The new White House economic guru, Lawrence Summers, says there is no silver bullet. David Leonhardt writes.
A FEW weeks ago, I called a well-known economist with a question about the financial crisis. "I hope the only reason you're calling me," he said, "is that you couldn't reach Larry."
Larry would be Lawrence Summers, the intellectually fierce economist whom Barack Obama named this week as his lead economic adviser in the White House. Until recently, it would have been hard to imagine Mr Summers - who held a higher-ranking job in the Clinton administration and was very publicly forced out as the president of Harvard only two years ago - in this particular job.
Yet there he was at a news conference this week, standing just over Obama's left shoulder. And the comment made by that well-known economist goes a long way to explaining why.
Over the past two years, Summers has carved out a role unlike anyone else's in the Democratic Party. He has been something of a shadow economic minister, laying out in real time how a Democratic administration would have responded to the financial crisis. When other economists and policy makers have questions, they often call Summers.
He is also the centrist who has made it safe for other centrist Democrats to move to the left. Both times I've interviewed Obama this year, he has brought up Summers, unbidden, and pointed out that Summers was now writing a lot more about the plight of the middle class than about budget deficits. At Monday's news conference, Obama called him "a thought leader".
Below is an issue-by-issue guide to Summers. Before we get to it, though, there is a broader point.
Years ago, Henry Kissinger suggested that Summers be given a White House post in which he was charged with shooting down or fixing bad ideas. Summers's loyal proteges - Timothy Geithner, who beat him to become the next Treasury secretary; Peter Orszag, the next budget director; Sheryl Sandberg, the chief operating officer of Facebook; and others - say that Summers can make them smarter in ways that almost no else can.
"I find that five minutes of talking to Larry is often more valuable than an hour of talking to someone else," Geithner says.
But Summers also has a habit of alienating some people who could have been his allies. His ill-considered, though also sometimes exaggerated, remarks about women and science are the best-known example.
If he can avoid such mistakes - and take care to criticise ideas rather than people - he may find himself ideally suited to the moment. The stakes are clearly huge. And given that the Obama administration is planning to spend $600 billion or so stimulating the economy over the next two years, some less-than-great ideas will doubtless be making the rounds.
On to the issues:
THE FINANCIAL CRISIS In December last year, when officials at the Federal Reserve and in the Bush administration were saying a recession was unlikely, Summers gave a speech with a different forecast. He said that it was "distinctly possible we're headed into a period of the worst economic performance since the stagflation of the late 1970s and recessions of the early 1980s". More recently, he predicted the financial markets would not return to normal for a long time.
Expect him to urge Obama to be aggressive and creative in trying to jump-start lending - and to avoid the rosy predictions that have made the Bush administration appear to be out of touch. Summers likes to say that there is no silver bullet. He is instead likely to argue for trying many different things and erring on the side of overreaction. (One example: unlike many Democrats, he is a longstanding critic of Fannie Mae and Freddie Mac. Yet he still says they need to get even bigger during the crisis, to keep mortgage lending flowing.) Continued…
