Monday, November 01, 2010

Barone Charitably, and Mistakenly, Exonerates Summers and Romer

Michael Barone takes an admirable stab at the Obama administration's misreading of the economy. He thinks that the very smart economic team of Summers and Romer missed the difference between a classic business cycle recession and a financial panic-induced recession. This is a highly perceptive shot at it, as I myself have talked about this interpretation as all the difference in formulating investment decisions, but I think that Barone is off the mark. First, I don't think that Romer and Summers are all that smart - and when I say "not smart" I am not denying that these people are highly intelligent, I am saying that they were unsuited to the task. These were highly intelligent people unable to see what was going on a) because of their disciplinary biases, b) their perch in a top-down Democratic administration, and c) their disconnectedness from basic economic activity. They had multiple disadvantages that impeded their perception that they could not see , and that is why I think that they cannot be considered smart. Numerous people sussed out the essence of the financial crisis and the impending recession, and even offered advice, but the administration's economic team was blind to it all. Blindness is not a characteristic of smart operating. For example, here the administration wagered its future on the stimulus and the pumping of a trillion dollars into the economy and yet the putative geniuses Summers and Romer let the POTUS traverse the country spouting the rankest anti-business rhetoric we've heard since the days of "malefactors of great wealth." So a trillion dollars got flushed out into the economy (to dead people and bridges to fat pensions) while a trillion dollars of potentially productive capex got hoarded - a wash. A complete and utter wash and nobody told Obama, "Stop" or "Cool it." Not smart. Very dumb, actually. I won't even talk about ObamaCare. There is no way that Romer and Summers could have thought this would help, and yet they remained silent. If they didn't know the uncertainty itself, let alone the dead weight loss of compliance costs, would weigh heavy on the tenuous economy, they could hardly be considered smart. I could go on, but the point is made, the Obama administration didn't misread the economy, they didn't care. Yes, they had some Keynesian, old liberal hands who were predisposed to see the economy through a demand side lens and who overestimated the importance of the role of government, but they made fundamental mistakes which indicate that they weren't basing their program on sound economics.. They were ignoring reality and steamrolling over economic prudence in order to enact a once in a generation progressive policy dream. "Focusing like a laser on jobs" therefore can be considered one of the many great lies of the Obama presidency. They were never focused on jobs, never. The only focus was on their desires, their role in the change that they've been dreaming about for decades. Barone tries mightily, but I imagine even he is too much of an insider and a gentleman to call this what it is - a great big lie. A miss it is not, for if it was an innocent miss, Summers and Romer are guilty of malpractice.

UPDATE: Just to add, this is why I think savvier Obama supporters, like Mort Zuckerman, left the reservation alot sooner and did so voluntarily. He saw what was going on and he has his reputation in the private sector to worry about.


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