2009 And All That
Paul Krugman, NYT
There has been a lot of commentary on Neil Irwin’s report on why the White House doesn’t want Janet Yellen to chair the Fed, with good reason. The merits of Yellen versus Summers aside, it sounds as if the WH wants Summers, and doesn’t want Yellen, for all the wrong reasons. They want a team player — and consider Yellen’s somewhat independent stance as a liability, even though she has been consistently right. They consider Yellen diminished because she wasn’t part of the team making policy in 2009 — when most people outside the WH don’t consider 2009 anything like a policy triumph.
Let’s break that last one down a bit more. It is overwhelmingly clear that, as some of us warned at the time, the stimulus was too small and too short-lived. We can argue until we’re blue in the face whether the WH could have gotten a bigger stimulus, or at least built into its plans a mechanism to get additional stimulus down the road, say via reconciliation; we can also argue about whether it could have driven a harder bargain with the banks, possibly taking one or two into receivership to encourage the others. What’s clear, however, is that the inner circle badly misjudged the scale of the problem — and their overoptimistic forecasts and pronouncements haunt them to this day.
Oh, and Yellen was right when they were wrong.
(More here.)
There has been a lot of commentary on Neil Irwin’s report on why the White House doesn’t want Janet Yellen to chair the Fed, with good reason. The merits of Yellen versus Summers aside, it sounds as if the WH wants Summers, and doesn’t want Yellen, for all the wrong reasons. They want a team player — and consider Yellen’s somewhat independent stance as a liability, even though she has been consistently right. They consider Yellen diminished because she wasn’t part of the team making policy in 2009 — when most people outside the WH don’t consider 2009 anything like a policy triumph.
Let’s break that last one down a bit more. It is overwhelmingly clear that, as some of us warned at the time, the stimulus was too small and too short-lived. We can argue until we’re blue in the face whether the WH could have gotten a bigger stimulus, or at least built into its plans a mechanism to get additional stimulus down the road, say via reconciliation; we can also argue about whether it could have driven a harder bargain with the banks, possibly taking one or two into receivership to encourage the others. What’s clear, however, is that the inner circle badly misjudged the scale of the problem — and their overoptimistic forecasts and pronouncements haunt them to this day.
Oh, and Yellen was right when they were wrong.
(More here.)
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