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Thu Feb 23, 2012, 11:05 AM

EXCLUSIVE: The Memo that Larry Summers Didn’t Want Obama to See

EXCLUSIVE: The Memo that Larry Summers Didn’t Want Obama to See

.................

Now, based on reporting I’ve done for my forthcoming book on the Obama administration, I can fill in a major gap in the narrative—an earlier version of the same memo that includes Romer’s larger option. (A source provided the memo on the condition that he not be named.) In this version of the memo, Romer calculated that it would take an eye-popping $1.7-to-$1.8 trillion to fill the entire hole in the economy—the “output gap,” in economist-speak. “An ambitious goal would be to eliminate the output gap by 2011–Q1 [the first quarter of 2011], returning the economy to full employment by that date,” she wrote. “To achieve that magnitude of effective stimulus using a feasible combination of spending, taxes and transfers to states and localities would require package costing about $1.8 trillion over two years.” Alas, these words never made it into the memo the president saw.

By clicking on the graphic below, you can examine the relevant section of Romer’s version of the memo alongside the final version that Lizza recently published. What’s striking is that the two versions are very similar, except that the paragraph in which Romer makes the case for $1.7-to-$1.8 trillion has simply vanished.

LARGER GRAPH HERE: http://www.tnr.com/sites/default/files/WhiteHouseMemo.pdf


What happened? When Romer showed Summers her $1.7-to-$1.8 trillion figure late the week before the memo was due, he dismissed it as impractical. So Romer spent the next day or two coming up with a reasonable compromise: $1.2 trillion. In a revised document that she sent Summers over the weekend, she included the $1.2 trillion figure, along with two more limited options: about $600 billion and about $850 billion.

At first, Summers gave her every indication that all three figures would appear in the memo he was sending the president-elect. But with less than twenty-four hours before the memo needed to be in Obama’s hands, Summers informed her that he was inclined to strike the $1.2 trillion figure. Though Summers, like Romer, believed more stimulus was almost unambiguously better, he also felt that a $1.2 trillion proposal, to say nothing of $1.8 trillion, would be dead on arrival in Congress. Moreover, since Obama’s political operatives were convinced that any stimulus approaching a trillion dollars was hopeless, Summers worried that urging more than this amount would stamp him and Romer as oblivious in their eyes. “$1.2 trillion is nonplanetary,” he told Romer, invoking a Summers-ism for “ludicrous.” “People will think we don’t get it.”

the rest:
http://www.tnr.com/article/politics/100961/memo-Larry-Summers-Obama

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Reply EXCLUSIVE: The Memo that Larry Summers Didn’t Want Obama to See (Original post)
kpete Feb 2012 OP
MannyGoldstein Feb 2012 #1
barbtries Feb 2012 #3
joeybee12 Feb 2012 #6
_ed_ Feb 2012 #39
xchrom Feb 2012 #2
Post removed Feb 2012 #4
leveymg Feb 2012 #5
jtown1123 Feb 2012 #16
leveymg Feb 2012 #20
JDPriestly Feb 2012 #18
leveymg Feb 2012 #21
JDPriestly Feb 2012 #34
Swede Atlanta Feb 2012 #7
Fuddnik Feb 2012 #8
zipplewrath Feb 2012 #9
yurbud Feb 2012 #10
sabrina 1 Feb 2012 #22
yurbud Feb 2012 #23
sabrina 1 Feb 2012 #28
yurbud Feb 2012 #32
chervilant Feb 2012 #41
Scruffy1 Feb 2012 #27
yurbud Feb 2012 #33
hifiguy Feb 2012 #30
Javaman Feb 2012 #11
Jakes Progress Feb 2012 #25
Javaman Feb 2012 #31
yurbud Feb 2012 #38
Renew Deal Feb 2012 #12
grasswire Feb 2012 #13
jwirr Feb 2012 #14
MsPithy Feb 2012 #15
JDPriestly Feb 2012 #17
Bill USA Feb 2012 #19
yurbud Feb 2012 #24
leveymg Feb 2012 #35
Dont call me Shirley Feb 2012 #26
girl gone mad Feb 2012 #29
Jakes Progress Feb 2012 #36
SugarShack Feb 2012 #37
_ed_ Feb 2012 #40
Hotler Feb 2012 #42
Beacool Feb 2012 #43
dsgerhe Feb 2012 #44

Response to kpete (Original post)

Thu Feb 23, 2012, 11:10 AM

1. A President should never fight for something

 

that (s)he might not win in its entirety.

It would be grubby.

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Response to MannyGoldstein (Reply #1)

Thu Feb 23, 2012, 11:39 AM

3. exactly.

let's only do what we perceive to be politically expedient. since we can all see into the future and all that.
this tells me that his advisors would not even allow him to consider everything.
what could ever be more important than politics.

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Response to barbtries (Reply #3)

Thu Feb 23, 2012, 12:12 PM

6. Yup, why let Obama see something that goes against Summers' et al's

 

narrative of bending over for the banks and Wall Street?

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Response to MannyGoldstein (Reply #1)

Fri Feb 24, 2012, 09:48 AM

39. Just imagine what cable news would say!

Must prevent Fox News from criticizing us at all costs.

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Response to kpete (Original post)

Thu Feb 23, 2012, 11:11 AM

2. du rec. nt

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Response to kpete (Original post)


Response to kpete (Original post)

Thu Feb 23, 2012, 11:59 AM

5. She was right - projected $1.8T to return to 7% unemployment, and they

managed a stim of $.8T, about 40 percent of the required funding, the drop from 9.1 percent to 8.3 percent got us about a third of the way there.

There are a lot of assumptions there, such as what is the base-line "full employment" figure. If we apply Okun's Law*, unemployment drops one percent for every two percent GDP growth that is sustained for a year. By the same parameter, the natural unemployment rate (due to structural unemployment, not cyclical swings) during the period leading up to the 2008 crash was in the range of about six to seven percent. In the 1950's, that was about four percent, and that illustrates how much the American economy has slowed.

I recall Obama saying early on that unemployment would remain elevated over previous levels. He was right. It looks like the "new normal" is now up to 8% unemployment.
_________________________
Google: "full employment six percent"
9.
Macroeconomics - Google Books Result
books.google.com/books?isbn=0812046196...Jae K. Shim, Joel G. Siegel - 1993 - Business & Economics - 152 pages
Most economists define full employment as meaning that a given percentage of ... an unrealistic goal and needed to be revised to 6 to 7 percent unemployment.
10.
Survey of Economics - Google Books Result
books.google.com/books?isbn=0324579616...Irvin B. Tucker - 2008 - Business & Economics - 532 pages
Full employment is the situation in which an economy operates at an unemployment rate equal ... In practice, therefore, full employment is difficult to define. ... In the 1980s, the accepted rate was 6 percent, and, currently, the consensus among ...

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Response to leveymg (Reply #5)

Thu Feb 23, 2012, 04:10 PM

16. Such a shame they lost Romer. She was their only hope n/t

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Response to jtown1123 (Reply #16)

Thu Feb 23, 2012, 04:29 PM

20. Obama kept Larry and Rahm, instead.

Our loss, Goldman's gain.

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Response to leveymg (Reply #5)

Thu Feb 23, 2012, 04:13 PM

18. Less than full employment is when you can't get a job

and can't feed your family as a result. Any unemployment rate that places any Americans in that position -- not being able to pay the rent and feed their family -- is unacceptable.

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Response to JDPriestly (Reply #18)

Thu Feb 23, 2012, 04:31 PM

21. Agreed! I just wanted to interpret for non-economists what Romer was actually referring to, and

the fact that events have validated her estimates and approach. Obama can always rehire her with a promotion (Treasury Secretary), if he wants to.

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Response to leveymg (Reply #21)

Thu Feb 23, 2012, 10:43 PM

34. That might be a good idea.

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Response to kpete (Original post)

Thu Feb 23, 2012, 12:20 PM

7. What a terrible way to run a country......

 

The President should have had access to all credible, relevant information regardless of how politically acceptable or unacceptable that information might be.

Many, many economists said that the stimulus was too small by at least half and we have seen the anemic growth emanating from that fact. It is kind of like getting a prescription and only taking half the prescribed dose. You may keep from getting worse and you may get better but it will take a lot longer and eventually you will run out of pills before you are fully recovered.

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Response to kpete (Original post)

Thu Feb 23, 2012, 12:51 PM

8. Summers was even worse than that.

He thought that he controlled ALL domestic policy.

In Ron Suskind's, "Confidence Men", he tells a story of Obama asking Peter Orszag to personally do a report for him, and "Hand deliver it to no one, but him" bypassing Summers and Emmanuel.

When Orszag did as he was ordered, and Summers found out about it, he stormed into his office and went insane.

And he really went nuts when he didn't get the Fed Reserve Chair that he thought Obama had promised him.

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Response to kpete (Original post)

Thu Feb 23, 2012, 01:11 PM

9. Actually being kind

This story suggest that Summer's objection was the political possibility of a sufficiently large stimulus. Instead, it has alternately been reported that he objected to one on ECONOMIC grounds. He is reported to have decided that a 1.8 trillion stimulus would not have been well accepted by the markets. It was reported that he kept it from the president, in part, because he didn't want the president to have a chance to choose it.

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Response to kpete (Original post)

Thu Feb 23, 2012, 01:31 PM

10. Larry Summers and president should never be in the same sentence unless

he is being denied a pardon for economic treason.

Jabba the Summers belongs in a dog cage in Gitmo far more than some illiterate Afghan goatherder.

The policies he advocated during the Clinton and now Obama years did more damage al Qaeda could ever hope to in wet dream.

I sincerely hope his dominatrix forgets his safe word.

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Response to yurbud (Reply #10)

Thu Feb 23, 2012, 04:59 PM

22. Love your comment! Says it all perfectly n/t

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Response to sabrina 1 (Reply #22)

Thu Feb 23, 2012, 05:00 PM

23. if I said what I really felt about that guy, I'd be in the dog cage in Gitmo

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Response to yurbud (Reply #23)

Thu Feb 23, 2012, 06:32 PM

28. Lol, you and me both!

Especially when I think of the role he played in silencing Brooksley Born who could have prevented everything that is happening to this country today.

She was so much more intelligent that Greenspan, Summers and the rest of the crew who drove this country into the gutter. The fact that not one of them has ever had the decency to apologize to her, shows that they got what they wanted, that she was a serious threat to their devious plans. And I agree, together this bunch of morons did more harm to this country than Al Queda could have dreamed of.

I don't want to raise your BP any more than necessary, but rather than being held accountable for the role he played in Economic Meltdown, Summers is being considered as head of the World Bank.

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Response to sabrina 1 (Reply #28)

Thu Feb 23, 2012, 08:23 PM

32. it wasn't even a matter of intelligence but of intent and lack of conscience on the part of

Summers, Greenspan, and their ilk.

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Response to sabrina 1 (Reply #28)

Fri Feb 24, 2012, 10:53 AM

41. Ah, yes, Ms. Born!

The obscenely wealthy corporate megalomaniacs are scurrying around like cockroaches in the dawning light because their wealth is an illusion. Their hedonism has resulted in the massive Black Hole that the brave and erudite Brooksley Born called the Dark Market. With a current notional value of $680 TRILLION, the 'worth' of these worthless financial instruments exceeds the combined GNPs of EVERY NATION ON THIS PLANET by a factor of ten.

The entire system is broken. Our global economy is undergoing catastrophic change. I find it disheartening that our 'leaders' and 'economists' continue to discuss this issue as though there is a 'recovery' just around the corner. I am equally distressed by the willingness of so many of the Hoi Polloi to snarf the corporatists' 'recovery' red herrings.

We are witnessing a global cultural crisis, and some folks are just not ready to acknowledge that.

Time for change. I am hopeful, now that #Occupy is spreading across the globe. Like many in #Occupy and here on DU, I hope ours will be a non-violent revolution, promoting Satyagraha.

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Response to yurbud (Reply #10)

Thu Feb 23, 2012, 06:25 PM

27. The same for Geitner.

He led the charge to force the world to accept derivative training. Look under Fiscal Services Ageement.

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Response to Scruffy1 (Reply #27)

Thu Feb 23, 2012, 08:23 PM

33. criminality and economic terrorism seem to be primary qualifications to direct our economic policy

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Response to yurbud (Reply #10)

Thu Feb 23, 2012, 07:12 PM

30. Bravo!!

 

Well said indeed!

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Response to kpete (Original post)

Thu Feb 23, 2012, 01:43 PM

11. so larry summers is a asshole...

so what else is new?

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Response to Javaman (Reply #11)

Thu Feb 23, 2012, 05:22 PM

25. What else?

Maybe more proof that Obama answers to larry instead of the other way around.

Yes, that is a little overstatement. But Why would he keep such an ass? Why keep using the guy that is undermining what you say your want? What hold is there?

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Response to Jakes Progress (Reply #25)

Thu Feb 23, 2012, 07:41 PM

31. those are the million dollar questions. nt

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Response to Jakes Progress (Reply #25)

Fri Feb 24, 2012, 02:09 AM

38. see my economic hitman comment. also, the brooksley borne incident makes it clear

what his hold is: he speaks for ALL the big bankers.

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Response to kpete (Original post)

Thu Feb 23, 2012, 02:05 PM

12. Summers should never work in government again.

And he shouldn't have been brought back in the first place, but whatever.

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Response to Renew Deal (Reply #12)

Thu Feb 23, 2012, 02:35 PM

13. on whose advice did Obama appoint Summers?

Was it Rahm?

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Response to grasswire (Reply #13)

Thu Feb 23, 2012, 03:47 PM

14. And that is the question of the day. Good guess.

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Response to kpete (Original post)

Thu Feb 23, 2012, 04:05 PM

15. Summers thinks women don't have the "aptitude" for science, engineering

and apparently (Romer being a woman) economics and math.

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Response to kpete (Original post)

Thu Feb 23, 2012, 04:11 PM

17. What would people think if we asked for something that would

really work?

It would be so embarrassing to stand up for what is right. We can't possibly do that.

Sarcastic, but that is how Obama's appointees think -- and we have to assume that Obama thinks that way too.

Now, Santorum does not seem to stop to think about what people will think about his caveman ideas. And, though I don't think he will win in November, his campaign does seem to be gaining momentum.

When you worry too much about what people will think and too little about what is right for the American people, you are asking for trouble. I hope that Obama is changing and that his new appointees will provide him with all the information he needs and not just the censored version.

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Response to kpete (Original post)

Thu Feb 23, 2012, 04:16 PM

19. so nice of Summers to do Obama's thinking for him.



recommended.


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Response to kpete (Original post)

Thu Feb 23, 2012, 05:03 PM

24. I just realized Summers is the domestic equivalent of an Economic Hit Man

He tells presidents to play ball with the banks and Wall Street, and when they or regulators like Brooksley Borne (sp?) get out of line, he has the stick as well as the carrot.

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Response to yurbud (Reply #24)

Thu Feb 23, 2012, 11:02 PM

35. He was a global hitman before he turned his attention to the US economy. He restructured Russia.

That involved a great amount of pain for regular people, too, and ended up putting the country and its resources under the control of the Oligarchs (Russian Mafia and former KGB). Same is happening here, as we write.

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Response to kpete (Original post)

Thu Feb 23, 2012, 05:41 PM

26. Liery Summers

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Response to kpete (Original post)

Thu Feb 23, 2012, 06:36 PM

29. Ultimately, it's on Obama for hiring Summers and giving him such a key role.

"You knew what I was when you chose me."

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Response to girl gone mad (Reply #29)

Fri Feb 24, 2012, 12:38 AM

36. True, but worse that he keeps him.

You can forgive a naive newcomer for making a stupid hiring mistake. But what does it say that three years in, Obama keeps him on and still follows his advice? Either he's too dim to catch on or he really likes what summers does.

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Response to kpete (Original post)

Fri Feb 24, 2012, 01:19 AM

37. He has done this so many times, why are people here still surprised?

 

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Response to kpete (Original post)

Fri Feb 24, 2012, 09:50 AM

40. Obama hired Summers

and Geithner, Rubin, and Orszag. This is subterfuge. Obama hired these guys and keeps them around because he agrees with them.

Frankly, the idea that Obama is so clueless that Summers can manipulate him is a worse story.

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Response to kpete (Original post)

Fri Feb 24, 2012, 11:46 AM

42. k&r I find it hard to believe to Mrs. Romer didn't go ..

to the President after he got the memo that the figure was not what she wrote to be right. I find it hard to believe that the president didn't know better, he is a smart man. What I do believe is that the man has no fight in him. He has failed to tell the banksters and the repugs to go fuck themselves. Cheney had no problem telling people to go fuck themselves. Wall St. owns our president. I wonder what dirt they have on him.

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Response to kpete (Original post)

Fri Feb 24, 2012, 03:22 PM

43. I wonder what else he kept from Obama.

Furthermore, I also wonder what he kept from Clinton.

I heard that he is one of the people on the list to head the World Bank. First the US, then the world.

Be afraid, be very afraid.........

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Response to kpete (Original post)

Fri Feb 24, 2012, 10:43 PM

44. Spam deleted by uppityperson (MIR Team)

 

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