Larry Summers On the Moon

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Nearly 40 years to the day that Neil Armstrong and Buzz Aldrin first set foot on the Moon, the United States celebrated late last week with another exercise in weightlessness: a speech to the Peterson Institute for International Economics by National Economic Council Chairman Lawrence Summers.

Summers, an eminence grise in Democratic circles and a key architect of Clinton-era economic policies, has often been one of the few sources of comfort to those of us who fear the Democratic Party's hybrid of ignorance and contempt for markets. But in his address to the Washington-based think tank, Summers revealed that he has internalized the economic logic of the Obama Administration: that a more centrally-planned marketplace can escape the rules of economic gravity.

It didn't help Summers' case that the lion's share of his task was defending the indefensible: Obama's sputtering stimulus plan. Repeating now familiar arguments from a White House on the defensive, the chairman noted that "the impact of the Recovery Act [will] build up over time, peaking during 2010 with about 70 percent of the total stimulus provided in the first 18 months."

This emphasis on delayed and diluted expectations is the only escape hatch left for the Obama Administration after its claims that the stimulus would keep unemployment under 8.5 percent have been given the lie by jobless numbers that have broken double digits in 15 states and are perilously close to doing so nationally.

But Summers' rationale also begs an intellectually provocative question. If this administration - or any other, for that matter - is capable of allocating capital more efficiently than the private sector, why wait 18 months to do so? If it is within the power of the stimulus's authors to generate economic salvation on a whim, why couldn't it be done by now? The White House response is generally two-fold.

First, there is Obama's familiar trope that "it took a long time to get into this mess and it will take a long time to get out of it." This is the kind of elementary school pap that passes for serious thinking in a White House communications office, but nowhere is it written that there's an ironclad rule of proportionality between the time it takes to create a crisis and the time it takes to recover from one. President Warren Harding ended the recession of the early 1920s in less than three years through a policy of cutting taxes, cutting spending and rolling back costly and wasteful regulation. By contrast, Herbert Hoover and Franklin D. Roosevelt made the Great Depression a more than decade-long affair through a mélange of massive government interventions in the economy. Like a serious health problem, how you got there is a lot less important than how you respond.

Second, there is the government's insistence that it takes time to properly sift through all of the applications for federal aid. While this may be a laudable prophylactic measure against waste and fraud, it ought to give pause to those who think the stimulus will seed the marketplace. The sort of effort that drives economic growth comes from precocious savants who work through the night in their Silicon Valley garages, not Transportation Department bureaucrats who decide which potholes will be filled with federal dollars and go home at 5 PM.

Summers also offered the curious boast that the government's efforts represent "the largest program of fiscal stimulus in the nation's history, with a total cost of about five percent of GDP." Leaving aside the utterly reasonable conclusion that this ought to condemn stimulus measures to irrelevance in perpetuity, one wonders why Chairman Summers thought this fact worthy of touting. After all, if government can multiply this wealth by confiscating it from private markets, why stop at five percent? If we're guaranteed a return on investment, why not plow 10 or 20 percent of GDP into the state's hands? And why not do it in perpetuity? At five percent, the government is either throwing money down a hole or not trying hard enough.

Summers suffers from the temptation of planners throughout history - the belief that his capacious intellect can, in its sublimity, substitute for the innumerable decentralized decisions made by individuals acting on better information and attuned to economic rather than political motives. His rejection of this notion of "spontaneous order" was most glaring in delineating the shape of the Obama economy to come: "The rebuilt American economy must be more export-oriented and less consumption-oriented, more environmentally-oriented and less fossil-energy-oriented, more bio- and software-engineering-oriented and less financial-engineering-oriented, more middle-class-oriented and less oriented to income growth that disproportionately favors a very small share of the population."

In his hubris, Summers might as well have been explaining what the weather must be like. Whether exports rise or consumption falls cannot be mandated from the White House unless it is willing to punish contrary economic activity. Fossil energy will remain dominant as long as it is more affordable and alternatives remain quixotic. And the relative standing of software and finance - which have no bearing on each other - will respond to consumer demand. On each of these fronts, Summers' primary motivation is for the market to punish industries he personally dislikes.

But it's in Summers' final comment about a "middle-class-oriented" economy that we see the intellectual poverty of Obamanomics. The rich and the middle class need not be at each other's throats to get ahead. Free-market economics bounded by the rule of law is a positive-sum game. You only get ahead by providing something someone else wants. The only force that can make it otherwise is the intervention of people like Larry Summers.

Troy Senik is a former White House speechwriter and a contributor to the Center for Individual Freedom (  He can be reached at

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