No matter who he chooses to take over at the Fed, the approach to economic policy making that Ezra Klein describes in the WaPo: Why Larry Summers Was Always The Favorite, will be considered by historians to be the single biggest weakness of President Obama, a president who is good, but not great.
Klein is examining why the "Clinton Clique" of Econ Advisors--Geithner, Summers, Orzag, Lew, Sperling, Furman, Burwell--has maintained total control over economic policy in the Obama administration, even as the rest of the executive branch has been staffed entirely with new blood. Meanwhile, the two or three non-Clinton people on the Econ Team have vanished; gone are Christina Romer, Austan Goolsbee, and Jared Bernstein. Here is Klein on the view from the inside as to why the team endures:
Privately, members of Obama’s economic team think the answer is that they’re just really, really good at their jobs. It’s a self-serving argument, to be sure, but that doesn’t mean it’s wrong.
What might not be wrong, in Klein's view? That the Clinton Clique did a great job of steering America through an economic crisis? Or that the belief (right or wrong) that the Clique did a great job is, in fact, why the team has been kept intact? Neither. Instead, Klein is living in full Processland, and what makes a team very successful in Processland is not a successful result. Instead, process success happens when an organization "functions well," i.e., in this case, it efficiently creates economic policy.
If there is any justice in this world, future Democratic Administrations will bring back Romer, Goolsbee, and Bernstein and therefore highlight for historians that, back in 2009, they, not the Clinton Clique, were the policy advisors who had it right.
Romer, Goolsbee, and Bernstein were the ones pushing for a bigger stimulus (although they obviously downplay that a little, now), they were the ones advocating to do more for underwater homeonwers, and they were the ones counseling against listening to all the Very Serious People about the dangers of the deficit (Romer 9/1/2010: "The only surefire ways for policymakers to substantially increase aggregate demand in the short run are for the government to spend more and tax less. In my view, we should be moving forward on both fronts." [p. 13]).
Amongst reality-based economists there is very little debate about the success of the 2009 team: while much of the credit goes to Bernanke at the Fed, the Administration did much better than it might have. Compared to Europe, where the results run from the UK with its double dip recesssion to the ongoing Depression in Spain and Greece (forget recession), American policymakers correctly applied the lessons of both the Great Depression and Japan's Lost Decade.
But a man or woman who combined Obama's values with a better sense for money matters would never have been content with a "well functioning" economic team that merely scored better than its European peers. Such a president never would have made the turn toward deficit reduction and the search for a "Grand Bargain" when he should have been advocating for higher deficits with all his might.
The counter argument that further fiscal stimulus was politically impossible, especially after the midterm elections is true, but unpersuasive, because a status quo preserving stand-off would have been vastly preferrable to the contractionary policy we got. The blood of Sequestration is on the hands of the GOP (The Cost of Austerity: 3 Million Jobs), but like a patient who should have been on suicide watch, the GOP was only able to inflict this self-harm thanks to Obama's mistake. It's the kind of mistake a good man can make, but not a Great President. Alas.