When I first learned in 2009 that Ron Suskind's next book was going to be about the making of a economic policy in the Obama administration, I looked forward to it. Previous books about the making of economic policy had degenerated into unseemly hagiography (cough Robert Woodward's Maestro cough) or into gotcha books (cough Robert Woodward's The Agenda cough). It seemed to me that Ron Suskind had done considerably better than "gotcha" books -- or had written "gotcha" books that also had immense extra value added -- on the Bush-era national security apparatus.
I thought he would do equally well on economic policy.
I thought the Obama economic-policy team was first rate. All five of the principals, Benjamin Bernanke, Timothy Geithner, Lawrence Summers, Christina Romer, and Peter Orszag, seemed to me among the very best candidates in the world for senior economic policymaking jobs in an American administration. And they were all my friends, or at least we were friendly. I did think that some of them were in the wrong jobs. Lawrence Summers made much more sense to me as Treasury Secretary than as NEC chair. Timothy Geithner seemed to me much better suited to be NEC Chair than to manage a large department with line authority.
Nevertheless, even though the economic situation was horrible, the economic policy team looked good to me. I looked forward to a Suskind book that would tell of success: smart and serious people who knew what they were doing fighting about substance, presenting the president with good options, him choosing the best one, and the course of the economy during the Obama administration being if not great at least better than we all feared after the bankruptcy of Lehman Brothers.
And there is a perspective from which Obama administration economic policy has been a considerable success. The banking system collapse was averted. The spike of the unemployment rate to 15% or higher was averted. Obama passed a pretty good financial regulatory reform. Obama passed a pretty good health-care financing reform. Obama passed the largest quick fiscal expansion he could get through congress (using the Reconciliation process would have taken months and months longer). We are left with a jobless recovery, and with crippled mortgage finance and construction, and a ticking bomb in Europe. But, one could say that things could have been much worse--and would have been much worse had Republicans controlled any substantial share of economic policy or been more effective at blocking Obama initiatives.
And of the successes of Obama administration economic policy perhaps the greatest success was the successful implementation of the "stress tests" of the banking system by Tim Geithner and his Treasury Department in the spring of 2009. The panic and the downturn could not be halted until finance became convinced once again that the key highly-leveraged money-center banks were well-capitalized. The government's TARP authority was not large enough to do the job. Somehow, private investors had to be convinced that investing in the banks was a good idea. The stress tests did that, and played a role in restoring confidence in 2009 somewhat akin (albeit on a smaller scale) to Roosevelt's abandoning the gold standard in 1933. It was a major achievement, well-executed--especially given that Tim Geithner was then "home alone" at the Treasury without confirmed deputies.
But this is not the only perspective from which to view Obama administration economic policy.
Since the spring of 2009 I have became more and more alarmed by the economic policy choices made by the Obama administration. A new administration needs to (1) forecast what is most likely to happen, and (2) design and implement policies that will deal with what is likely to happen, The Obama administration did that. I think that some of its initial policies were wrong, but given the press of events I would give the administration moderately high marks for the policies it designed and implemented up through, say, April 2009.
Thereafter, however, things to me seemed to gradually fall apart. An administration has a third task it needs to carry out: (3) think hard about the risks--what if the administration has misjudged the situation? what if more things go wrong?--figure out what it needs to do to buy insurance against those risks, and do those things as well. It needs to ask itself:
The major risks that confronted the Obama administration-to-be in the fall of 2008 and the winter-spring of 2009 that are relevant here were:
To deal with all of these, Obama needed to staff his administration up--to choose and nominate officials and, if the Senate did not confirm them in a timely fashion, recess-appoint them.
To deal with the first of these seven, the Obama administration needed to set up the Budget Act Reconciliation process and to husband executive branch authority so that it could conduct large-scale expansionary economic policy via Reconciliation and loan guarantees and quantitative easing if Republicans filibustered and the economy was still in the dumps in 2010 and 2911. To deal with the second, the Obama administration needed to rapidly nominate and get confirmed Federal Reserve governors and a Federal Reserve Chair who would take the Federal Reserve's dual mandate very seriously indeed if unemployment was above 9% and stable or rising in 2010 and 2011.
To deal with (3) and (4) the administration needed to prepare the ground by doing more of what it had done to buy insurance against (1) and (2)--by warning at every opportunity that the first round of expansionary policies might not be enough, by preparing the ground via Reconciliation and by husbanding executive branch authority, and by making sure not to abandon the fight against unemployment for the fight for long-run fiscal stability until the recovery was well-established--lest the administration wind up in 2010 and 2011 with a jobless recovery and few remaining tools to expand demand. To deal with (5), the administration needed to prepare the ground for using Fannie Mae and Freddie Mac to essentially nationalize, refinance, and work out mortgages nationwide, should it turn out in 2010 or 2011 that the recovery was not strong or sustained.
To deal with (6), it would have been wise on day 1 to promote the IMF to the role of global technocratic crisis manager, and to get commitments from major credit-worthy economies that they would back the IMF with sufficient resources for it to actually handle the situation. should the mortgage-induced banking crisis of 2008-9 set off sovereign debt crisis in 2010-11.
I wasn't a genius to see these as the risks. They were, at least in the circles in which I moved, obvious.
Yet the only risk that the Obama administration has appeared to even think about guarding against is (7)--which is the one risk that has not come home to roost big time.
For me the big question since the summer of 2009 has been: Why? Why didn't the Obama administration make any significant effort to purchase insurance against risks (1) through (6)? Those were the questions that I hoped Ron Suskind's book would answer for me.
And, alas, it does not do much to do so. Instead, it falls into the Woodward The Agenda trap: it is a story of strong and colorful personalities knifing each other in internal bureaucratic bar fights with little sense of what the substantive policy arguments were, of the arguments' merits and demerits, and of the stakes.
Moreover, the book falls victim to the Teddy White disease: a reporter taking the time-colored recollections of individuals and turning them into a third-person omniscient capital "T" Truth, giving the narrative an authority it does not deserve.
This is further compounded by Suskind's having the implicit viewpoint of the third-person omniscient narrator jump away from one source to another when the first source tells a version of the story that Suskind does not want to highlight. References to seventeenth-century muzzle-loading musketry technology become in Suskind's retelling references to twenty-first century pornography. People who steamrolled the entire Democratic coalition to get policy ideas that had their origins in the hard-right Heritage Foundation enacted into law are in Suskind's view too weak to stand up to the big boys of the administration. Suskind wrongly thinks people who skip meetings to deal with crises are demonstrating their disloyalty to the president, when Obama would have been the very first to say: "What are you doing here? You need to be firefighting!" And Tim Geithner dresses badly and will never make the cover of the Financial Times "How to Spend It" supplement.
And so what I at least regard as the big stories and mysteries of economic policymaking under Obama are largely passed by.