Larry Summers’ End

By: Paul_L_Kasriel

There is something poetic, I suppose, about Larry Summers announcing his upcoming departure from the Obama administration on the last day of summer. The Obama administration has been accused of having a "tin ear" when it comes to its relations with the business community, perhaps because its principal economic advisers never had to "meet a payroll." As I recall, the administration that preceded the current one was loaded with "payroll meeters". Although that administration might have had superb relations with business, these good relations did not translate into great economic performance.

Rather, the economy generated the weakest employment growth in the postwar era and some of the weakest real economic growth, even before the onset of the recession in the first quarter of 2008. So, it is not entirely clear that having experienced business types on your economic advisory team is the key to superior, or even average, economic performance. But if the Obama administration is looking for a business type to add to his economic advisory team, I would nominate a cast-off from the prior administration - former Secretary of the Treasury Paul O'Neill. As the former CEO of Alcoa, Mr. O'Neill has plenty of experience in the business world, successful experience, I might add. And, of course, having served in the prior administration, he knows where the men's rooms are located, so he could hit the ground running.

By the way, why was Mr. O'Neill dismissed from the economic team of the prior administration? He wanted to begin taking actions to reduce the projected long-term federal budget deficits. As you may recall, such endeavors would have clashed with the view of the VP of the prior administration - deficits don't matter. Mr. O'Neill also has been involved in private-sector projects to explore ways to help slow down the increases in health-care costs - something critical to the success in reducing projected out-year federal budget deficits.

Paul Kasriel is the recipient of the 2006 Lawrence R. Klein Award for Blue Chip Forecasting Accuracy

by Paul Kasriel
The Northern Trust Company
Economic Research Department - Daily Global Commentary

Copyright © 2010 Paul Kasriel
Paul joined the economic research unit of The Northern Trust Company in 1986 as Vice President and Economist, being named Senior Vice President and Director of Economic Research in 2000. His economic and interest rate forecasts are used both internally and by clients. The accuracy of the Economic Research Department's forecasts has consistently been highly-ranked in the Blue Chip survey of about 50 forecasters over the years. To that point, Paul received the prestigious 2006 Lawrence R. Klein Award for having the most accurate economic forecast among the Blue Chip survey participants for the years 2002 through 2005.

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.

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