Origins Of The Mistaken Pivot To Deficits

Zachary Goldfarb has a fascinating piece looking at Treasury Secretary Timothy Geithner as the main architect of the mistaken decision to turn the corner and start focusing on deficit reduction rather than jobs:

By early last year, Geithner was beginning to gain the upper hand in a rancorous debate over whether to propose a second economic stimulus program to Congress, beyond the $787 billion package lawmakers had approved in 2009.

Lawrence Summers, then the director of the National Economic Council, and Christina Romer, then the chairwoman of the Council of Economic Advisers, argued that Obama should focus on bringing down the stubbornly high unemployment rate. This was not the time to concentrate on deficits, they said.

Peter Orszag, Obama’s budget director, wanted the president to start proposing ways to bring spending in line with tax revenue.

Although Geithner was not as outspoken, he agreed with Orszag on the need to begin reining in the debt, according to current and former administration officials. Some spoke for this article on the condition of anonymity to discuss internal deliberations.

The real mistake here, though, was made by the president. Having people on your staff who share common values but have a range of views is a good idea. But this is an issue that’s much more in the Romer/Summers wheelhouse than Geithner’s or Orszag’s. The ultimate decision was probably over-determined, with it seeming to other members of the team that there was no legislative path forward for additional stimulus so that becoming optimistic about the confidence-boosting potential of releasing deficit plans was mentally pleasing. In general, the Obama administration stands out for having at times a weak grasp of the non-legislative functions of the presidency and doesn’t seem to spend much time worrying about Fed appointments or stimulative things executive agencies can do.