The centrists lose their economic prerogative — and that’s a bad thing?
by digby
Apparently, the left took Larry Summers scalp and it’s a bad because it means the Democratic Party has “junked the centrists prerogative to set economic policy.”
This was really never about monetary policy — which is sad, given that it’s the only function of the Fed where it has independence. And I don’t think this was about Summers’s record on financial regulation, although that’s debatable. It was clear that Summers’s views had changed (even if how fully they had changed wasn’t so clear), as I wrote when he was under close consideration. Nor is it as if the issue stopped the Senate from confirming enough of his colleagues, who shared the same opinion at the time, to make the West Wing a family reunion.
No, this was about tribalism. In the mind of progressives, the Democratic Party has let them lead on social issues — see Obama’s quick “evolution” on same-sex marriage — but locked them out of the room where tax rates are set, trade agreements signed, budgets drawn up and regulations stamped. It could only keep them pounding at the door for so long.
“This is a complex moment in our national life.” That’s what Summers wrote in his withdrawal letter. He doesn’t elaborate, and it’s an odd remark to leave hanging. I think he’s writing about change in the Democratic Party as it junks the centrists’ prerogative to set economic policy. I think he’s writing, too, about betrayal. The White House put him into public consideration and then sat there while the left took a scalp.
I’m a little bit confused. I thought the argument was pretty much all about financial regulation and Summers’ record, even quite recently, as a proponent of less of it. I don’t recall very many people taking him exclusively to task for his views on monetary policy. True, I may have missed it. But, I think crazed tribal leftists Jeff Merkley and Sherrod Brown made it pretty clear what their opposition was all about:
Summers had become a lightning rod for some of Obama’s allies in Congress and advocacy groups. Democratic lawmakers, including Senators Jeff Merkley of Oregon and Sherrod Brown of Ohio, said they opposed Summers on the grounds that he was too lax on financial regulation.
The Fed has massive regulatory powers and anyone with any sense was concerned that Summers was not a guy who would use it to benefit the people but rather to preserve the status quo, at best. Sure there were other concerns about Summers’ (and Obama’s) continuing disrespect toward women. (Despite the president’s admirable record on civil right in other areas his record on female appointments is worse than Bill Clinton’s was 15 years ago.) And Summers has the kind of prickly personality and reputation for loose lips that is not conducive to the role of Fed Chairman which requires very prudent, deliberate rhetoric. But the essential argument was that Summers’ record on deregulation and his inability to change course or see crises as they were unfolding rendered his judgment suspect at a time when it’s vitally important to reform the system.
But speaking of monetary policy, this is one good reason why we should probably be wary of young “centrists”:
This is a precedent we will regret when, in some distant future, we once again need the Fed to crush inflation at the cost of mass unemployment or when, as now, we want a Fed chairman that would accept some inflation to pull us out of the remnants of a deep recession.
I lived through the Volcker recession of the early 80s. It was ugly. Very ugly. The country was never quite the same — in fact, take a look at income inequality today and you can see how well all the inflation scaremongering of that time worked to keep wages low for the ensuing 30 years. I didn’t think there was anyone on the center, center-left or, actually, anywhere but the far right who would want to “crush inflation at the cost of mass unemployment.” Hopefully, I’ll have finally shuffled off my mortal coil before the next alleged inflation crisis hits. But I feel for you kids if this is idea is blithely accepted among the economic thinkers of your generation. You don’t need any more mass unemployment in your lifetimes.
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