Who'll Replace Larry Summers?
Lawrence Summers, President Barack Obama’s top economic adviser, is headed out the White House door, becoming the latest in a string of leading policy wonks to bail on the administration. Summers won’t leave his position as National Economic Council director until after the midterm elections, according to reports. The timing is both ordinary—turnover regularly occurs inside the West Wing after the first half of a president’s term—and also a clear reminder of what has Obama and the Democrats in such a bind come November: the economy.
Summers and his economic team had an unenviable job, figuring out a way to jump-start the economy after the collapse of 2008. While economists say the Obama stimulus kept the country out of a deeper hole, Summers’ performance received jeers from all quarters. Some Democrats were frustrated that Summers, far from a fresh face in D.C. with deep ties to Wall Street, was put in charge of cleaning up the financial mess. Republicans cried foul, as the Obama administration promised that the unemployment rate would max out at 8 percent, only to have it creep up toward 10 percent. To make matters worse, Summers brought a sharp-elbowed style—the same approach to leadership that got him bounced from his job as the president of Harvard—into a position that is supposed to be conciliatory by nature.
The Daily Beast called on veterans of Wall Street and Washington, including inside the Obama administration, to discuss Summers’ departure. Here are the early reviews:
Founding partner, Forstmann Little & Company
“The policies that Summers espoused haven't worked at all and the argument that ‘if we hadn't done what we did, things would be worse’ is pretty weak. He should obviously be replaced by someone who does not believe that government printing and government spending can create growth. It never has and it never will.”
Chairman and Editor in Chief of U.S. News & World Report
Do we know what his advice was? If his advice was to have a larger stimulus program, one that was better directed, that would be great. The fact is that there were some fundamental issues with macroeconomic policies of the administration, which we are still suffering from. The stimulus was too small and was badly directed and did not have the impact on the economy that we needed it to have. As a number of us urged, there was no back up program in case it was too small. If the economy of the United States had worked out differently, it would have been easier to recognize that he is one of the greatest economists of our era. It didn’t work out that way. The White House will not get credit for avoiding a depression. Credit in this case means blame. You get one bite of the apple. Make sure it’s the right bite. Larry, who I’ve known for a long time, is a brilliant economist. If he asked for a larger stimulus, he made the right judgment. The politics came out differently. That is the fault of the administration not Larry’s.
Author of The Ascent of Money: A Financial History of the World
The outgoing White House economic adviser can alienate a room in record time. But Niall Ferguson says his intellect is worth the trouble—and he helped stave off a Great Depression.
Larry was my boss when I first moved to Harvard, and indeed he really was pretty crucial in persuading me to move. He has a fantastically powerful mind, but he’s also got a fantastically abrasive personality. I really like that, as it was quite a change from the somewhat oleaginous British academic leadership.
As for Larry’s turn in Washington, the administration was facing the biggest financial crisis since the Great Depression. I have no doubt that he was a crucial decision-maker in the administration’s response to that crisis. Whatever one may say about the administration, things could have gone a whole lot worse than they did. We avoided the Great Depression and it was a pretty near-miss. I think the economic team in the White House deserves some credit for that.
What I don’t know is what his departure, along with those of Peter Orszag and Christina Romer, signals for the direction from here. It will be interesting to see who takes their places. Obama has interesting choices. He can either tack to the left, and pay more heed to the Krugmans and others, or head in the other direction, to try to head off the Republican takeover in November. My guess is his Chicago political instincts will lead him to the latter.
Meanwhile, Harvard, look out, he’s coming back. Undergraduates will be pleased. I was always surprised at how popular was with my students. The arts and sciences people may have had it in for him but his willingness to engage on a variety of subjects with students…he really enjoyed the cut and thrust of debate about a whole range of political subjects. He used to enjoy getting into classrooms, which Harvard professors don’t always do. His pugnacious style tended to put out of joint the noses of the more thin-skinned and perhaps less intellectually confident colleagues.
I think there’s a culture in U.S. economics which makes a virtue in brutality in argument. Larry personifies that. The famous paper that began, “There are idiots, look around,” pretty much gets Larry’s style. I’ve seen him in a short space of time manage to alienate a majority of people in a room. He has a remarkable talent for rubbing people the wrong way. My view is it’s worth it, for the intellectual payoff you get. If I present a paper, if there’s something wrong with it, he’ll spot it—and tell you you’re an idiot. I rather like that. Not everyone does.
Financier, entrepreneur, former CEO of Paine Webber
“He’s brilliant, and has a great point of view on economic thought and he brought to the administration government experience, which everyone wanted to see when Obama took office. The big question is what should happen next. What’s very important for this administration is someone with business experience, someone who has created jobs. Whether or not you agree, they’ve gotten through these two big reforms, health care and financial reform. Now, job creation needs to be number one, with visible economic growth number two—whoever gets this position needs to understand that, and be an excellent communicator.”
Journalist, former managing director at Goldman Sachs
“The departure of Larry Summers from President Obama’s economic advisory free-market squad is similar to that of the high school degenerate who left the keg party after the last barrel was emptied and the place was demolished. Only it was the reckless financial deregulation he promoted through the Glass-Steagall repeal as treasury secretary in 1999 that led to the Great Bailout Party of 2008, where Wall Street drank the federal subsidy barrel dry and left the general economy trashed. It’s high time he left, but it should have happened long ago. Now, if only Treasury Secretary Tim Geithner would follow suit.”
President and CEO, Aspen Institute
“Larry Summers is so smart that listening to him sometimes makes your head snap. He has an analytic rigor and intellectual honesty that makes him congenitally prone to toss hand grenades whenever he spots pockets of fuzzy thinking, which is often. This does not always make him popular, but it does make him invaluable—especially in an era when fuzzy thinking is rampant. History will note that he was among those who helped stop a precipitous financial meltdown. His flaw was that he sometimes gave rigor and intellectual honesty a bad name by reminding people how unsettling it can be. He's easy to parody, as he is in a priceless scene in the forthcoming Facebook movie, The Social Network, but. Harvard is damn lucky to have him back. And he will write a seminal book on the 21st century global economy.”
CEO of Johnson Publishing Company and former White House social secretary
“Don’t make too much out of it. Everyone does their stint and then they go back to their real lives.”
Co-founder of The Huffington Post
“Larry Summers is to a large extent responsible for the administration’s inadequate answers to the economic problem. It’s not that Larry Summers hasn’t done a lot. It’s that he hasn’t done enough…he had a chance to do it right at the beginning, but Summers underestimated the depth of the economic crisis and he did not underestimate it accidentally. He underestimated it because his view of the world is very Wall Street-centric, so once they had saved Wall Street, they thought everything else would follow naturally. And the fact that the two economies, Main Street and Wall Street, de-coupled, was not on his radar screen.”
“I hope that his replacement is someone from a different school of thought. I think we need some bottom-up visionaries…The core of them—Summers, Geithner—these guys come out of the Wall Street, Harvard community and their point of view is conditioned by their privileges and their point of view is conditioned by their experiences. Their point of view is from the top down. They see the world differently.”
CNN host, former New York governor
“It gives the president an opportunity to stake out a new direction in terms of messaging to the public, which is one important component of this with six weeks left before the midterms to make a dramatic statement about middle-class economics as opposed to Wall Street economics…I would love to see Obama say, ‘Elizabeth Warren shouldn’t be the assistant to the treasury secretary, make her the [director of the National Economic Council] because you need a voice for middle-class America in policy circles now…I have been pretty open about my disagreements with Larry Summers and Tim Geithner. At the moment of his resignation I don’t think it’s right to critique it that way, but it gives the president an opportunity.”
Senior Political Writer for The Daily Beast
The departure of Larry Summers leaves a power vacuum in Washington. Look for Obama’s Chicago circle to fill it—and watch the gloves come off.
Larry Summers has succeeded. We don’t yet know whether historians will judge the economic policy that he masterminded a success, but we do know that they’ll be judging him on economic policy, not on his assessment of women’s aptitude in science. He took a job that most former Treasury secretaries would have considered beneath them in part, at least, in a bid for redemption. He didn’t achieve that in his 18 months as economic czar, but he changed the subject, which is the first step.
Whoever takes Summers’ place, he or she is unlikely to possess as much high-level governmental experience or as fearsome an intellectual reputation, which means the job of National Economic Council head will become less influential, as it was before Summers arrived. (Trivia question: Who was Summers’ predecessor? Answer: a young former congressional aide named Keith Hennessey.)
The person most likely to fill the power gap is Austan Goolsbee, newly promoted to head the Council of Economic Advisers, a former University of Chicago professor who enjoyed a close relationship with Obama but was regularly big-footed by Summers. If Summers’ departure does signal Goolsbee’s ascent, it will represent an odd inverse of the Clinton pattern. When Clinton got into trouble, he replaced Arkansas loyalists like chief of staff Mack McLarty with Washington insiders like Leon Panetta and David Gergen. But in Obama’s season of discontent, the pendulum may be shifting the other way. Goolsbee is an FOB from Chicago; Summers is a Clintonite who parachuted in after Obama won the nomination. Similarly, Rahm Emanuel, although a Chicago native, is a Clinton administration veteran and Washington insider who didn’t even endorse Obama in the primaries. His likely departure could mean more power for David Axelrod and Valerie Jarrett, Obama’s two closest allies from the Windy City.
What will this mean for the way the White House handles the Tea-soaked Republicans likely to come rampaging through Congress after November? Just a guess, but I’d predict less conciliation and more brawling. Somehow, I don’t think this is going to be Dick Morris II.
Steve Rattner talks about Larry Summers on Morning Joe.