God help America if our president is this shallow

David Levey sent me this David Wessel post.

One leading candidate is Janet Yellen, the Fed’s current vice chairwoman, who has garnered substantial support among Democrats in Congress and among economists. But the public lobbying on her behalf appears to have annoyed the president and may lead him to look elsewhere.

Obama seems determined to prevent an economic recovery.



42 Responses to “God help America if our president is this shallow”

  1. Gravatar of OneEyedMan OneEyedMan
    16. September 2013 at 04:46

    There are other considerations besides choosing the best candidate. For example, like Bush and others before him, Obama probably is interested in protecting presidential prerogatives, which includes choosing rather than being told who should fill appointed positions.

  2. Gravatar of TravisV TravisV
    16. September 2013 at 05:05

    Prof. Sumner,

    Would Stan Fischer be a good Fed Chairman? How bout compared to Yellen?


  3. Gravatar of TravisV TravisV
    16. September 2013 at 05:09

    Andrew Ross Sorkin says that according to his sources, Yellen is hardly a done deal at all. And other CNBC people (especially Cramer) keep suggesting there’s a good chance Obama will pick Fischer.

  4. Gravatar of PeteG PeteG
    16. September 2013 at 05:40

    I’m still hopeful C Romer gets back in the conversation. She’s also a trusted adviser, though not as close as Summers. She’d be the first woman.

    I really don’t know what to think about Obama’s criteria. As best as I can figure he wants somebody who believes in low money growth means lower inequality, fewer bubbles, and low inflation. More generally he believes inflation is bad, low inequality good, big business is naturally immoral, good regulations can force businesses to be moral, and federal reserve needs to stop creating bubbles…whatever that means.

  5. Gravatar of jknarr jknarr
    16. September 2013 at 06:05

    Smokescreen. They have very specific reasons for not wanting Yellen. The reasons, however, are against the public’s interest, and so go undiscussed.

    They hint at peevishness. Simply put, Yellen is likely not a “team player” for the bank-federal government tight money axis.

    They want a tight-money-created disaster, so they can rewrite more rules. When you govern by crisis, you need team players to keep secrets and push agendas.

  6. Gravatar of Neil S Neil S
    16. September 2013 at 06:18

    The evidence seem to me to indicate that our president is indeed that shallow.

  7. Gravatar of Michael Michael
    16. September 2013 at 06:22

    David Laidler was Russ Roberts’ guest on EconTalk today:


    Laidler gave a good defense of the Fed’s actions since the crisis, but when Roberts asked him about NGDP targeting he dismissed it out of hand, for the same tired old reasons (unlike inflation it is subject to revisions, and can’t be explained to the general public, where inflation estimates are readily available and it is simple to explain that inflation is change in the cost of living).

    Disappointing end to an otherwise good interview.

  8. Gravatar of ssumner ssumner
    16. September 2013 at 06:38

    OneEyedman, That’s what I’m afraid of.

    Travis, I’d guess he’d be OK, but haven’t followed his career closely.

    Thanks Michael.

  9. Gravatar of Catherine Catherine
    16. September 2013 at 06:53


    Well, at least he’s not campaigning for Arne Duncan’s job.

  10. Gravatar of Reader223 Reader223
    16. September 2013 at 07:01


    That revision argument is funny. If monetary policy was based on NGDP targeting the NGDP path would be much smoother. I wouldn’t be surprised if most of the revisions come from NGDP variability due to it not being targeted.

  11. Gravatar of Catherine Catherine
    16. September 2013 at 07:14

    btw, Larry Summers is the friend of a friend (the friend of a colleague of my husband’s, to be precise…). Given what F-o-F has said about him in the past, I have warm feelings toward the man. I also liked him — as a person — in Suskind’s and Scheiber’s books as well. (For the record, I think of him as Aspergery.)

    But he pretty clearly doesn’t know what he doesn’t know, and that’s just for starters.

    If you want confirmation that we’ve dodged a bullet, read his op ed on college education, where he confidently cites “what we now understand about how people learn.”

    Larry Summers’ concept of “what we now understand about how people learn” is flatly and roundly rejected by nearly everyone who researches learning. In fact, Larry Summers’ concept of “what we now understand about how people learn” is the exclusive belief system of education schools.

    Does Larry Summers really wish to endorse education schools over cognitive science? I doubt it.

    As far as I can tell he has no idea who thinks what, and he didn’t feel the need to check.

    Worse: it’s not just that he doesn’t know what he doesn’t know. What he thinks he knows about “how people learn” is foolish, wrong, and destructive.

    That said, I saw Benjamin Cole’s comment on an earlier post wondering whether Summers’ personality might lead him to bolder action than we are likely to see with Janet Yellen. I do wonder that myself.

    But I don’t want to find out.

  12. Gravatar of Catherine Catherine
    16. September 2013 at 07:16

    I’m still hopeful C Romer gets back in the conversation. She’s also a trusted adviser, though not as close as Summers.

    Me, too, but I read a few weeks back that Yellen and Romer are close friends.

    I’m hoping that if Yellen becomes chair, Romer will be appointed down the line.

  13. Gravatar of Catherine Catherine
    16. September 2013 at 07:30

    Andrew Ross Sorkin says that according to his sources, Yellen is hardly a done deal at all.

    I’m sure that’s true inside the minds of “White House insiders” (I am incredibly tired of hearing from White-House-insiders), but they’ve just taken a big hit whether they know it or not. I suspect Senate Dems aren’t keen on receiving further instruction from Jack Lew.

    That said, I would have thought the same (Yellen isn’t a done deal) if I hadn’t read the Times article:

    The White House had made some efforts to build support for Mr. Summers on Capitol Hill. Earlier this year Mr. Obama asked Rob Nabors, then his chief Congressional liaison, to work with Mr. Summers, and Mr. Summers himself sought meetings with a number of senators.

    But some congressional aides said White House officials had made little effort in recent weeks to solicit support for Mr. Summers from key senators “” and that they seemed unaware of the depth of opposition.

    Senator Jon Tester, a Montana Democrat who sits on the crucial Senate Banking Committee, did not hear from the White House until Friday. It was not a long conversation. Asked whether he would be willing to vote for Mr. Summers, Mr. Tester simply said that he would not.

    Mr. Tester’s opposition was a critical blow. He is not a member of the group of liberal senators that had opposed Mr. Summers from the outset. Instead, his opposition showed that other constituencies, including rural lawmakers who support community banks, might also rally against Mr. Summers.

    It became clear to the administration that it would need more Republican support than it had anticipated just to get Mr. Summers’s nomination out of committee and presented to the full Senate. That meant cutting deals and making promises to Republican senators that the White House was unwilling to make.

    Summers Pulls Name From Consideration for Fed Chief

    As far as I can tell, Democrats really don’t want to be jerked around on this any more. The jobs situation is an absolute mess, and core Democrats care deeply about unemployment.

    Then we have headlines like this one: Stocks Soar on Summers Withdrawal. At least somebody in DC is reading the Times, even if White House Insiders aren’t.

    It looks to me like President Obama has entered lame-duck territory, but regardless of whether that is the case, Senate Democrats are probably feeling that their judgment should prevail.

  14. Gravatar of Jim Glass Jim Glass
    16. September 2013 at 07:39

    Obama knows nothing at all about economics, and even less (negative knowledge?) about monetary economics, so he will make his decisions on the basis of other factors (and “hearsay” economics, at best). He must.

    The markets in general and Market Monetarists in particular may be happy about Summers not getting the job, but don’t think Obama made this decision to please *them*.

    Expect future insider-tell-all books to reveal how Summers was done in by the left-side Democratic interest groups among which he has been piling up enemies since he advised that more garbage should dumped in poor countries and promoted deregulation during his Clinton Administration years, then inflamed the delicate but still influential Harvard faculty into revolt, etc. And expect the next Fed chief to be selected via the same process, having to survive those forces.

    So when Elizabeth Warren gets the job….

  15. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    16. September 2013 at 08:03

    I think Jim is right that Summers had to drop out for all the wrong reasons. But, who knows if he’d have made a good Fed Chairman. Bernanke, on paper, was the best qualified man for the job EVER. Arthur Burns had all the credentials for it too.

    Then there was Ayn Rand’s friend Alan Greenspan, who didn’t even have a Phd. He only ended up being the most successful Fed Chairman of all time.

  16. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    16. September 2013 at 08:30

    Also, when it comes to shallow Presidents, let’s remember just how low the bar is;

    ‘I just have a hunch that Stalin is not that kind of man. Harry [Hopkins] says he’s not and that he doesn’t want anything but security for his country, and I think that if I give him everything I possible can and ask for nothing from him in return, noblesse oblige, he won’t try to annex anything and will work with me for a world of democracy and peace.’

    That’s FDR telling his first ambassador (Wm. Bullitt) to the Soviet Union that his first hand evaluation of Stalin is off the mark. Roosevelt went to his grave without changing his mind.

  17. Gravatar of Bob Murphy Bob Murphy
    16. September 2013 at 10:18

    Your duty is now clear, Scott. You and Krugman need to start obnoxiously campaigning for me to be the next Fed chair, because you support my hard money views. Then maybe Obama will pick Yellen to spite you.

  18. Gravatar of ssumner ssumner
    16. September 2013 at 10:28

    Catherine, Excellent comment.

    Jim and Patrick, Yes, he was nixed for the wrong reasons.

  19. Gravatar of Catherine Catherine
    16. September 2013 at 11:25

    Here is my all-time favorite passage about Alan Greenspan, from the last chapter of Laurence Meyer’s A Term at the Fed:

    “Greenspan also believes in using monetary policy to counter adverse shocks that may pull the economy away from full employment. This position is not apparent to most observers–perhaps not even to Greenspan himself. The Chairman, after all, frequently waxes eloquent on the importance of price stability–and almost never on the role of monetary policy in encouraging full employment. Still, the Greenspan FOMC has always positioned itself to respond quickly to shocks that might threaten full employment. [emphasis added] During my term, we saw the Greenspan FOMC respond in this way during the Asian crisis, Russia’s devaluation, and the collapse of LTCM. Greenspan’s emphasis on restoring full employment was also evident after the slowdown and recession that followed the bursting of the equity bubble.

    The first two principles””anchoring inflation expectations and responding aggressively to departures from full employment””may appear to be somewhat contradictory. Policymakers who emphasize price stability, for example, may be reluctant to push the economy aggressively back to full employment, fearing a rise in inflation if they overshoot full employment. Conversely, policymakers who emphasize full employment may not make lowering inflation a priority, particularly if the attempt to lower inflation would require pushing the economy below full employment for a while.

    The Chairman, however, sees full employment and price stability as being mutually reinforcing, not contradictory. Maintaining price stability, for example, reduces the risk of an overheated economy, which could lead to higher inflation, sharply tighter monetary policy, and the possibility of a recession. If policymakers start from price stability, on the other hand , they have the freedom to react aggressively should the economy weaken and unemployment begin to rise. Having anchored inflation expectations they don’t have to worry that their aggressive stimulus might dislodge those expectations.

    In effect, the Chairman has created the best of all possible worlds for himself: He appears to be a hawk in terms of inflation (by building credibility for his commitment to price stability and anchoring inflation expectations). But when facing adverse shocks to aggregate demand and employment, he acts like a dove.”

    This is why I agree with Benjamin Cole that there is a real question as to what Larry Summers would have done if he had actually gotten the job.

    We’re in the realm of temperament and the “cognitive unconscious,” and it’s a problem.

    It’s a problem because no one’s ever heard of the cognitive unconscious & no one is vetting for it.

    Ben Bernanke does not have the cognitive unconscious for the job.

    Alan Greenspan did.

  20. Gravatar of Full Employment Hawk Full Employment Hawk
    16. September 2013 at 12:56

    It is not a matter of annoyance, it is a matter of not looking weak by giving in to political pressure. With Obama facing showdowns with the Republicans about the budget and the debt ceiling, that is not something he can afford to do. So this is a very serious issue that he has to give serious consideration.

    If Obama concludes that he cannot afford to nominate Yellen because he fears that giving in to pressure to appoint her makes him look weak, there is fortunately another option available, appointing Christina Romer, who would be an even better choice than Yellen.

  21. Gravatar of xtophr xtophr
    16. September 2013 at 17:07

    Online betting site Paddy Power has Yellen as the strong front runner at 1:7. Runner up is former Fed Vice Chairman Donald Kohn at 4:1.


    Here’s Kohn in an interview with Central Banking Journal from December, 2012:

    CBJ: Do you think as the crisis hit home in 2008 that monetary policy adjusted quickly enough?

    Kohn: “We adjusted about as quickly as we could. We began adjusting in late 2007 before the official peak of the business cycle. Secondly, we had a huge adjustment in monetary policy targets in January 2008, which turned out to be the first month of recession. We saw that the economy was weak, that credit markets and credit channels were being constricted and we took substantial, almost unprecedented, actions to offset that constriction of credit channels by lowering interest rates.”


    Timothy Geithner at 16:1 is politely demurring for now, but politicians do that.

  22. Gravatar of wufwugy wufwugy
    16. September 2013 at 17:11

    Reading the Stan Fischer article and this jumped out at me:

    “Big central banks tend to be cautious about using that lever. If Bernanke halved the value of the dollar relative to, say, the Chinese yuan, that would dramatically increase U.S. exports and probably economic growth, too, but it would also wreak havoc with the global financial system. Every dollar-denominated asset in the world, including all manner of bonds, would plummet in value.”

    Could this be the reason the Obama administration and the Fed appear reluctant to increase monetary stimulus and target higher inflation?

  23. Gravatar of xtophr xtophr
    16. September 2013 at 17:41

    Roger Ferguson is at 12:1 odds, but if this were a horse race I’d be tempted to pick him. He was lauded for performing gracefully under pressure during 9/11 by opening the discount window to all comers. His private-sector background at McKinsey and TIAA-CREF would probably soften any resistance from the financial community. And his policy position seems like a continuation of Bernanke’s.

    I’d pick him (as a bet) only because he might appear to Obama as a nice, safe, middle-of-the-road candidate that won’t cost too much political capital at a time when the President has many upcoming battles. If you want to read tea-leaves, you might divine that the administration believes the worst is over, and that “exotic” approaches like NGDPLT are unnecessary at this point; unemployment is at 7.6%, why bother?


  24. Gravatar of xtophr xtophr
    16. September 2013 at 19:11

    Sorry to yammer on, but here’s an important Yellen position in a recent speech.


    The heart of the the speech comes around 33:00.

  25. Gravatar of Steve Steve
    16. September 2013 at 19:31

    I agree with xtophr.

    Giving “Mister Yellen” 1:7 odds is a bit ridiculous given that Obama does not seem to want her. He made a bit of a “red line” gaffe by naming her as a top candidate along side Summers when he thought Summers would breeze through, but I don’t think he wants her.

    Romer is a good long-shot, only because she (kind of) worked with Obama, and is also one of the best qualified candidates. It’s just Obama’s woman problem…

    At 12:1, Ferguson is a good undervalued bet. He’d probably become a dovish leaning leader of the Fedborg, without stepping on too many toes. He might even become an accidental NGDP targeter.

    I’d also include Obama’s basketball buddy Jeremy Stein as a long-shot candidate if Obama decides he wants to “promote from within.” Stein would be by far the worst possible candidate, but Stein fits the profile of what Obama looks for. Fun guy to shoot hoops and drink beer with during a crisis. And he likes to pop bubbles.

    Geithner ain’t gonna happen. 16:1 is too pricey.

  26. Gravatar of xtophr xtophr
    16. September 2013 at 19:38

    …okay, this is an older thread, so I’m just going to go ahead and post another video link to a potential Fed Chief candidate. OK? OK.

    SO. Roger Ferguson. Here he is:


    And I hope you join me in hoping that TIAA-CREF is not deprived of his leadership.

  27. Gravatar of Steve Steve
    16. September 2013 at 19:44

    One thing that could be a factor is age. A lot of media / PaddyPower favorites are older:

    70 Donald Kohn
    69 Stanley Fischer
    69 Larry Meyer
    67 Alan Blinder
    67 Janet Yellen

    Janet Yellen is the only one of these that makes sense, because she brings continuity. But none of these would be likely to serve more than 8 years.

    In contrast, Roger Ferguson is 61, and Christina Romer is a young lass at only 54.

  28. Gravatar of Steve Steve
    16. September 2013 at 19:49

    Ouch! I love this headline:

    Wall Street up on Summers’ withdrawal; Obama curbs gains


  29. Gravatar of xtophr xtophr
    16. September 2013 at 19:54


    So Jeremy Stein:


    I wouldn’t trust him with a cash register.

  30. Gravatar of Steve Steve
    16. September 2013 at 20:07

    Yes, I am just playing bookie.

    Actually, I think it would make sense for Obama to promote Yellen to Chair, and also appoint Romer to the Board, along with a Republican guy for balance. Lots of openings coming up.

  31. Gravatar of xtophr xtophr
    16. September 2013 at 20:46


    OK, bet. Lobster roll in Connecticut against your best sandwich. I’ll take all bets:

    Name the next Fed Chief:

    1: Name your Fed Chief
    2: Name your sandwich
    3: Name your locale

    (All CT prizes must be claimed in person Capt. Scott’s Lobster Dock. Scout’s honor applies.)

  32. Gravatar of Steve Steve
    16. September 2013 at 22:03

    I think it’s Yellen, but I have her at maybe 2:3 odds.

    2:3 Yellen
    6:1 Romer
    8:1 Stein
    8:1 Ferguson
    10:1 Kohn
    20:1 Krueger
    30:1 Geithner

    That’s my book.

  33. Gravatar of W. Peden W. Peden
    16. September 2013 at 23:58

    I actually think that Romer might be better than Yellen, because she is very good at explaining difficult economic concepts to a general audience. One of Alan Greenspan’s strengths was his ability to handle the press and Congress; a Fed chair can’t be much better than his/her board at decision-making, but there are definitely different levels of communication skills among potential candidates.

  34. Gravatar of Lorenzo from Oz Lorenzo from Oz
    17. September 2013 at 00:34

    RBA Governor (equivalent of Fed Chair) get picked by executive decree (I believe technically it is an Order in Council) but much more corporately (i.e. RBA insiders almost always get the job: the one exception, Bernie Fraser, was an ex officio member of the RBA Board and presided over the crucial 1993 change in RBA policy). This tradition of insider appointments says a fair bit about the standing of the RBA.

    Glen Stevens (Governor 2006-) Previous position, Deputy Governor.
    Ian Macfarlane (Governor 1996-2006) Previous position, Deputy Governor.
    Bernie Fraser (Governor 1989-1996) Previous position, Secretary of Treasurer (ex officio member of RBA Board).
    Bob Johnston (Governor 1982-1989) Previous positon, senior RBA officer.
    Sir Harold Knight (Governor 1975-1982) Previous position, Deputy Governor.
    He once told a senior RBA economist “We need to behave predictably and without trying to out-think market participants.”
    Sir John Phillips (Governor 1968-1975) Previous position, Deputy Governor
    “Nugget” Combes (Governor 1960-1968) Previous position, senior public servant.

    The RBA was established in 1960, splitting off the reserve bank functions from the Commonwealth Bank.

    Of course, no Australian Government would ever leave positions on the RBA Board vacant, so the mindset is seriously different.

  35. Gravatar of Lorenzo from Oz Lorenzo from Oz
    17. September 2013 at 00:39

    Nugget Coombes had been Governor of the Commonwealth Bank since 1949, so he was essentially the head of the central bank from 1949-1968.

  36. Gravatar of Saturos Saturos
    17. September 2013 at 01:07

    Thanks Lorenzo, I’ll never forget now that the CBA had a Governor called Nugget Coombes.

  37. Gravatar of dtoh dtoh
    17. September 2013 at 03:15

    Obama has to be one of the most incompetent presidents in the history of the Republic.

  38. Gravatar of ssumner ssumner
    17. September 2013 at 05:17

    Catherine, Good point.

    FEH, Keep in mind Summers was torpedoed by the Dems, not the GOP.

    xtophr, Not a very promising statement. They did all they could? That’s absurd.

    wufwugy. Could be, but it’s not really an issue. Hitting the NGDP target would not require a sharp devaluation against the yuan.

    Steve, I actually support Obama’s no negotiation position on the debt ceiling.

    W. Peden, I agree that Romer would be better.

    dtoh, Actually he’s just average.

  39. Gravatar of Full Employment Hawk Full Employment Hawk
    17. September 2013 at 05:35

    “the administration believes the worst is over, and that “exotic” approaches like NGDPLT are unnecessary at this point; unemployment is at 7.6%, why bother?”

    If it believes that, it is hopelessly out of touch with Main Street. The worst is more than over for our plutocracy. For them its Morning in America. But for ordinary working people, the economy is still depressed and in unsatisfactory shape, and they recognize that it is. The recent reductions in the unemployment rate are largely the result of discouraged workers leaving the labor force. And a large part of the jobs being created are low wage McJobs, and not jobs with living wages. Working people have friends and relatives that are unemployed or underemployed and are afraid of losing their jobs. But the high unemployment is hurting the workers who are working. The mass army of unemployed we currently have is putting very strong downward pressure on real wages, so that wages are stagnating at best and virtually all the increases in productivity are going to the plutocracy.

    What Obama needs most badly is a more competent set of economic advisors that are in touch with Main Street.

  40. Gravatar of Full Employment Hawk Full Employment Hawk
    17. September 2013 at 05:42

    “FEH, Keep in mind Summers was torpedoed by the Dems, not the GOP.”

    I understand that. I played a tiny role in this myself by signing various petitions circulated by progressive groups and members of Congress against Summers getting the job.

    The progressive wing of the Democratic party did Obama a big favor by keeping him from making a serious mistake with respect to appointing Summers. Now they need to push agressively for either Yellen or Romer.

  41. Gravatar of Blue Aurora Blue Aurora
    17. September 2013 at 06:43

    I agree with Scott Sumner that Mr. Obama better not reject Janet Yellen out of pure and childish spite.

    Although this is belated, I’m going to have to chip in on a few comments made by others.

    Jim Glass: I agree with you that Mr. Obama probably doesn’t have a great deal of knowledge of economics in general. However, I in turn respond with something that can be said of any government – no government can deal with everything immediately in and all at once. Issues and interests are going to be prioritized. Judging from Mr. Obama’s background prior to the Presidency, it seems to me that his main interest and passion really is foreign policy (he did an undergraduate major in Political Science with a concentration in International Relations).

    Patrick Sullivan: Actually, Alan Greenspan did gain a doctorate. He was in the doctoral programme at Columbia University, but left (I don’t recall the exact reason, but I think he might not have been fully committed to postgraduate education at the time). He later attained a doctorate in economics from New York University. According to William Silber’s biography of Paul Volcker, he never finished his doctoral programme and apparently regrets that from time to time.

    Catherine: What makes you think Larry Summers is on the autism spectrum?

  42. Gravatar of Mike Clayton Mike Clayton
    19. September 2013 at 18:52

    Amazing macroeconomic insider views.
    Greenspan and Summers beat up Brooksley Born when she blew the whistle on Wendy Gramm’s massive deregulation (“modernization”) of the commodities exchange, which moved the speculators from 20 percent to 80 percent of transaction volume…or so I was told. Anyone have that data? Of course only the BIG BANKS got that special treatment in a secret memo?? I am very happy with Ben and wish he would stick around to help clean up after the GOP creates an even bigger mess with the debt ceiling games and trying to defund ACA just as states are finally setting up exchanges. How is that for fiscal headwinds.

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