President Obama needs to put the interests of the country ahead of his personal views

What do most progressives, market monetarists, Wall Street economists, James Hamilton and John Taylor agree upon?

Answer: Yellen is a better choice than Summers.



32 Responses to “President Obama needs to put the interests of the country ahead of his personal views”

  1. Gravatar of Suvy Suvy
    30. July 2013 at 09:19

    Larry Summers is a complete jackass and prick. He’s arrogant and he was one of the people in charge that led us to our current problems. He’s a horrible, horrible choice for the most powerful man in the world. He should never be Chairman of the Federal Reserve and he needs to be thrown out of any sort of position of power.

  2. Gravatar of W. Peden W. Peden
    30. July 2013 at 09:36

    It’s good to see John Taylor get it right. He’s not had a very good few years, but he’s still a great economist.

  3. Gravatar of Saturos Saturos
    30. July 2013 at 09:53

    Allison Schrager starts by talking about integrating finance and macro, but then recommends two people who both would in fact be better than Yellen: Stanley Fischer and Roger Ferguson.

    Suvy, plus he was a jerk in The Social Network.

  4. Gravatar of dirk dirk
    30. July 2013 at 10:11

    Hey Scott, thanks for mentioning and linking to the article about Simon Leys in the recent post. I wasn’t familiar with him, but bought his new collection, The Hall of Uselessness, which came out today and it is excellent! I read your blog for tidbits like that.

  5. Gravatar of StatsGuy StatsGuy
    30. July 2013 at 10:13

    I’m sure you’ve seen this.

    I don’t know if Obama has.

    You know, there’s a reasonable case that the most important determinant of asset valuations (and the real economy) has been the accuracy of Fed forecasts, since the forecasts largely determine policy.

  6. Gravatar of policy wank policy wank
    30. July 2013 at 10:27

    I guess it’s understandable that Taylor is so enamored with the Taylor Rule, but has he ever acknowledged that a Taylor Rule doesn’t tell you what to do when you hit the ZLB, i.e. what a central bank should do when the rule spits out a negative number!? As Scott often notes a Taylor Rule because useless right when you need monetary stabilization the most. Then he has the gall to castigate other economists for abandoning rule-based policy at the ZLB without ever offering an alternative. Or is the alternative just to stay at zero until the formula spits out a positive number again?

  7. Gravatar of ChacoKevy ChacoKevy
    30. July 2013 at 10:33

    @Saturos: Yeah, I saw that piece. What really caught me off guard was DeLong’s sorta preference for Summers. I’m having trouble understanding how he could want Summers over Yellen, particularly when he stated his preference for Romer earlier.
    Is my understanding wrong when I thought that the monetary positions for expansion-status quo-tightening(possibly) are Romer-Yellen-Summers?

  8. Gravatar of TravisV TravisV
    30. July 2013 at 11:10

    Here’s why I’m a fan of Professor Sumner:

    He’s able to see the actual truth: neither Richard Epstein nor Jamie Galbraith are right.

    Epstein: “Obama’s Middle Class Malaise”

    Galbraith: Structural Reform!

  9. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    30. July 2013 at 11:12

    Hope Scott doesn’t forget about us now that he’s a doyen;

  10. Gravatar of Bill Ellis Bill Ellis
    30. July 2013 at 11:17

    Well, to be fair…I am sure Obama thinks his personal views on the FED choice have been formed by his best estimation of what is best for the country…
    But if he picks Summers over Yellen his best estimation would seem to be lacking. I am not sure which is worse… your characterization of Obama or mine. (Obama really does not seem to “get” monetary policy. But then again how many politicians actually do ? )

    Hopefully he will listen to all the “Yell’n for Yellen” …(Such a bad play on words it could not be left unsaid)… coming not only from the commentariat, but from the political leaders of his own party.

  11. Gravatar of Scott Sumner Scott Sumner
    30. July 2013 at 11:38

    Saturos, To say I disagree with that article would be an understatement. This crisis shows exactly the opposite of what she claims.

    Thanks dirk.

    Chacokevy, He recently co-authored a paper with Summers, so there may be a personal connection. But I’m sure he respects Summers.

  12. Gravatar of Scott Sumner Scott Sumner
    30. July 2013 at 11:44

    Statsguy, Yes, I saw that.

    Patrick, First eminence grise, now doyen. He’s making me constantly look up definitions.

  13. Gravatar of Anon Anon
    30. July 2013 at 12:46

    The very real possibility is that the FOMC’s fragile consensus over QE departs with its current Chairman. Chances are neither Summers nor Yellen will change that.

    Part of the problem is that Bernanke has built a Frankenstein’s monster of thresholds, guidance, timings, and targets. Each one of these elements is up for debate. Remember when the FOMC just decided on what to do with the FFR? It seems like ancient history now.

    It seems all this “transparency”, Yellen’s centerpiece policy, is about to create a great deal of uncertainty.

  14. Gravatar of Bill Ellis Bill Ellis
    30. July 2013 at 15:30

    If Obama is truly wed to Summers for some relational reason, then economic arguments may not be the way to sway him. (They may be outside of his scope, or he is in an information bubble.)

    So the best way to put pressure on Obama to abandon Summers is not by making econ arguments. The best way is to get women angry at him.
    IF the misogynistic aspects of Summer’s past can capture significant coverage in the news cycle, it will cause women’s groups to condemn the choice. Obama will not stand against them.

  15. Gravatar of Geoff Geoff
    30. July 2013 at 15:30

    “President Obama needs to put the interests of the country ahead of his personal views”

    Yay collectivist gobbledygook.

    Has anyone ever actually DEFINED “the country”? Every time I’ve seen anyone attempt to do so, they always ended up referring to some special interest group or another. Rarely the geographical dirt and rocks within a particular boundary.

  16. Gravatar of ChargerCarl ChargerCarl
    30. July 2013 at 16:22


  17. Gravatar of Don Don
    30. July 2013 at 16:35

    There is not enough room in the economics world for a “Summers” and a “Sumner”. I choose the latter. The former can drift away to silently collect checks from an investment bank.

  18. Gravatar of Mark A. Sadowski Mark A. Sadowski
    30. July 2013 at 16:41

    The more I think about this, the more I think it all boils down to one name: Gene Sperling.

    Yellen clashed with Sperling during the Clinton administration, when she was Chair of the CEA and he was Director of the NEC. Evidently this is payback time. Too bad the interests of the country don’t come first.

    I think this also explains why Romer’s name hasn’t come up. There seems to be a feud going on between the “Rubin boys” (Summers, Geithner, Sperling and Lew) and the “California girls” (Tyson, Romer and Yellen):

    Incidentally note that the Rubin boys are mostly non-economists and the California girls are all economists.

  19. Gravatar of W. Peden W. Peden
    30. July 2013 at 16:51

    Mark Sadowski,

    Associating Yellen with Romer in almost any way raises my estimates of her a lot.

  20. Gravatar of Mark A. Sadowski Mark A. Sadowski
    30. July 2013 at 17:05

    If Allison Schrager is an example of the quality of economic PhDs that Columbia is producing these days all I can say is things there have gone to hell in a handbasket.

    Ferguson was in charge of the Fed’s bank supervision during the housing bubble, and that didn’t exactly go too well did it? It’s particularly damaging now because the next Fed Chair will have to decide how much to enforce the new rules in Dodd-Frank which is why Senate Democrats are so up in arms that whoever it is be a good regulator. So you can pretty much write off Ferguson as a potential candidate.

    As for Fischer his name has not come up on any short list of likely Presidential picks, so despite his availability and qualifications, I think he is very unlikely to be nominated by Obama. In any case he has said some very disturbing things about ECB policy which I personally find disqualifying.

  21. Gravatar of Ricardo Ricardo
    30. July 2013 at 17:27

    Forget Summers, he’s done. Time to load your ammo for the next trial balloon: Ferguson.

  22. Gravatar of Mark A. Sadowski Mark A. Sadowski
    30. July 2013 at 17:57

    You wrote:
    “Chacokevy, He recently co-authored a paper with Summers, so there may be a personal connection. But I’m sure he respects Summers.”

    I hope everybody here realizes that DeLong served as Deputy Assistant Treasury Secretary under Summers in the Clinton Administration.

    To be blunt, DeLong is a card carrying member of the “Rubin boys”.

    DeLong’s endorsement of Summers is pure unadulturated politics of the most parochial kind. Economics had very little to do with it.

  23. Gravatar of Benjamin Cole Benjamin Cole
    30. July 2013 at 19:31

    On paper, Yellen is superb.

    But, oy, the PR.

    Another middle-aged lady, ala Sotomayor or Kagan. Looks like a political appointment, a sop to the Hillary Clinton crowd. Identity politics.

    (Side note: That’s what happens when people stoop to identity politics–then when someone is actually qualified, it looks like identity politics again….)

    Scare thought: Yellen will feel a need to show her inflation-fighting cred, and not be the woman Fed chairman who allowed higher inflation. Except right now fighting inflation is no important, but fighting for growth is.

  24. Gravatar of Aidan Aidan
    30. July 2013 at 22:02

    No, that’s what happens when people are sexist. Don’t excuse your or anyone else’s sexism by blaming it on people “stooping to identity politics.” It would look like promoting the current Vice Chair of the Fed who has had a sterling track record and has rock solid credentials. It would look like a political appointment to people who have no idea what they’re talking about and cannot measure credentials beyond gender, i.e. the Wall Street Journal op-ed page.

    And god knows that women are wildly overrepresented in American politics. The people will revolt if they get a *third* middle-aged lady appointment! Better avoid that PR nightmare by a less-qualified political pal of the White House with a history of sexism accusations.

  25. Gravatar of vasja vasja
    31. July 2013 at 03:47

    But, according to the link below, Summers favours (or at least favoured it 1991) NGDP targeting!

  26. Gravatar of ssumner ssumner
    31. July 2013 at 03:59

    Anon, Another good argument for NGDPLT.

    Mark, Yes, I think the set of personal connections here is key.

    vasja, It seems he’s walked away for those views, or perhaps the problem is that he thinks monetary policy is ineffective at the zero bound. Which would make him a disastrous choice.

  27. Gravatar of J Mann J Mann
    31. July 2013 at 05:09

    It doesn’t relate to monetary policy, but this Noah Millman anecdote about Summers is well worth reading.

  28. Gravatar of ssumner ssumner
    31. July 2013 at 07:21

    J Mann, I’ve heard similar stories from people in Boston. However that’s a point in his favor–we do need Aspergers-types in charge of monetary policy.

  29. Gravatar of TallDave TallDave
    31. July 2013 at 17:38

    All about the politics…

    Multiple sources tell CNN that another heated moment came when Rep. Ed Perlmutter of Colorado asked about rumors that Larry Summers is being considered to head the Federal Reserve, and told the president it is a bad idea.

    Sources said the president got defensive and clearly upset, saying that he is sick of the Washington game and liberal press like the Huffington Post going off on Summers as not liberal enough.

    The president reminded the room of Democratic lawmakers that Summers was a key part of his economic team as they tried to turn the economy around in 2009. He also made clear that he has made no decision for the Fed chief, but noted that top choices, including Summers and Janet Yellen, are so similar in qualifications you “have to slice the salami” pretty thin to see the differences.

  30. Gravatar of TallDave TallDave
    31. July 2013 at 17:47

    ChacoKevy — DeLong wants the same thing Obama wants, for the same reasons, which should be fairly obvious from reading his blog.

  31. Gravatar of Mark A. Sadowski Mark A. Sadowski
    31. July 2013 at 20:11

    I replied to the following post by Evan Soltas. I just thought I’d share it here:

    July 30, 2013

    What Larry Summers Said in 1991
    By Evan Soltas

    “…1. He’s practically in favor of NGDP targeting…
    2. He doesn’t like monetary rules, specifically John B. Taylor’s or Milton Friedman’s…
    3. He is dovish on inflation…”

    My reply:

    With all due respect I think you have seriously jumped the gun in making some of these pronouncements here:

    1) In his introduction Summers states that one of the reasons for an increased interest to economists in the issue of what should be the objectives of monetary policy was the then relatively recently established consensus that central banks control the rate of growth of NGDP.

    “…Instead,the issue I take is one that thas been of increasing interest to economists in recent years: What should be the long-term objectives of the monetary authority.

    Increased interest in this issue as opposed to the issue of fine-tuning the economy reflects the general intellectual consensus that has emerged on two points. First, what the monetary authority surely can control in the long run is the growth rate of nominal income…”

    So he was clearly not stating that central banks should target NGDP, he was only stating that the realization that the central banks control NGDP had motivated an increased interest in the objectives of monetary policy.

    2) Summers doesn’t specifically address the Taylor Rule in the panel discussion. Moreover it would have been quite impossible for him to do so as the panel discussion took place in the 1991, two full years before John Taylor’s paper on the rule was published (“Discretion versus Policy Rules in Practice,” Carnegie-Rochester Conference Series on Public Policy, Vol. 39, December 1993, pp. 195-214). More importantly, the fact that Summers rejected rules in favor of discretion underscores the fact that he was clearly not in favor of targeting NGDP, since NGDP targeting is itself a rules-based monetary policy. In fact NGDP targeting was one of the rules-based monetary policies discussed by Stanley Fischer in his 1990 chapter on rules versus discretion (“Rules versus discretion in monetary policy,” Handbook of Monetary Economics, in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 2, chapter 21, 1990, pages 1155-1184 Elsevier).

    3) At the time Summers wrote this, in 1991, the Federal Reserve’s primary measure of inflation was still CPI, and CPI had risen by 5.4% the previous year. With the sole exception of 1986, inflation had not been below 3% in nearly 23 years. So an explicit target of 2-3% inflation would actually have been quite hawkish. By the time Yellen made the argument in favor of a 2% inflation target in 1996, a target that has now essentially been adopted throughout much of the advanced world, CPI was in its third year of below 3% inflation, and a 0% inflation target was the subject of serious policy discussion by the FOMC.

    Moreover, although Summers’ 1991 conference argument that downward nominal wage rigidities justified a positive inflation target preceded Yellen’s nearly identical 1996 policy argument, both arguments were in turn preceded by research authored by Yellen and George Akerlof. The downward stickiness of nominal wages was a subject that Yellen and Akerlof had written on extensively, as far back as their seminal 1985 paper on near-rational expectations (“A Near-Rational Model of the Business Cycle, With Wage and Price Inertia,” The Quarterly Journal of Economics, Vol. 100, 1985 Supplement, pp. 823-838).

  32. Gravatar of We Can Argue What Getting Forecasts Right Means but Janet Yellen Does Get Them Right | Last Men and OverMen We Can Argue What Getting Forecasts Right Means but Janet Yellen Does Get Them Right | Last Men and OverMen
    19. February 2017 at 09:49

    […] to prefer Summers because he has able to charm Obama personally:       Bear in mind too, that Krugman is a good friend of Summers who thinks […]

Leave a Reply