim, remember the summer you worked at that bar and the owner said you weren’t exactly the best bartender? Well, maybe this is like that, and this job just isn’t for you.’” He shook his head. ‘My own mother!’”
Geithner’s actions seem consistent with those of the humble but dedicated man this quote reveals, and unlike the other officials, he has not cashed in on his political influence. Indeed, the only real evidence of anything resembling a cabal is in the section on the auto bailout, where it is clear that union influence caused the Obama administration to overrule the advice of Obama’s economic team, and deliver billions and billions of taxpayer dollars to Obama’s financial backers in the auto unions.
Suskind spends a good deal of time fleshing out a number of important but lesser players like CFTC Chairman Gary Gensler, CEA member (and later chair) Austan Goolsbee, and CEA Chairwoman Christina Romer. That Goolsbee is a bit player is rather surprising, given his close friendship with the president, but the gentle spirited and engaging Goolsbee was, as Suskind documents, quite effectively pushed aside by rivals very early in the game. He is not the first campaign official, nor will he be the last, to see such a fate. The economist who was most responsible for getting Bill Clinton elected, for example, was his chief economic advisor for the campaign Robert Shapiro. But Shapiro also was outmaneuvered by political operatives masquerading as economists, notably Bob Reich and Ira Magaziner.
As for Romer, my personal experience with her story might provide a bit of insight. Early in the Obama administration, Christy Romer’s confirmation was being held up by Republicans, and a person close to her situation contacted me and asked for help on the grounds that Christy was being excluded from White House meetings by Larry Summers because she had not been confirmed. Since Christy’s academic work was nonpartisan, and even documented the effectiveness of tax reductions in stimulating the economy, the person argued, Republicans should want her in the meetings.
I have no way of knowing whether the story about exclusion was correct, and understand that there are often legalities surrounding such things that could provide an innocent explanation. But as a fan of Romer’s work, I reached out to key Republicans to discuss her obvious merits. She ended up being confirmed much sooner than expected, although there is no way of knowing whether my recommendation was relevant.
In any case, from Suskind’s reporting, it is clear that Romer felt marginalized while at CEA, and this seems consistent with my experience. One suspects that if she was excluded from activities before confirmation, that the exclusion was not handled diplomatically. Indeed, Suskind writes that Summers and Emanuel were “notoriously brusque, but even more abrupt and dismissive of women.” Geithner states that Romer was “of ‘no value on policy issues’ of ‘financial rescue.’” Romer herself said on one occasion, “Tim and Larry will handle that, always Larry and Tim, and I sort of wondered, aren’t I supposed to be the third leg of the stool.” As many other women in the Obama administration received similar treatment, Suskind goes on to treat this as a case of sexism, which it might have been, but there is a more innocent explanation that I will return to in a moment.
“Confidence Men” is a worthy read for economists considering a public life because the experiences of the economists in the Obama administration are so common to economists that pursue a political career. The personal anecdotes are food for thought, and an important caution about what can happen if you are not vigilant when you come to Washington.“‘Confidence Men’ is a worthy read for economists considering a public life because the experiences of the economists in the Obama administration are so common to economists that pursue a political career.” - Kevin Hassett
An economist willing to give policy advice is presented with a clear problem. Very often, the balance of evidence provides incomplete information regarding the likely impact of any policy change. What would happen, for example, if the top marginal income tax rate were lifted to 40 percent, or cut to 30 percent? How about 50 and 20? Obviously there is a diversity of opinion on that matter, and the question is, what should the economic advisor recommend?
With the risk of sounding like someone accelerating towards his dotage, I can say that I have been in the room with economists and decision makers countless times, and one thing I have often learned is that the economist that has the most influence on the decision is often the economist that exudes the most confidence. Over time, then, economic teams tend to be divided up between those who are aggressive, convincing and influential, and those who are grumpy and feel excluded from the process.
A corollary of this observation is that any smart economist immersed in the White House policy process will rapidly learn that oozing confidence is a ticket to power. Over time, the positive feedback for confidence can significantly shape the individual. A neutral observer might, for example, read the work of Romer and wonder how it would be that a person whose work provides such a rich diversity of results regarding the influence of tax rate reductions versus government spending on the economy might have become such a strident advocate for the a textbook Keynesian stimulus that makes no concessions to competing views. The answer is one every economist must confront: the internal workings of the policy process made her that way. If you compare the Christy Romer you saw at a conference in 2005 to the Romer you saw in 2009 who was positively hostile to economists arguing for less reliance on Keynesian policies, then you begin to understand the forces that could, over many years, produce behavior like that of Larry Summers.
The dirty secret of White House is that everybody is struggling for position, and everybody wants to hold the meeting without inviting you. I doubt that Larry Summers was acting as a sexist when he attempted to exclude Romer from the decision process since virtually everyone in every White House works tirelessly to exclude rivals from the decision process.
This was true in the Bush administration as well. Once, a friend took a senior economic position under President Bush and called up to ask for advice. My first suggestion was that he hire a specific individual to be his right hand, as that individual is famously assertive and will make sure he is in every meeting he needs to be. A while later, someone else on that person’s staff called up to recount how one of President Bush’s top political advisers had taken him aside and asked about my friend’s hire as follows: “who the ‘heck’ is this person?” Clearly, my friend was being served well.
This is what you can expect if you are an economist and you get involved in presidential politics. First, once your candidate becomes successful, everyone will want your job, and Nobel Prize winners will call the candidate and tell him he should replace you. Second, if you survive that throughout the campaign, you will face a more concerted assault during the transition, when powerful forces work to replace you with their favorite. Third, once you begin serving in government, you will likely spend more time fending off personal assaults and fighting not to be excluded than you could possibly have expected. Finally, the personalities and actions of your colleagues will defy belief. I have seen far worse than the behavior Suskind describes in his book.
But you should serve the country anyway. The stakes are high, and our world is immeasurably better because so many economists of both parties have been willing to tolerate this insane environment, if only for a year or two. As bad as our economic policies can be at times, they would have been far worse without the input of economists.“As bad as our economic policies can be at times, they would have been far worse without the input of economists.” - Kevin Hassett
A potential president who reads “Confidence Men” would learn that his policy team needs to be run by a man who is an honest broker, who has the confidence to delegate responsibility to the appropriate department, and the competence to encourage and resolve disputes collegially. Such a man will have command of an impressive apparatus that has the potential to achieve much good. Suskind suggests that Obama himself has learned this lesson, and I can say with great confidence that his choice of Gene Sperling as Summers’ replacement suggests he has.
An economist would be lucky to serve in an administration that is collegial and well organized, but it probably will not happen for most. That is why “Confidence Men” is must reading for economists.
Note: This article is a pre-publication version of an article that appeared in International Finance, Volume 15, Issue 2, Pages 267-274, Summer 2012 and first appeared online August 21, 2012
There are no comments available.
1150 17th Street, N.W. Washington, D.C. 20036
© 2015 American Enterprise Institute for Public Policy Research