There are two major upcoming economic events: the first is a series of fiscal showdowns involving a continuing resolution (end of September) and the debt ceiling (mid-October); I’ll address those in a later post–the second involves Obama’s nomination of a new Chairman of the Federal Reserve.
As Ezra Klein notes, at this point Larry Summers is all but guaranteed to be the nominee. The last couple months have seen a fairly contentious horse race play out in the econ blogosphere between supporters of Summers and Janet Yellet, the current vice-Chair of the Fed. Several months ago Yellen appeared to be a lock for the position (which was apparent to everyone except, apparently, Obama’s economic team), and Obama’s (alleged) support for Summers has rankled prominent economists on the left for a number of reasons, including the fact that:
1) Yellen has much more experience in central-banking and has been one of the most prominent doves on the Central Bank over the last 5 years.
2) Summers tends to polarize those around him, while many feel that the Central Bank (which is policy by committee) demands a softer touch in order to build consensus.
3) Obama is passing up (another) qualified female candidate for an historic position in favor of one of Bob Rubin’s good ‘ol boys.
In terms of policy preferences, I actually don’t see a lot of difference between Summers and Yellen; I think I have a slight preference for Yellen because I think it would be nice to see a woman in the top Fed position and I am a little worried by Summers’ temperament, but I think the odds are that Summers will do a fine job (though it is a slightly riskier appointment).
I think the much much more serious issue that the appointment of Summers raises is something that Dean Baker touches on:
President Obama’s economic team think they are doing a great job, hence the desire to bring back former teammate Larry Summers as Fed chair. This is terrifying because the economy this Labor Day is described by a set of statistics that can only be described as horrible.
We are almost 9 million jobs below the trend level of employment. The number of people involuntarily working part-time is still up by almost 4 million from its pre-recession level. Wages have been stagnant for a decade and show no signs of increasing any time soon. And, according to the Congressional Budget Office, the economy is still operating more than $1 trillion (6 percent) below its potential. Oh, and by the way, the financial sector is more concentrated than ever, with top honchos drawing the same sort of paychecks they did before the crisis.
This is something that has become more and more obvious over the past 3-4 years–a lot of excuses are made about GOP opposition in the House, but it’s beyond argument at this point that Obama and his economic team have continuously shot themselves in the foot–and, based on the nomination of Larry Summers, have no idea that their performance has been sub-par. From failing to aggressively assist underwater homeowners after the Financial Crisis to the premature pivot to deficit reduction to the failure to include triggers in the stimulus that would have released more fiscal support in the face of weak economic growth to botched negotiations over the debt ceiling in 2011 and the fiscal cliff in 2012, the Obama team’s economic mismanagement has been a major factor in our slow recovery over the last few years, and the most depressing thing of all seems to be their utter lack of awareness over that fact.