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January 24, 2012

11 Stunning Revelations From Larry Summers' Secret 2008 Economics Memo To Barack Obama

Topics: Political News and commentaries

This is indeed a stunner, albeit not terribly surprising to informed, thinking Americans ... given what they now know about Barack Obama. The most despicable revelation? The stimulus was never about 'stimulating' the economy -- it was all about payback to campaign contributors and elected Democrats ... and implementing Obama's far-left, progressive, socialist agenda!

James Pethokoukis points out a lengthy piece in The New Yorker that looks at policymaking in the Obama White House. A key source for writer Ryan Lizza is a 57-page, "Sensitive & Confidential" memo written by economist Larry Summers -- who eventually became head of Obama's National Economic Council. The memo was written to Obama in December 2008.

Here's some of what Pethokoukis learned about Team Obama's thinking as the financial crisis was exploding, followed by quotes from the memo itself:

1. The stimulus was about implementing the Obama agenda.

The short-run economic imperative was to identify as many campaign promises or high priority items that would spend out quickly and be inherently temporary. ... The stimulus package is a key tool for advancing clean energy goals and fulfilling a number of campaign commitments.

2. Team Obama knows these deficits are dangerous (although it has offered no long-term plan to deal with them).

Closing the gap between what the campaign proposed and the estimates of the campaign offsets would require scaling back proposals by about $100 billion annually or adding new offsets totaling the same. Even this, however, would leave an average deficit over the next decade that would be worse than any post-World War II decade. This would be entirely unsustainable and could cause serious economic problems in the both the short run and the long run.

3. Obamanomics was pricier than advertised.

Your campaign proposals add about $100 billion per year to the deficit largely because rescoring indicates that some of your revenue raisers do not raise as much as the campaign assumed and some of your proposals cost more than the campaign assumed. ... Treasury estimates that repealing the tax cuts above $250,000 would raise about $40 billion less than the campaign assumed. ... The health plan is about $10 billion more costly than the campaign estimated and the health savings are about $25 billion lower than the campaign estimated.

4. Even Washington can only spend so much money so fast.

Constructing a package of this size, or even in the $500 billion range, is a major challenge. 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.

5. Liberals can complain about the stimulus having too many tax cuts, but even Team Obama thought more spending was unrealistic.

As noted above, it is not possible to spend out much more than $225 billion in the next two years with high-priority investments and protections for the most vulnerable. This total, however, falls well short of what economists believe is needed for the economy, both in total and especially in 2009. As a result, to achieve our macroeconomic objectives -- minimally the 2.5 million job goal -- will require other sources of stimulus including state fiscal relief, tax cuts for individuals, or tax cuts for businesses.

6. Team Obama wanted to use courts to force massive mortgage principal writedowns.

The next step in the housing plan is responsible bankruptcy reform along the lines of the Durbin bill you cosponsored. This would allow bankruptcy courts to write down the principal of primary residences to the current market value. We recommend announcing this reform to begin immediately following the close of the enhanced Hope for Homeowners period.

Take the time to read the rest here.

There's lots of interesting tidbits of information in both Pethokoukis' piece and the relatively Obama-friendly New Yorker piece on the Summers memo that provided a blueprint for spending huge amounts of taxpayer dollars for the sole purposes of political payback and, as I noted in my introduction, pushing Obama's extremist, progressive, socialist agenda. Of course none of what the stimulus was actually about had anything to do with supposedly 'stimulating' the economy or anything else he spoke of in the "post-partisan" rhetoric of his many campaign speeches.

Posted by Hyscience at January 24, 2012 9:04 AM

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