Never thought I’d write that headline. But I agree with GOP House Majority Leader Boehner that our current Secretary of the Treasury and National Economic Council chief should be kicked to the curb.
Not for the same reasons, and I doubt he would approve of the people I’d like to see run Treasury and the NEC (Paul Krugman and Joseph Steiglitz), but there is no doubt Geithner and Summers have worn out their welcome and that their policies (and the policies they kept on the sidelines) have been failures which limited any chance at promoting job creation over Wall Street profits.
As Krugman again points out today, our problem isn’t with the supply side of the economic equation but the demand side:
But one more thing struck me: at least some members of the FOMC have bought into the hangover theory — the modern version of liquidationism in which mass unemployment is somehow necessary in the aftermath of a burst bubble:
Narayana Kocherlakota, president of the Minneapolis Fed, argued that a large part of today’s unemployment problem is caused by issues the Fed can’t solve, such as the mismatch between the skills of jobless workers and the skills that employers wanted.
[…]
And this is strikingly true this time around. Kocherlakota would have us believe that there’s a big problem of mismatch because manufacturing is trying to hire, while construction has slumped. But here’s the employment reality:
[Graph not pictured]
Manufacturing employment has slumped, not risen — in fact, it has fallen more than construction employment. The problem is lack of overall demand, not worker mismatch.
Geithner, Summers, The Federal Reserve in general, et al., all have their eyes on the wrong ball. Without demand there is no new investment in jobs or the infrastructure to produce more goods and services (which also creates more jobs). Without job creation there is no demand for goods and services. Without new jobs there isn’t enough tax revenue to deal with looming deficits at the local, state and federal level. In short, you have to invest in job creation with government spending to turn this economy around. The free market and deficit reduction are not going to come charging to the rescue.
And applying “austerity” measures is not the way to work one’s way out of a recession. On the contrary it;s likely to make matters worse. You can see it happening now in Greece (courtesy of the Wall Street Journal):
ATHENS—The Greek economy contracted sharply in the second quarter as government austerity measures bit deeper into incomes, according to government data released Thursday.
The national statics service Ellsta said Thursday that second-quarter gross domestic product fell 1.5% on a quarterly basis, weaker than forecasts of a 1% drop and the 0.8% fall in the first quarter.
Jobs data for May, meanwhile, revealed persistently high unemployment, which ticked higher to 12% from 11.9% in April.
In short, screwing the “little people” makes things worse. Both in the short term and in the long term. The cuts to government services like education have long term consequences. Just ask the California education system which went from being one of the best on the world to being one of the worst thanks to Proposition 13.
It is now the Dark Ages for California public schools. While some wealthy districts in the state can choose to spend close to $23,000 per child, the majority of those relying on state funding are limited to a paltry $5,000 per-child allotment. And so in most places, classrooms are overflowing, exceeding 40 kids in a room in secondary schools and 30 kids in grades K-5.
Or check out Ireland where these measures have been in place for some time now:
Nearly two years ago, an economic collapse forced Ireland to cut public spending and raise taxes, the type of austerity measures that financial markets are now pressing on most advanced industrial nations. […]
Rather than being rewarded for its actions, though, Ireland is being penalized. Its downturn has certainly been sharper than if the government had spent more to keep people working. Lacking stimulus money, the Irish economy shrank 7.1 percent last year and remains in recession.
Joblessness in this country of 4.5 million is above 13 percent, and the ranks of the long-term unemployed — those out of work for a year or more — have more than doubled, to 5.3 percent.
In short, austerity and protecting Wall Street profits leads to punishment for small businesses struggling to survive, and millions of people who cannot find jobs after being laid off. Meanwhile large multinational companies in the oil and financial industries clean up in the short term at our expense.
Geithner and Summers were hired to make the Financial industry happy and less nervous, and they’ve accomplished that task, but at the cost of systemic high unemployment, more foreclosures, more poverty and more misery for anyone who isn’t getting one of those big bonus checks at Goldman Sachs. Now is not the time to continue policies only Herbert Hoover could love.
So I hope Geithner and Summers go, and sooner rather than later. They didn’t represent change, they represented the status quo. Obama could have kept Hank Paulson as Treasury Secretary and things wouldn’t be much different today. And that is a sure sign that Geithner and Summers are the wrong people for the job they were given.
It was precisely the thinking of the old line economists and financial elites (of whom Geithner and Summers are charter members) who thought the status quo was just fine and would somehow magically resolve all the problems it had created over the last 30 years in our economy that has endangered the future. To be blunt, Geithner and Summers and the policies they promoted (and prevented) have endangered the future of Democratic control of Congress, the future of President Obama’s prospects to accomplish anything over the next two years, and more importantly the future of millions of people young and old who are suffering from the effects of failing to change the same old economic thinking coming out of Washington and New York.
So Mr. Boehner, you and I can agree on one thing: it is time for Geithner and Summers to return to the private sector. Long past time in fact.
