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Obama’s Flunking Economy: The Real Cause

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Alex Wong/Getty Images
Lawrence Summers, then director of the National Economic Council, and Treasury Secretary Timothy Geithner, Washington, D.C., December 2010

Ron Suskind’s Confidence Men is not a calm first draft of history. It is not an impartial or unbiased look at the Obama administration’s first two years. Rather, it is an investigation. The crime is homicide, and the victim is the promise of Barack Obama’s presidency. But this isn’t a suspenseful whodunit. Suskind tips his hand in the first pages.

He’s describing the press conference in September 2010 where President Obama announced that Elizabeth Warren would help set up the Consumer Financial Protection Bureau. Warren is one of Suskind’s heroes. She’s introduced as “the nation’s town crier” and “a leading voice for tough, restorative reforms.” The mystery of the initial chapter is why Obama seems to be holding her at arm’s length.

It’s quickly solved. The villain of this vignette—and one of the key villains of the rest of the book—is “the boyish man in the too-long jacket at Obama’s right hip, bunched cuffs around his shoes, looking more than anything like a teenager who just grabbed a suit out of his dad’s closet.” So who is this man-child who can’t find a properly sized suit to wear to the Rose Garden? Who couldn’t take the time to get his pants hemmed before stepping in front of the cameras? “That’s Treasury secretary Tim Geithner,” Suskind says, “looking sheepish.”

That “looking sheepish” is a common Suskind trick. His book doesn’t just have good guys and bad guys. It has good guys who look like good guys, and bad guys who squirm beneath the weight of their badness. You’re never left to wonder long over which is which. Of Larry Summers, Obama’s first director of the National Economic Council, Suskind says that his personality “recalls that of Nixon and Henry Kissinger, or, more recently, Dick Cheney.” As for Rahm Emanuel, Obama’s first chief of staff, he’s “all impulse and action, with very modest organizational skills.”

By contrast Peter Orszag, Obama’s first budget director, “could think in numbers, talk in full sentences, and work nonstop.” Former Senate Majority Leader Tom Daschle’s comments are “counterintuitive, but incisive.” Financial regulator “Gary Gensler fell into one of those discrete categories of people who create lasting change in Washington’s marketplace of ideas.” When Treasury economist Alan Krueger passes around a pack of slides, each is “a chart of blazing, graphed insight.” Suskind offers little evidence for these descriptions. The book does not explain which of Gensler’s ideas will be current in thirty years. Suskind’s approach asks, rather, that we trust his assessments.

I prefer to verify. So I went back to the tape. I rewatched the September 2010 press conference where Obama introduced Warren to the country. I paid special attention to Geithner. Suskind’s right: his suit is too big. But he doesn’t look sheepish or ashamed. He looks, by turns, bored and interested. He clasps his hands behind his back. He nods attentively. He tries not to fidget. He looks like every experienced bureaucrat looks when they’re asked to stand like a prop near the president. Blank, and trying not to make any news. He failed.

I mentioned this was a murder mystery, so I won’t leave you in suspense about the perpetrator: Suskind’s investigation leads him right to Obama’s senior staff, who he believes took advantage of the young president’s inexperience and led a refreshingly unconventional candidate into a depressingly conventional presidency.

Suskind’s story goes something like this: in 2008, Obama was presented with an economic crisis of astonishing severity and complexity. In the beginning, he showed himself to be unexpectedly prepared to deal with it, both intellectually and temperamentally. His self-assurance and personal magnetism attracted a variety of impressive and able advisers, including former Federal Reserve Chairman Paul Volcker, billionaire investor Warren Buffett, UBS America chief Robert Wolf, former Labor Secretary Robert Reich, and former SEC Chairman William Donaldson.

But as “the severity of the crisis bore down on him,” Obama found himself leaning toward a different sort of adviser—safer, more predictable. He wanted people who knew Washington, and knew how to get things done. The “bold visions of the campaign season had meanwhile resolved into the serious, often risk-averse business of actually governing,” writes Suskind. “In the midst of a battering economic storm, it no longer seemed like the right time to be making waves.”

And no single adviser better encapsulates Suskind’s criticisms, and the contradictions in his argument, than Larry Summers. Even more than Geithner, Summers is the villain of the book. Suskind describes him as “brilliant at cultivating the sense of control, even as events spun far beyond what could be managed with any certainty.” He calls that talent “an illusionist’s trick calling for a certain true genius.”

It’s that trick that gives the book its title. Merriam-Webster defines a “confidence man” as “a swindler who exploits the confidence of his victim.” Suskind’s definition is more subtle. “Confidence is the public face of competence,” Suskind writes. “Separating the two—gaining the trust without earning it—is the age-old work of confidence men.” To Suskind, Summers was the ultimate confidence man, and Obama the ultimate mark. Summers offered what Obama wanted—certainty—and Obama was just terrified enough to take it. But the certainties Summers offered were not, in Suskind’s view, the certainties the moment required.

The work that went into Confidence Men cannot be denied. Suskind conducted hundreds of interviews. He spoke to almost every member of the Obama administration, including the President. He takes you inside Gensler’s home and into the Oval Office. He heads to Wall Street and back. He quotes memos no one else has published. He gives you scenes that no one else has managed to capture. The book is valuable for these contributions alone. But Suskind’s reporting seems, at times, to contradict his thesis.

It is not enough, of course, to say that Summers’s personality is reminiscent of Richard Nixon’s, or that “people think he knows more than he does.” What Suskind needs to prove is that Summers, as director of the National Economic Council, gave Obama bad advice. After all, if every dark intimation about Summers’s capture of the President is true, but Summers used his influence to steer Obama toward better ideas, we should be applauding him.

Suskind ultimately identifies two opportunities when Obama could have made decisions that might have substantially affected today’s economy. The first was in the debate over bank nationalization. The second was in the debate over whether to propose further rounds of stimulus. In both cases, Suskind clearly wishes the Obama administration had pushed harder, demanded more, been less respectful of the status quo. In both cases, Suskind’s own reporting shows that Summers agreed with him. And in both cases, Summers—the same Summers who was said to be able to convince anyone of anything, who had Obama’s ear, who allegedly controlled the economic process—lost the fight. But Suskind never resolves, or even addresses, the difficulty that poses for his thesis.

Suskind’s most explosive reporting comes in his recounting of the debate over nationalizing Citigroup. He alleges that the President directed Geithner to develop a plan to take over the failing bank and Geithner simply ignored the President’s order. Geithner and the White House deny this, of course. But this moment is central to Suskind’s story. In his conclusion, he says a successful nationalization of Citigroup would been the moment when “the American people would see that ‘government could do this right,’” and it would have killed off the fear “that if another financial institution failed, it would spark a financial crisis similar to what happened after Lehman.”

Summers, contrary to what you might gather from Suskind’s description, was in favor of nationalizing Citigroup, and he fought for it. Suskind reports that Summers ran interference for Christina Romer, head of the Council of the Economic Advisers, when she made the President aware that Geithner wasn’t developing a plan to take over the bank. He also reports that Summers personally “worked the phones in early March to try to gather the information” needed to produce the takeover plan that Treasury was refusing to provide.

Similarly, in what is perhaps the second-most-explosive portion of Suskind’s book, Suskind recounts a White House meeting in which Romer tried to persuade the President to pursue a second round of stimulus. In a reply that Suskind uses to establish the President’s rough treatment of female staffers, Obama harshly dismisses her. In the next passage, however, Suskind reports on a subsequent meeting when “Summers stepped up, offering, almost word for word, the position Romer had voiced previously.”

So if Summers was really the Svengali Suskind presents him as, if he really had such mastery over the President and the policymaking process, Citigroup would have been nationalized and the administration would have been more aggressive in its pursuit of more stimulus. Neither happened. If you take Suskind’s policy preferences seriously, the implication is that Summers wasn’t persuasive enough to save Obama’s presidency.

That incoherence speaks to the weakness of Suskind’s book, which is also a weakness that afflicts much punditry about the presidency: it is very surefooted in its reporting on personalities and the process by which decisions were made, and very vague when it comes to assessing the policy that was under consideration and judging whether the final approach performed better or worse than the alternative proposals.

The President’s poll numbers aren’t the mystery Suskind presents them as. If you want to know what killed Obamaism, the answer is the stagnant economy. No president, no matter how politically graceful or personally confident, looks good in the midst of an economic crisis. When unemployment rose during the 1980–1981 recession, President Ronald Reagan’s approval ratings fell below 40 percent and his party lost twenty-six House seats in the midterm election. When Franklin Delano Roosevelt and the Federal Reserve twisted toward austerity too early and sparked the 1937 recession, Democrats lost more than seventy seats the following year. No one would accuse either president of insufficient charisma or weak leadership. Americans don’t want leaders so much as they want jobs. And that’s Obama’s problem now, too.

The great counterfactual of Suskind’s book is “What if Obama had chosen a different team of advisers?” But by the end of his book, the counterfactual was coming true. Emanuel was out. Summers, too. Romer had left, and so had Orszag. Even David Axelrod, Obama’s longtime political adviser, was decamping back to Chicago. Only Geithner remains.

In his conclusion, Suskind seems appreciative of the replacements Obama chose. “Following the midterms,” reports Suskind, “the president seemed to be assembling the team he’d originally wanted.” He quotes an anonymous Obama adviser who says, “Rahm and Larry especially, but others on senior staff as well, didn’t have a strong appreciation of what got [Obama] elected, the power of it and how to harness it.” He says that the housecleaning left Obama looking “oddly liberated.”

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