White House Adviser Summers Hopes History Forgets This Great Recession

With the U.S. economy apparently headed for another rough patch, the Obama administration faces a growing chorus of complaint and opposition. Just this past week, House Minority Leader John Boehner called for Larry Summers and Timothy Geithner, Obama's top economics advisors, to resign. While Geithner is fairly well-known to the general public, Summers is not. Who is this insider who helps President Obama call the macroeconomic shots?

By most accounts, White House economic adviser Larry Summers is a cantankerous but brilliant economist who has a gift for explaining complex ideas simply, a skill that's invaluable in the current economic climate.

As the director of the National Economic Council, his influence is seen in a broad range of economic policies ranging from health care to financial reform. Summers organizes the president's Daily Economic Briefing, and he co-chaired the auto industry task force. He also acts as a spokesperson, explaining Obama administration policies and initiatives.

A Defender Who Makes a Clear Case

Few can make the case as clearly as Summers for Obama's economic plan. In a recent op-ed in the Financial Times, the economist rejected criticism that Obama was not committed to reducing the deficit and boosting the economy.

"During the next five years, the US is expected to experience the fastest deficit reduction since the second world war. Much of that will stem from the return to growth and the phasing out of Recovery Act programmes," he wrote. "We will see clearly in the years ahead that pushing growth and reducing deficits are complementary, not competing, objectives. Reducing the spectre of prospective deficits will enhance near-term growth. And ensuring adequate growth in the near term will reduce long-term deficits."

Speaking at the Eighth Annual John M. Templeton Jr. Lecture on Economic Liberties and the Constitution at the National Constitution Center in May, Summers offered a spirited defense of the Obama administration's call for a second stimulus package, as the impact of last year's $787 billion program starts to wear off.

He also argued in his talk at Philadelphia's National Constitution Center -- for which DailyFinance was the media sponsor -- that the President has little choice given the historical consequences at stake.

"A flawed financial system means a weaker economy," said Summers, who served as Treasury secretary during the Clinton administration. "Less income means less hiring. The 1930s were such a time, and 2008 was such a time. General Electric was not able at one stage to borrow money for five days.... There was no alternative but for strong action to stop those vicious cycles."




Economics in His Blood

Summers was born in New Haven, Connecticut, and grew up in the suburbs of Philadelphia. Economics was a family business. His parents Robert and Anita were economists at the University of Pennsylvania. His late Uncle Paul Samuelson was a Noble laureate in economics. Another uncle, Kenneth Arrow, also won the award. At 16, Summers entered the Massachusetts Institute of Technology and did graduate work at Harvard University, becoming one of the youngest tenured faculty members at the age of 28.

He has reached the pinnacle of his profession, being appointed both Secretary of the Treasury and chief economist at the World Bank. Henry Kissinger suggested that he be given a job in the administration "shooting down or fixing bad ideas." Those who know Summers well say it's role that suits him well.

"He does not suffer fools," says R. Glenn Hubbard, dean of the Columbia University Graduate School of Business and a former Bush administration official, in an interview. "Larry's strength is being able to connect the dots very quickly. He communicates clearly and succinctly. "

In a 2001 profile in Slate, David Plotz argued that Summers always tried to find real-world applications for economic principals, and that "from early in his career, he engaged in practical politics." He served on the staff of the Council of Economic Advisers in the Reagan administration and was chief economics adviser to Michael Dukakis' 1988 presidential campaign. In the early 1990s, he was the chief economist at the World Bank. Summers arrived at the Clinton Treasury Department in 1993 as undersecretary for international affairs and served as Treasury Secretary from 1999 to 2001, until he was named president of Harvard University. In was there that his communications skills failed him.

Hard Times at Harvard

In 2006, Summers, now 55, left the presidency of Harvard University over comments he made that seemed to question the aptitude of women for math and science -- remarks his supporters say were overblown by the media. Members of Harvard's Faculty of Arts and Sciences passed a vote of no confidence in Summers for this and other controversies.

"There is no question that he got a raw deal from a lot of people," says Claudia Goldin, Henry Luce Professor of Economics at Harvard University, in an interview. Goldin adds that most Harvard faculty members, including those in the professional schools, backed him. "I think he was often misinterpreted."

Other aspects of Summers' career have generated controversy. As Summers admitted in response to a question from a DailyFinance reader during the Philadelphia speech, he's no stranger to deregulation. Experts have pointed to several laws passed during the Clinton era that contributed to the financial crisis, including the repeal of the Depression-era Glass-Steagall Act that had mandated the separation of commercial and investment banking.

Summers gritted his teeth and cracked a joke about how much he liked the audience. Later, he explained that he thought it was unfair to compare his previous government service with his current stint.

"Clearly, we are in a different world than we were in the 90s," Summers said.

How Do You Define Success?

Throughout his talk, Summers maintained the air of a supremely confident college professor, a role he has played for decades. Gruff manner aside, the American people would be wise to listen to what he has to say because it makes quite a bit of sense.

"People asked me when I first made plans to go to Washington and advise President Obama on his economic strategy, 'How do you define success?' " said Summers. "I was never quite sure how to answer that question, then one day a kind of answer struck me. I remembered back to my twin daughters' study of Advanced Placement American History... What I was struck by as an economist was that all kinds of events that seemed important to me -- the 1987 stock market crash, the 1982 recession, the inflation of the 1970s -- were barely mentioned in their course. In contrast, the course seemed to go on and on and on about the Depression of the 1930s.

"I vowed that the first definition for success for us would be this: Let's make sure that this economic crisis is not studied by students of history 25 years from now or 50 years from now. "

Government: the Problem or the Solution

As his daughters' study of history illustrates, there are times when the American people see government as part of the problem (the 1980s) and others when it's part of the solution (the 1930s). Summers argues that the American people favor a more activist government now -- like they also did in the first decade of the 20th Century and again in the 1960s -- though it needs to be held accountable.

"Yes, we have much to fear from excessive government, but it was my judgment that the largest challenges we face came from the concern that government would do too little, that government would not seek to restore stability in our economy, that an unchecked financial system would too often be a source of instability, rather than stability," Summers said.

Summers's rhetoric underscores that there are no neat, simple answers to how the economy got stuck in its current predicament and how we can get out of it. Implicit in his speeches is another assumption: Anyone who says otherwise is a fool.

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kem0330

Larry is an empty suit with a big ego. Just another boso in Obama's cabinet.

August 29 2010 at 12:05 PM Report abuse +4 rate up rate down Reply
mornewz

Oh, babble.

August 29 2010 at 8:55 AM Report abuse rate up rate down Reply
Jim S

We are not interested in what is on his resume... we are not interested in how he can turn a complex issue around for the laymen to understand.... WE DO understand that you cannot spend your way out of debt and WE DO understand that the stock market reacts to emotion at first then sits back and adjusts.... there is only one direction.... cut spending drastically

August 29 2010 at 8:37 AM Report abuse +6 rate up rate down Reply
marine1942

Another failure. Did Bush breed him ??

August 29 2010 at 7:45 AM Report abuse -4 rate up rate down Reply
1 reply to marine1942's comment
moneywhys

It's an interesting constrast. On one side you have people using names like **********. They oppose Summers. On the other side you have people who genuinely see the mess that all the years of trickle down has done to the middle class. Which people are thinking and which people are just puppets of the wealth class who have manipulated the uninformed through Fox News?

August 28 2010 at 7:49 PM Report abuse -2 rate up rate down Reply
1 reply to moneywhys's comment
mojobujak

money, sounds like you've got a bad case of liberal groupthink - try to pull yourself away from MSNBC and it might not be fatal.

August 29 2010 at 8:29 PM Report abuse +2 rate up rate down Reply
cmdrhlamb

well, obama can do what the shrub did.....if his economic adviser does'nt agree with him, fire him and then search for a "yes" man.....

August 28 2010 at 7:03 PM Report abuse +5 rate up rate down Reply
baz7160

He's never had a job outside of academia or government- he's never had to put HIS money where his MOUTH is! He's a "nutty professor" experimenting with your and my money.

August 28 2010 at 5:49 PM Report abuse +8 rate up rate down Reply
jg2432

We should forget Summers, he is just another political hack.

August 28 2010 at 1:28 PM Report abuse +7 rate up rate down Reply
bohemianacres

Obama campaigned on the idea that the hard times, recession, will be over mid-2010. It definitely has not happened and about half of the "experts" say a double dip or at best a deepening is coming. Now we have Summers saying in the next "five years" we will see a great improvement. Heck, that is 2015. And I suppose when 2015 comes and there is no major improvement or very little, the catch year will be 2020. The country is near death now because of policies and legislation passed in the last decade. It does not work. We are living the end results of all that government now. Sorry, if the current administration does not do something fast and something that will show immediate improvement other than the Fed saying "We will not let the economy fail" as they did yesterday, which means about the same as one standing on the top floor of a burning building and the firepeople below are saying to hang in there, "We will not let harm get you", there will be five years of bad economy, and then another five years and another five year, etc. I think what we, the middle and low income people have to accept is this is the new Standard of Living, and move on. Government, legislatures, D.C., States, etc. are proving to be a total waste of money and time.

August 28 2010 at 11:48 AM Report abuse +4 rate up rate down Reply
Roger

Mr. Summers would most likely fail running any small business, and most likely, be removed from any large corporation after several quarters. Its obvious the person who penned this article is enamored by the left side of the government and the minions who live off of the taxpayer bounty. This November the populace will go forward to the polls and the outcome should remind the politicians and appointed government employees, if we want more government or less. Let's pray to God that we want less, and move forward in paying less for government, as well.

August 28 2010 at 10:27 AM Report abuse +1 rate up rate down Reply