Summers needs to take Explaining Econ 101
Millions of Americans are out of work, the budget deficit is in the trillions and Europe is flirting with economic collapse.
Summers delivered this dismissive judgment during a speech Monday morning to the Johns Hopkins School of Advanced International Studies. In a Q&A session afterward, a man in the audience asked about the debt crisis in Europe -- and the former Treasury secretary and Harvard president answered in a most curious way.
"[M]y guess is that most of you, unless prompted, would not mention the move from a G-7 towards the G-20 as one of the most important things that happened last year," Summers said. "But I suspect that when historians look back at this time, after the precise details of this economic fluctuation have been forgotten, the establishment of a global forum that really does embody all the major economies in the world will be remembered as an important aspect of this moment."
It was vintage Summers: smart, esoteric -- and utterly unhelpful. Maybe he's correct, in an academic sense, that this era will come to be known not as a period of economic misery and human suffering but as the time when the Group of 20 large economies came to replace the Group of Seven (G-8, actually). Still, is that the message the White House wants to be putting out now?
The Summers speech, SAIS Dean Jessica Einhorn told the students in her introduction, was arranged on "short notice" and would be "a most timely presentation." This hinted at big news.
What he delivered instead was a lot of econo-speak that could only baffle Americans worried about finding or keeping a job. He spoke of "the multiplier process" and "a range of catalyzing investments." He invoked the "liquidity trap" and "tail risks." He alluded to the "width of the confidence interval" and the need to "achieve the sustainability criterion."
It was the language of the PhD thesis: "Conditions for fiscal policy to have an expansionary impact are especially likely to obtain . . . considerations militating in favor of sustainable budgets . . . the ultimate consequences of stimulus for indebtedness depend critically on the macroeconomic conditions."
Obama has a problem. There's building evidence that he's pursuing the right economic policy, but his administration isn't very good at explaining it. He needs urgently to convince Americans that recovery is at hand, but that message is losing to those on the other side who are screaming about socialism.
In part this is because Obama lacks a credible economic spokesman to deliver the message. Treasury Secretary Tim Geithner lacks gravitas in public appearances. Paul Volcker is 82 and only a part-time adviser. Christina Romer, head of the Council of Economic Advisers, is perceived to lack clout. CEA member Austan Goolsbee is a gifted spokesman but doesn't have one of the top jobs. Then there's Summers. He's radioactive because of his tenure at Harvard, where he clashed with women on the faculty. The clashes have continued at the White House, according to Jonathan Alter's new book, "The Promise." When Romer protested that Summers tried to cut her out of important meetings because of her sex, Summers reportedly yelled at her: "Don't you threaten me!"
"Don't you bully me!" Romer replied.
At SAIS, Summers took the stage 10 minutes late and slumped in a chair, his still-buttoned jacket bunching around his midriff, as the dean introduced him. He ventured seven minutes and 20 seconds into his speech before uttering the phrase, "I want to begin . . . " He evidently was trying to avoid being provocative, because he stuck to his bland text and was cautious handling several of the questions.
An economic bubble in China? "I'm going to be uncharacteristically reticent and not comment." Paying for future wars? "I'm going to leave national security policy to the president."
His speech showed signs that it was heavily vetted. It had so much on-the-one-hand/on-the-other-hand content that Summers even began with a mention of Harry Truman's desire for "a one-handed economist."
On the one hand, "I cannot agree with those who suggest that it somehow threatens the future to provide truly temporary, high-bang-for-the-buck jobs and growth measures," Summers said. "On the other hand, those who recognize the fiscal and growth benefits of strong expansionary policies must also recognize that it is simultaneously desirable to provide confidence that deficits will come down to sustainable levels."
On the one hand, "whenever global risk aversion has increased . . . we're seen as a source of strength," he said. "On the other hand, if there were ever a moment when that turned out not to be the case, that would probably be a moment when we had taken things much too far."
On the one hand, Summers is a brilliant economist. On the other hand, Obama clearly needs somebody else to sell his economic message.