There’s a mole burrowing deep into the heart of the Obama administration. Bo, the “first dog,” may have noticed it, but the humans in the White House seem unaware of its presence. Maybe that’s because this particular mole is of the two-legged variety and carries the imprimatur of such prestigious institutions of higher learning as MIT and Harvard University.
The mole has a name: Lawrence H. Summers, director of the National Economic Council and trusted presidential advisor, whose writ on all things financial exceeds even that of Treasury Secretary Timothy Geithner, front man for the war on recession.
Americans may wonder why the crackdown on the misbehaving megabanks has not been more energetic or prosecutorial, and why easing unemployment and home foreclosures has been given such short shrift in favor of saving the money changers of the temple. Look no further than Summers, a dyed-in-the-wool economic conservative and market worshipper. It was his influence, more than any other, that led the administration to extend the Republican TARP bailout in its original form and to steer the stimulus package as much toward tax cuts as toward infrastructure spending.
Summers, according to those in the know, was originally slated to get Geithner’s position at Treasury, the official top economic job in Washington, but circumstances forced him to become the gray eminence behind the scene. Obama’s chief economic advisor has baggage — he was forced out as president of Harvard University when intemperate remarks embroiled him in a 2005 sexual-politics controversy on campus. An appointment requiring Senate confirmation was considered a non-starter.
Nevertheless, Summers is what political-power aficionados call “a player,” and notwithstanding his culpability in the economic crisis, his establishment connections were enough to gain him the top economic-policy job in the administration not subject to congressional approval. So there sits the mole, dispensing neoliberal poison pills in the guise of economic wisdom and pushing the discussion of how to address the greatest economic calamity of modern times steadily rightward. The Summers credentials are undeniably impressive: Ph.D. in economics from Harvard (1982); chief economist for the World Bank (1991-93); deputy secretary of the Treasury (1995-98); secretary of the Treasury (1999-2000); president of Harvard (2001-06). Great resumé, but to what end?
The key to understanding the behavior of the White House mole-in-chief lies with his academic background and intellectual history. As a doctoral candidate, Summers studied under a certified right-wing economist, sometime Republican advisor Martin Feldstein. He followed this up with a two-year stint on the staff of Ronald Reagan’s Council of Economic Advisors in 1982-83. His acknowledged hero and periodic role-model is none other than the late libertarian free-market guru Milton Friedman, whose death in 2006 prompted a laudatory op-ed by Summers in the New York Times. “We are now all Friedmanites,” gushed the mole.
Little of Summers’ ideological inheritance has been set aside in his subsequent carrying out of policy; the mole is a creature of habit who never abandoned what he learned, literally or figuratively, at the feet of Feldstein and Friedman, despite working for Democrats like Bill Clinton. The lessons absorbed include “fiscal responsibility,” which has made Summers an antitax deficit hawk, a theology practiced under Clinton and urged upon Obama. Administration budget cuts have been postponed for now, but they’re on the agenda.
Deregulation is part of the package as well. As Treasury secretary, Summers joined Federal Reserve Chairman Alan Greenspan and Enron CEO Ken Lay in pressing California Gov. Gray Davis to “solve” that state’s 2000 power crisis by relaxing government regulations and environmental standards in order to reassure Wall Street energy investors. Worse still, in light of subsequent developments, was Summers’ enthusiastic championing of the Gramm-Leach-Bliley Act of 1999, which repealed the Depression-era Glass-Steagall controls on banking and led directly to the great financial collapse. The mole characterized the removal of Glass-Steagall’s protections as “historic legislation” that would “better enable American companies to compete in the new economy.” One of the ways they competed was by engaging in dangerous derivatives trading, a practice frowned upon by regulators at the Commodity Futures Trading Commission, but backed to the hilt by Greenspan, Summers, and Summers’ then-boss Treasury Secretary Robert Rubin, who combined to overrule skeptical CFTC Chair Brooksley Born.
It’s not a pretty picture, and it carries over into the international sphere. As Treasury undersecretary in the late 1990s, Summers campaigned strenuously to sell the World Trade Organization on the desirability of opening global banking and insurance markets to unrestricted competition. The WTO accord he helped engineer went into effect in 1999 and set the stage for the worldwide recession by internationalizing finance — allowing Wall Street’s unregulated financial-services industry to export its gambling psychology and toxic credit instruments far and wide. The initiative was justified as a windfall for US banking and insurance interests. In Summers’ words, “This agreement is good for America and good for the global economy.” Seldom has anyone been so wrong and yet so well rewarded in the aftermath of disaster.
Remarkably, the mole has managed until now to escape the consequences of his own mistakes and contradictions. Although obliged to give latter-day lip service to the need for greater economic oversight, Summers continues to lobby for less regulation over his former associates on Wall Street. (Prior to his latest Washington appointment, he earned millions as a managing director of the investment hedge fund D.E. Shaw & Co. and as a paid speaker regaling financial firms that later got federal bailouts.) One of his recent efforts on behalf of privilege was to seek removal of congressional caps on executive pay at banks receiving rescue funds.
More far-reaching has been Summers’ ongoing crusade to lower high-end business taxes. In mole-speak, corporate and capital-gains taxes are “inefficient.” So are unemployment and welfare benefits, which Summers has favored scaling back over the years. Giving a helping hand up to those near the top, and a shove down to those near the bottom, has been a favorite mole activity. Lawrence Summers, mole supreme, did his best to foist his retrograde economics on the Clinton administration. Look for him to continue doing the same, surreptitiously of course, deep in the bowels of the Obama White House.
Wayne O’Leary is a writer in Orono, Maine.
From The Progressive Populist, August 15, 2009
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