Ezra Klein: Were the president’s advisers pushing him to do more or less?

[babylonsister]

http://www.washingtonpost.com/blogs/ezra-klein/post/the-obama-administration-in-one-memo/2011/08/25/gIQACRZcLQ_blog.html

What the Summers memo tells us about the Obama White House
Posted by Ezra Klein at 03:28 PM ET, 01/23/2012

Lizza's article:
The Obama Memos
http://www.democraticunderground.com/10169517



The economic policy memo that Larry Summers sent to Barack Obama in December 2008, and that the New Yorker’s Ryan Lizza has posted in full, is the ur-text for the Obama administration. It contains the economic team’s first thoughts on almost everything the White House would go on to do. It is, without doubt, the most authoritative guide we have to the way President Obama’s first, and arguably most crucial, decisions were framed by his key policy staffers. And it has s reopened an old question about the Obama administration: Were the president’s advisers pushing him to do more or less?

snip//

But for all the attention given to the sentence on the bond market, the memo quickly moves onto other topics. Much more attention is paid to a different constraint: the operational constraints in trying to put so much money into the economy in a way that was both quick and smart. “While the most effective stimulus is government investment, it is difficult to identify feasible spending projects on the scale that is needed to stabilize the macroeconomy. Moreover, there is a tension between the need to spend the money quickly and the desire to spend the money wisely. To get the package to the requisite size, and also to address other problems, we recommend combining it with substantial state fiscal relief and tax cuts for individuals and businesses.”

The memo deals with this question in great detail, and concludes that “we can only generate about $225 billion of actual spending on priority investments over the next two years.” The rest of the money would have to come from state and local aid and tax cuts, and tax cuts, in particular, were a less effective form of stimulus.

The administration ultimately proposed a stimulus of nearly $900 billion, which the Senate later reduced to about $700 billion (the widely quoted $787 billion total includes the AMT patch, which was unrelated to the stimulus). In subsequent deals, the administration would get around $500 billion more in stimulus, for a total of $1.2-$1.3 trillion over three years.

There are other interesting revelations in the memo, too. For instance, it notes that Phil Schiliro, the incoming legislative director, thought the TARP brand was so badly damaged that the administration should “consider repealing TARP and replacing it with a new program that we design and propose as part of the Economic Recovery program.” That suggestions was never followed up on, but it makes for an interesting what-if.

[gateley]

1. A late-to-the-party K&R! How did this sink? VERY interesting/important, IMO. Thanks!! nt