Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
Volcker may have replaced Summers as Obama's chief economic advisor
Possibly as a result of the Republican victory in the Massachusetts Senate race, President Obama appears to have changed economic advisors. His bank reform ideas come from the previously-ignored Paul Volcker, not Larry Summers, who made economic policy last year. The White House's January 21 Press Release features Paul Volcker, but does not even mention Summers by name. It begins:
WASHINGTON, DC- President Obama joined Paul Volcker, former chairman of the Federal Reserve; Bill Donaldson, former chairman of the Securities and Exchange Commission; Congressman Barney Frank, House Financial Services Chairman; Senator Chris Dodd, Chairman of the Banking Committee and the President's economic team to call for new restrictions on the size and scope of banks and other financial institutions to rein in excessive risk taking and to protect taxpayers.
Volcker was America's most competent Federal Reserve Chairman ever. He slowed the increase in the money supply in order to reduce the inflation rate from 10.4% in the first quarter of 1981 down to 3.3% in the third quarter of 1984.
In contrast, Summers may be America's most incompetent economic advisor ever. He let Congress take most of the infrastructure spending out of Obama's recovery plan. He let China grow by stealing our manufacturing jobs. He has wasted hundreds of billions of dollars in taxpaper money in a doomed attempt to keep house prices from falling to their normal values. He has added more than a trillion dollars to the American government debt, creating huge problems for the future.
I don't know whether Volcker will be able to get America out of the Great Recession. But I do know that the policies that he will suggest will be based upon America's long-term good, not just short-term considerations.
Journal of Economic Literature:
Atlantic Economic Journal: