Mon, 09 Feb 2009 23:09:51 +0000 – By Liz PeekFinancial Columnist
Treasury Secretary Timothy Geithner can't seem to push his much-anticipated bank salvation plan out the door. It was expected last Friday, then today (Monday) and then...maybe tomorrow? I suggest one possible cause for his paralysis: too many cooks in the soup. Or, really, too many economists.
[caption id="attachment_3433" align="aligncenter" width="300" caption="Treasury Secretary Timothy Geithner and President Obama (AP file photo)"][/caption]
In this, one of our darkest hours, the United Sates may be headed for economic battle. I don't mean facing down the Chinese over an undervalued yuan. I mean between the warring groups of economists now holed up in the West Wing.
Already there are signs of discord. Larry Summers, who heads the National Economics Council, is apparently barring Volcker's attendance at White House briefings. That's surprising, because Summers is normally considered such a team player.Paul Volcker
Already there are signs of discord. Larry Summers, who heads the National Economics Council, is apparently barring Volcker's attendance at White House briefings. That's surprising, because Summers is normally considered such a team player.
Of course, then we also have the Council of Economic Advisors, headed by Christina Romer, no slouch of an economist in her own right. She may have trouble elbowing her way to the table though. The transition team failed to pick up that she's an advocate of tax cuts which, in a paper written jointly with her husband, she describes as significantly more powerful than government spending. Oops.
Here's the point. Economists rarely agree, and are often wrong.
There was a reason for George Bernard Shaw's comment that "if all economists were laid end to end they would not reach a conclusion." Consider the following: at the August 5, 2008 meeting of the Federal Reserve Open Market Committee, some of the best economic minds in the country discussed heatedly the threat of rising inflation. Though the committee agreed to leave interest rates unchanged, some actually voted for an increase! This was a month after the collapse of Freddie Mac and Fannie Mae and two months before Lehman Brothers failed, sending the economy into a tailspin.
For the record, I trained as an economist myself. You quickly learn that the discipline is not a science but an art -- and an abstract one at that. As a student you learn each year that the theories introduced to you the year before were complete bunk. It's refreshing that way -- it cleanses the palate.
President Obama has made it clear that the economy is problem numero uno. No one disputes that. The question is, will we rely on the wisdom of economists to get us out of this mess? Will they actually provide the guidance we need? The president has claimed that economists are united in supporting the stimulus bill. That clearly isn't true. Check out the full-page ad in the New York Post this morning, signed by dozens of economists who do not believe that massive government spending is the right answer.
Obama is so new to the national scene that we are watching breathlessly for hints about his management style. What I see is a fellow whose decision-making approach is rooted in his background as a community organizer. In "Dreams of My Father" we see him spending an enormous amount of time interviewing people, listening to their problems, looking for a cause. It is not so far-fetched to link that experience with his success as a campaigner. His motivation of and connection to large numbers of people was extraordinary.
However, I don't believe you can run a country in the same way. There are simply too many issues. You have to delegate people whom you trust and let them carry on. You have to shuck your desire to know and understand all points of view on each topic.
What worries me is that the last president who wanted to study and analyze every last data point was Jimmy Carter, who dove into an intellectual foxhole when confronted with crises, and was arguably one of our least effective presidents ever. His desk was reportedly covered at all hours with reading material, as he valiantly tried to understand the nuances of each issue to come before him. He may have understood them better than Ronald Reagan, for instance, but his personal convictions were utterly lacking, drowned in a sea of detail.
President Obama has to lead us out of this dark place. At the moment, despite the giddy expectations of only a few weeks ago, he is failing to do so. Though he can amass huge numbers of experts to lend a hand (so far he has established six new White House offices -- six! -- a novel approach to combating unemployment) ultimately he will have to make some decisions and stick by them. He will have to become, in fact, "the decider." As John Kenneth Galbraith said (and he should know) "Economics is extremely useful as a form of employment for economists."