The economist who resembled a bad penny
So, Larry Summers got into a job as an economic advisor to Obama, which is sort of a backdoor entrance, considering the progressive wing of the party protested the very idea of Summers as the Secretary of the Treasury. I’ve felt wishy-washy about him having a role in the Obama administration from the get-go. On one hand, he is a repeat offender of neoliberalism, a centrist whose own self-regard made him disdain a lot of good liberal ideas he should have taken more seriously. On the other hand, he’s smart and experienced, and we need those things during an economic crisis. More to the point, while he hasn’t apologized or anything like that, he’s been on a repentance journey of sorts, admitting that vast economic inequalities in a society is bad for the economy. This NY Times article by David Leonhardt is a good overview, and summarizes the situation as thus:
Mr. Summers has spent much of his career tweaking fellow liberals with arguments he considers unpleasant truths — on the dangers of budget deficits, the benefits of capitalism and other subjects. But he seems to have decided that conservative orthodoxies have become a vastly bigger threat to good economic policy than liberal ones. His favorite argument today is one that instead drives some conservatives nuts.
It goes like this: To undo the rise in income inequality since the late ’70s, every household in the top 1 percent of the distribution, which makes $1.7 million on average, would need to write a check for $800,000. This money could then be pooled and used to send out a $10,000 check to every household in the bottom 80 percent of the distribution, those making less than $120,000. Only then would the country be as economically equal as it was three decades ago.
The lack of middle-class income growth during that span is “the defining issue of our time,” Mr. Summers has said, in a tacit admission that liberals were ahead of him on this issue. He is likely to be front and center in Mr. Obama’s push to reduce taxes on the middle class and create good jobs. Mr. Summers may also push the administration to work with foreign governments to crack down on tax shelters.
We have no evidence to show that he’s lost his infatuation with deregulation, but I suspect you’d have to be a really big fool to push it at a time like this. But on the whole, I want more than anything to have someone who realizes that economic inequality really is the defining issue, and that the only way to save ourselves is to take measures to rebuild a real middle class that, oh, can engage in the sort of consumer spending that could get us up and running again. I doubt we’ll all be getting a check any time soon, but there’s other measures to help push people out of the paycheck-to-paycheck lifestyle and towards something more substantial. The most obvious way to start this process is to attack a major expense that keeps people from being able to get ahead—health care. According to Ezra, Summers is on board. As he should be, because anyone who is not on board at this point is a frigging moron.
In this, Summers isn’t articulating a bold new vision: He’s echoing the Democratic consensus. The Obama/Clinton/Edwards/Hacker/Baucus plans all do the same basic thing. With one hand, they spend some money to buttress the existing health care system and erect some new regulations to make it a gentler, more decent place. You do this because people are fundamentally scared of losing what they have right now, and reform needs to speak to their fears, not just the fears of budget and health care wonks.
With the other hand, they create a parallel health care system where the government acts as a health insurance superstore: It has a buyer who chooses products based on quality and price, offers an array of competing private and public options, and lets individuals and businesses alike compare coverage options and purchase the insurance that works best for them. At the beginning, this alternative system is fairly small. But the idea is that over time it grows to be quite large, as employers cannot continually absorb the cost of health care and they cannot squeeze out the efficiencies that a government agency with huge market share can demand. In essence, the plan deals with the fears of the public in the short-term but sets up the incentives so that the system moves towards the ideal of the experts in the long-term, which means moving away from employer-based health care.
I’d add that a side benefit of this is that it reduces the possibility of dramatic negative change. Insurance companies, after all, employ people, and if we made moves that put them in direct economic crisis, they’d start laying off people immediately. Gradual change will make it easier for the jobs to slowly convert to public ones without risking major job loss.
But what’s important to me is that we have people on the team that will make inequality (and therefore health care) a priority, and if Larry Summers is that guy, I’m on board. But I definitely agree with others who fear that he’ll backslide immediately. Guess we’ll have to wait and see.
One thing that I don’t think is relevant to this discussion is the controversy over his nasty comments about women’s inherent abilities, and how that might be the reason that we see too few women in math and science. Not that I think he wasn’t being odious, because he was. He was sexist and engaging in blatant ass-covering behavior. (To be fair, the ass-covering behavior is a point of concern, and since he won’t face up to damage he did under Clinton, it seems it might be an issue with his personality that hurts his leadership abilities.) His opinions about women’s basic capacity to be geniuses at physics is irrelevant to this position. I’m sure that a lot of people that do great jobs at their current high level jobs have stupid prejudices that we don’t know about because it never comes up. I don’t see how it could hurt his performance at this job, and if he is the most qualified person, I’d hate to see him swapped out for someone less qualified who may not have prejudices or, more likely, just hasn’t had any reason to have them published in newspapers. I’ve seen a few feminists reach for his sexist comments as a reason, and I think that’s the sort of off-message behavior that gets us ignored. You know, ;ike bringing “Free Mumia” signs to anti-war protests.