EXCLUSIVE: The Memo that Larry Summers Didn’t Want Obama to See

[kpete]

EXCLUSIVE: The Memo that Larry Summers Didn’t Want Obama to See

.................

Now, based on reporting I’ve done for my forthcoming book on the Obama administration, I can fill in a major gap in the narrative—an earlier version of the same memo that includes Romer’s larger option. (A source provided the memo on the condition that he not be named.) In this version of the memo, Romer calculated that it would take an eye-popping $1.7-to-$1.8 trillion to fill the entire hole in the economy—the “output gap,” in economist-speak. “An ambitious goal would be to eliminate the output gap by 2011–Q1 [the first quarter of 2011], returning the economy to full employment by that date,” she wrote. “To achieve that magnitude of effective stimulus using a feasible combination of spending, taxes and transfers to states and localities would require package costing about $1.8 trillion over two years.” Alas, these words never made it into the memo the president saw.

By clicking on the graphic below, you can examine the relevant section of Romer’s version of the memo alongside the final version that Lizza recently published. What’s striking is that the two versions are very similar, except that the paragraph in which Romer makes the case for $1.7-to-$1.8 trillion has simply vanished.

LARGER GRAPH HERE: http://www.tnr.com/sites/default/files/WhiteHouseMemo.pdf


What happened? When Romer showed Summers her $1.7-to-$1.8 trillion figure late the week before the memo was due, he dismissed it as impractical. So Romer spent the next day or two coming up with a reasonable compromise: $1.2 trillion. In a revised document that she sent Summers over the weekend, she included the $1.2 trillion figure, along with two more limited options: about $600 billion and about $850 billion.

At first, Summers gave her every indication that all three figures would appear in the memo he was sending the president-elect. But with less than twenty-four hours before the memo needed to be in Obama’s hands, Summers informed her that he was inclined to strike the $1.2 trillion figure. Though Summers, like Romer, believed more stimulus was almost unambiguously better, he also felt that a $1.2 trillion proposal, to say nothing of $1.8 trillion, would be dead on arrival in Congress. Moreover, since Obama’s political operatives were convinced that any stimulus approaching a trillion dollars was hopeless, Summers worried that urging more than this amount would stamp him and Romer as oblivious in their eyes. “$1.2 trillion is nonplanetary,” he told Romer, invoking a Summers-ism for “ludicrous.” “People will think we don’t get it.”

the rest:
http://www.tnr.com/article/politics/100961/memo-Larry-Summers-Obama

[MannyGoldstein]

1. A President should never fight for something

that (s)he might not win in its entirety.

It would be grubby.

[barbtries]

3. exactly.

let's only do what we perceive to be politically expedient. since we can all see into the future and all that.
this tells me that his advisors would not even allow him to consider everything.
what could ever be more important than politics.

[joeybee12]

6. Yup, why let Obama see something that goes against Summers' et al's

narrative of bending over for the banks and Wall Street?

[_ed_]

39. Just imagine what cable news would say!

Must prevent Fox News from criticizing us at all costs.

[xchrom]

2. du rec. nt

[leveymg]

5. She was right - projected $1.8T to return to 7% unemployment, and they

managed a stim of $.8T, about 40 percent of the required funding, the drop from 9.1 percent to 8.3 percent got us about a third of the way there.

There are a lot of assumptions there, such as what is the base-line "full employment" figure. If we apply Okun's Law*, unemployment drops one percent for every two percent GDP growth that is sustained for a year. By the same parameter, the natural unemployment rate (due to structural unemployment, not cyclical swings) during the period leading up to the 2008 crash was in the range of about six to seven percent. In the 1950's, that was about four percent, and that illustrates how much the American economy has slowed.

I recall Obama saying early on that unemployment would remain elevated over previous levels. He was right. It looks like the "new normal" is now up to 8% unemployment.
_________________________
Google: "full employment six percent"
9.
Macroeconomics - Google Books Result
books.google.com/books?isbn=0812046196...Jae K. Shim, Joel G. Siegel - 1993 - Business & Economics - 152 pages
Most economists define full employment as meaning that a given percentage of ... an unrealistic goal and needed to be revised to 6 to 7 percent unemployment.
10.
Survey of Economics - Google Books Result
books.google.com/books?isbn=0324579616...Irvin B. Tucker - 2008 - Business & Economics - 532 pages
Full employment is the situation in which an economy operates at an unemployment rate equal ... In practice, therefore, full employment is difficult to define. ... In the 1980s, the accepted rate was 6 percent, and, currently, the consensus among ...

[jtown1123]

16. Such a shame they lost Romer. She was their only hope n/t

[leveymg]

20. Obama kept Larry and Rahm, instead.

Our loss, Goldman's gain.

[JDPriestly]

18. Less than full employment is when you can't get a job

and can't feed your family as a result. Any unemployment rate that places any Americans in that position -- not being able to pay the rent and feed their family -- is unacceptable.

[leveymg]

21. Agreed! I just wanted to interpret for non-economists what Romer was actually referring to, and

the fact that events have validated her estimates and approach. Obama can always rehire her with a promotion (Treasury Secretary), if he wants to.

[JDPriestly]

34. That might be a good idea.

[Swede Atlanta]

7. What a terrible way to run a country......

The President should have had access to all credible, relevant information regardless of how politically acceptable or unacceptable that information might be.

Many, many economists said that the stimulus was too small by at least half and we have seen the anemic growth emanating from that fact. It is kind of like getting a prescription and only taking half the prescribed dose. You may keep from getting worse and you may get better but it will take a lot longer and eventually you will run out of pills before you are fully recovered.

[Fuddnik]

8. Summers was even worse than that.

He thought that he controlled ALL domestic policy.

In Ron Suskind's, "Confidence Men", he tells a story of Obama asking Peter Orszag to personally do a report for him, and "Hand deliver it to no one, but him" bypassing Summers and Emmanuel.

When Orszag did as he was ordered, and Summers found out about it, he stormed into his office and went insane.

And he really went nuts when he didn't get the Fed Reserve Chair that he thought Obama had promised him.

[zipplewrath]

9. Actually being kind

This story suggest that Summer's objection was the political possibility of a sufficiently large stimulus. Instead, it has alternately been reported that he objected to one on ECONOMIC grounds. He is reported to have decided that a 1.8 trillion stimulus would not have been well accepted by the markets. It was reported that he kept it from the president, in part, because he didn't want the president to have a chance to choose it.

[yurbud]

10. Larry Summers and president should never be in the same sentence unless

he is being denied a pardon for economic treason.

Jabba the Summers belongs in a dog cage in Gitmo far more than some illiterate Afghan goatherder.

The policies he advocated during the Clinton and now Obama years did more damage al Qaeda could ever hope to in wet dream.

I sincerely hope his dominatrix forgets his safe word.

[sabrina 1]

22. Love your comment! Says it all perfectly n/t

[yurbud]

23. if I said what I really felt about that guy, I'd be in the dog cage in Gitmo

[sabrina 1]

28. Lol, you and me both!

Especially when I think of the role he played in silencing Brooksley Born who could have prevented everything that is happening to this country today.

She was so much more intelligent that Greenspan, Summers and the rest of the crew who drove this country into the gutter. The fact that not one of them has ever had the decency to apologize to her, shows that they got what they wanted, that she was a serious threat to their devious plans. And I agree, together this bunch of morons did more harm to this country than Al Queda could have dreamed of.

I don't want to raise your BP any more than necessary, but rather than being held accountable for the role he played in Economic Meltdown, Summers is being considered as head of the World Bank.

[yurbud]

32. it wasn't even a matter of intelligence but of intent and lack of conscience on the part of

Summers, Greenspan, and their ilk.

[chervilant]

41. Ah, yes, Ms. Born!

The obscenely wealthy corporate megalomaniacs are scurrying around like cockroaches in the dawning light because their wealth is an illusion. Their hedonism has resulted in the massive Black Hole that the brave and erudite Brooksley Born called the Dark Market. With a current notional value of $680 TRILLION, the 'worth' of these worthless financial instruments exceeds the combined GNPs of EVERY NATION ON THIS PLANET by a factor of ten.

The entire system is broken. Our global economy is undergoing catastrophic change. I find it disheartening that our 'leaders' and 'economists' continue to discuss this issue as though there is a 'recovery' just around the corner. I am equally distressed by the willingness of so many of the Hoi Polloi to snarf the corporatists' 'recovery' red herrings.

We are witnessing a global cultural crisis, and some folks are just not ready to acknowledge that.

Time for change. I am hopeful, now that #Occupy is spreading across the globe. Like many in #Occupy and here on DU, I hope ours will be a non-violent revolution, promoting Satyagraha.

[Scruffy1]

27. The same for Geitner.

He led the charge to force the world to accept derivative training. Look under Fiscal Services Ageement.

[yurbud]

33. criminality and economic terrorism seem to be primary qualifications to direct our economic policy

[hifiguy]

30. Bravo!!

Well said indeed!

[Javaman]

11. so larry summers is a asshole...

so what else is new?

[Jakes Progress]

25. What else?

Maybe more proof that Obama answers to larry instead of the other way around.

Yes, that is a little overstatement. But Why would he keep such an ass? Why keep using the guy that is undermining what you say your want? What hold is there?

[Javaman]

31. those are the million dollar questions. nt

[yurbud]

38. see my economic hitman comment. also, the brooksley borne incident makes it clear

what his hold is: he speaks for ALL the big bankers.

[Renew Deal]

12. Summers should never work in government again.

And he shouldn't have been brought back in the first place, but whatever.

[grasswire]

13. on whose advice did Obama appoint Summers?

Was it Rahm?

[jwirr]

14. And that is the question of the day. Good guess.

[MsPithy]

15. Summers thinks women don't have the "aptitude" for science, engineering

and apparently (Romer being a woman) economics and math.

[JDPriestly]

17. What would people think if we asked for something that would

really work?

It would be so embarrassing to stand up for what is right. We can't possibly do that.

Sarcastic, but that is how Obama's appointees think -- and we have to assume that Obama thinks that way too.

Now, Santorum does not seem to stop to think about what people will think about his caveman ideas. And, though I don't think he will win in November, his campaign does seem to be gaining momentum.

When you worry too much about what people will think and too little about what is right for the American people, you are asking for trouble. I hope that Obama is changing and that his new appointees will provide him with all the information he needs and not just the censored version.

[Bill USA]

19. so nice of Summers to do Obama's thinking for him.

recommended.

[yurbud]

24. I just realized Summers is the domestic equivalent of an Economic Hit Man

He tells presidents to play ball with the banks and Wall Street, and when they or regulators like Brooksley Borne (sp?) get out of line, he has the stick as well as the carrot.

[leveymg]

35. He was a global hitman before he turned his attention to the US economy. He restructured Russia.

That involved a great amount of pain for regular people, too, and ended up putting the country and its resources under the control of the Oligarchs (Russian Mafia and former KGB). Same is happening here, as we write.

[Dont call me Shirley]

26. Liery Summers

[girl gone mad]

29. Ultimately, it's on Obama for hiring Summers and giving him such a key role.

"You knew what I was when you chose me."

[Jakes Progress]

36. True, but worse that he keeps him.

You can forgive a naive newcomer for making a stupid hiring mistake. But what does it say that three years in, Obama keeps him on and still follows his advice? Either he's too dim to catch on or he really likes what summers does.

[SugarShack]

37. He has done this so many times, why are people here still surprised?

[_ed_]

40. Obama hired Summers

and Geithner, Rubin, and Orszag. This is subterfuge. Obama hired these guys and keeps them around because he agrees with them.

Frankly, the idea that Obama is so clueless that Summers can manipulate him is a worse story.

[Hotler]

42. k&r I find it hard to believe to Mrs. Romer didn't go ..

to the President after he got the memo that the figure was not what she wrote to be right. I find it hard to believe that the president didn't know better, he is a smart man. What I do believe is that the man has no fight in him. He has failed to tell the banksters and the repugs to go fuck themselves. Cheney had no problem telling people to go fuck themselves. Wall St. owns our president. I wonder what dirt they have on him.

[Beacool]

43. I wonder what else he kept from Obama.

Furthermore, I also wonder what he kept from Clinton.

I heard that he is one of the people on the list to head the World Bank. First the US, then the world.

Be afraid, be very afraid.........

[dsgerhe]

44. Spam deleted by uppityperson (MIR Team)