11 stunning revelations from Larry Summers’s secret economics memo to Barack Obama

Discussion in 'Politics & Religion' started by Mercor, Jan 24, 2012.

  1. 11 stunning revelations from Larry Summers’s secret economics memo to Barack Obama

    By James Pethokoukis
    January 23, 2012, 3:08 pm

    A lengthy piece in The New Yorker looks at policymaking in the Obama White House. A key source for writer Ryan Lizza is a 57-page, “Sensitive & Confidential” memo written by economist Larry Summers—eventually to be head of Obama’s National Economic Council—to Obama in December 2008. Here’s some of what I learned about Team Obama’s thinking as the financial crisis was exploding, followed by quotes from the memo itself:

    1. The stimulus was about implementing the Obama agenda.

    The short-run economic imperative was to identify as many campaign promises or high priority items that would spend out quickly and be inherently temporary. … The stimulus package is a key tool for advancing clean energy goals and fulfilling a number of campaign commitments.

    2. Team Obama knows these deficits are dangerous (although it has offered no long-term plan to deal with them).

    Closing the gap between what the campaign proposed and the estimates of the campaign offsets would require scaling back proposals by about $100 billion annually or adding new offsets totaling the same. Even this, however, would leave an average deficit over the next decade that would be worse than any post-World War II decade. This would be entirely unsustainable and could cause serious economic problems in the both the short run and the long run.

    3. Obamanomics was pricier than advertised.

    Your campaign proposals add about $100 billion per year to the deficit largely because rescoring indicates that some of your revenue raisers do not raise as much as the campaign assumed and some of your proposals cost more than the campaign assumed. … Treasury estimates that repealing the tax cuts above $250,000 would raise about $40 billion less than the campaign assumed. … The health plan is about $10 billion more costly than the campaign estimated and the health savings are about $25 billion lower than the campaign estimated.

    4. Even Washington can only spend so much money so fast.

    Constructing a package of this size, or even in the $500 billion range, is a major challenge. While the most effective stimulus is government investment, it is difficult to identify feasible spending projects on the scale that is needed to stabilize the macroeconomy. Moreover, there is a tension between the need to spend the money quickly and the desire to spend the money wisely. To get the package to the requisite size, and also to address other problems, we recommend combining it with substantial state fiscal relief and tax cuts for individuals and businesses.

    5. Liberals can complain about the stimulus having too many tax cuts, but even Team Obama thought more spending was unrealistic.

    As noted above, it is not possible to spend out much more than $225 billion in the next two years with high-priority investments and protections for the most vulnerable. This total, however, falls well short of what economists believe is needed for the economy, both in total and especially in 2009. As a result, to achieve our macroeconomic objectives—minimally the 2.5 million job goal—will require other sources of stimulus including state fiscal relief, tax cuts for individuals, or tax cuts for businesses.

    6. Team Obama wanted to use courts to force massive mortgage principal writedowns.

    The next step in the housing plan is responsible bankruptcy reform along the lines of the Durbin bill you cosponsored. This would allow bankruptcy courts to write down the principal of primary residences to the current market value. We recommend announcing this reform to begin immediately following the close of the enhanced Hope for Homeowners period.

    7. Team Obama thought a stimulus plan of more than $1 trillion would spook financial markets and send interest rates climbing.

    To accomplish a more significant reduction in the output gap would require stimulus of well over $1 trillion based on purely mechanical assumptions—which would likely not accomplish the goal because of the impact it would have on markets.

    8. Greg Mankiw, economic adviser to Mitt Romney, was dubious about the stimulus.

    Greg Mankiw is the only economist we have consulted with who refused to name a number and was generally skeptical about stimulus.

    9. But the Fed was a stimulus enabler.

    Senior Federal Reserve officials appear to be of the view that a plan that well exceeds $600 billion would be desirable.

    10. IPAB was there at the very beginning.

    There are two possibilities for making tough decisions on the long-run budget, which could be done either separately or together: creating an executive-branch “health board” (which focuses on one part of the issue) and a Congressionally chartered commission (which could focus more broadly).

    11. The financial crisis wasn’t just Wall Street’s fault.

    A significant cause of the current crisis lies in the failure of regulators to exercise vigorously the authority they already have.
    http://blog.american.com/2012/01/11...ummers-secret-economics-memo-to-barack-obama/
     
  2. 377OHMS

    377OHMS

    "We're gonna...spread the wealth around"
     
  3. pspr

    pspr

    The community organizer thinks he knows what's best.
     
  4. Yeah, and so does Gordon Gekk-----I mean Mittens:D
     
  5. You know the stats 377, the one percent made out like bandits and the 99% were stagnant or worse.

    Yep, that's has got to be fixed.
     
  6. jem

    jem

    If the opposition, uses this fact correctly, there is now no way Obama can be re elected.

    it is a disgusting fact... blatant lies about infrastructure in support of cronyism over jobs.

    "1. The stimulus was about implementing the Obama agenda.

    The short-run economic imperative was to identify as many campaign promises or high priority items that would spend out quickly and be inherently temporary. … The stimulus package is a key tool for advancing clean energy goals and fulfilling a number of campaign commitments."
     
  7. OMG this just makes me sick. To think Obama hasn't helped even 1% of the people who voted for him. What a failure as a President. I hope the people wake up and realize this before the next election and vote him out of office so he can go back to being a community organizer.
     
  8. Hmm, ok your tax dollars is going to this. No problem for you?

    "The real reason that we should be concerned about private equity’s expanding power lies in the way these firms have become increasingly adept at using financial gimmicks to line their pockets, deriving enormous wealth not from management or investing skills but, rather, from the way the U.S. tax system works. Indeed, for an industry that’s often held up as an exemplar of free-market capitalism, private equity is surprisingly dependent on government subsidies for its profits"

    Read more http://www.newyorker.com/talk/financial/2012/01/30/120130ta_talk_surowiecki#ixzz1kQr9lUT5
     
  9. pspr

    pspr

    Even with current law, tax payers are not paying for pensions that are "dumped" as it is called in the NYT article.

    The Pension Benefit Guarantee Corporation is not funded by general tax revenues. Its funds come from four sources:

    Insurance premiums paid by sponsors of defined benefit pension plans;
    Assets held by the pension plans it takes over;
    Recoveries of unfunded pension liabilities from plan sponsors' bankruptcy estates; and
    Investment income.
     
  10. 1. What is the HCTC and who is eligible?
    The Health Coverage Tax Credit (HCTC) pays 65% of qualified health insurance premiums for eligible individuals and their families. The HCTC is a unique tax credit administered by the Internal Revenue Service (IRS) that individuals can receive either monthly as their health plan premium becomes due, or yearly as a credit on their federal tax return. The following individuals are candidates for the tax credit:

    1. Pension Benefit Guaranty Corporation (PBGC) payees who are at least 55 years old,

    http://www.irs.gov/individuals/article/0,,id=109956,00.html
     
    #10     Jan 24, 2012