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The Confidence Crumbles

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Posted on Nov 9, 2011

(Page 2)

The press conference ends with reporters shouting as the president turns to leave. One yells above the rest, “Why didn’t you put her up for confirmation?”

A moment later the president walks from the Rose Garden to the basement of the White House. Having finished with Geithner and Warren, he strolls unaccompanied, free of handlers and Secret Service, through a long subterranean hall on his way to the Situation Room.

“Hey, Alan, how you doing?” he pipes up, spotting Assistant Secretary of the Treasury for Economic Affairs Alan Krueger coming the other way. Krueger carries an additional title, held over from the nineteenth century: chief economist of the United States.

“Just fine, Mr. President,” a somewhat surprised Krueger responds.

“In fact, today’s my birthday.”

The two men stop to chat for a moment at the entrance to the White House mess. The president has grown to appreciate Krueger’s input over the past eighteen months. A Princeton professor and frequent stand-in for Geithner at Obama’s morning economic briefing, Krueger is something of an oddity in the upper reaches of government: he’s an actual researcher. Typically, high-ranking economists do their substantive, elbows-deep research in the earlier stages of their careers. Not Krueger. Not only had he been publishing groundbreaking studies up until joining the administration in January 2009, but he had also gone so far as to commission targeted research over the past year, using Princeton funds and resources when he found the government’s research apparatus too slow.

The current economic crisis, he felt, was too thorny and too unusual not to study with fresh eyes and first questions. Characterized by both rock-bottom interest rates and a catastrophic deleveraging spiral, the crisis defied most historical precedents from which actionable policies might be drawn. And the White House needed nothing so much as a stream of creative remedies, one right after the next.


book cover


Confidence Men: Wall Street, Washington, and the Education of a President


By Ron Suskind


Harper, 528 pages


Buy the book


The administration undershot the crisis, convincing itself by the summer of 2009 that the economy had turned the corner and, at the same time, recognizing that it would be a jobless recovery of stunning disparities, with restored GDP growth alongside fast-rising unemployment. In fact, internal administration projections in June 2009, when unemployment was at 8 percent, noted that joblessness would average a whopping 9.8 percent in 2010. Krueger and others began to work furiously to find innovative ways that the government might stimulate job growth. Being a close friend of both National Economic Council chairman Larry Summers, who was his graduate adviser at Harvard, and Office of Management and Budget director Peter Orszag, whom he mentored at Princeton, made Krueger one of the few people to whom both of Obama’s top economic advisers deferred. All to no avail. After the stimulus bill was passed in February 2009, little else happened on the jobs front for a year and a half. Proposals were talked to death without resolution; the few that were adopted tended to lack a coherent political strategy to make them legislative reality. The day before, the Census Bureau had announced that poverty had hit a fifteen-year high. Even the Wall Street Journal’s editorial page had bemoaned that middle class incomes dropped a stunning 5 percent between 2001 and 2009, a lost decade laying claim to the country’s worst economic performance in half a century. Unemployment stood at precisely the 9.8 percent the administration’s prognosticators had foretold.

Obama, who was at the center of this dispiriting process, tried to keep things light and breezy in the hallway with Krueger. He seemed improbably ebullient, wanting to talk.

“So, how old?”

“A little older than you,” Krueger says. “Just turned fifty.”

Obama steps back, appraisingly.

“Fifty? You’re looking pretty good for fifty.”

He means it. Krueger notices for the first time that the president, a year his junior, has really aged in office, bits of gray hair now sprinkling his crown, wrinkles growing around his eyes. Krueger is about to say, “Well, my job’s easier than yours,” but he catches himself and instead goes with “You should see me on the basketball court.” Maybe this will win him an invitation to one of Obama’s famous five-on-fives.

None forthcoming, and Obama closes it out. “So what are you doing for your birthday?”

“Going back to Princeton,” Krueger says. He’s a breath away from adding: soon for good.

He’s through with D.C. He has decided to return home a day after the midterms, exhausted for sure, but more than that, tamping down the sense of missed opportunity. As the two men part, he can’t help but wonder if Obama feels the same way. How could he not?

Waiting in the Oval Office are Jann Wenner, the founder of Rolling Stone magazine, and his executive editor, Eric Bates. They have been there for an hour, since just before the Elizabeth Warren event, waiting and preparing for an interview with the president. Rolling Stone, failing to score an Obama interview since the campaign, has nonetheless gone through a renaissance in the past two years, dealing some of the most forceful criticisms of Wall Street and Washington and the collusion between the two, with targeted shots directed at both Goldman Sachs and Obama himself.

So, for the president, today is all about forcefully answering the charge from the progressive community—and a great many independents—that what got him elected has not been evident in his governance. The administration’s strategy is to emphasize that the distance between the hopes of Grant Park and the trimmed ambitions of legislative pragmatism is not a fissure, rupture, or acquiescence, but rather the hard reality of governing in a partisan era. All the better for those words to appear in an organ of criticism, which is why Rolling Stone was chosen.

Obama enters his famous office and compliments Wenner, the stylish, aging hipster, on his colorful socks: “If I wasn’t president, I could wear socks like that.” Then he settles himself into a wing chair between marble busts of his heroes, Abraham Lincoln and Martin Luther King, Jr.

Obama is ready to rebut criticisms head-on. But the questions today do not pose much of a challenge, beginning with standard fare about the state of the economy he inherited and Republican obstinacy that, the president notes, reared up a day before his inauguration even, when he learned that the Republican Caucus would vote as a bloc against the stimulus package, even though it included tax cuts and other features they’d asked for.

Fifteen minutes have passed before he gets the first tough question, about how his “economic team is closely identified with Wall Street and the deregulation that caused the collapse.”

The president gives a revealing response, noting that while Tim Geithner and the proud and obstreperous Larry Summers never actually worked for Goldman Sachs, “there is no doubt that I brought in a bunch of folks who understand the financial markets, the same way, by the way, that FDR brought in a lot of folks who understood the financial markets after the crash, including Joe Kennedy, because my number-one job at that point was making sure that we did not have a full-fledged financial meltdown.”

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drbhelthi's avatar

By drbhelthi, November 11, 2011 at 2:46 am Link to this comment

@ berniem

Tell it like it is!
Three cheers for berniem!

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bobbylon's avatar

By bobbylon, November 10, 2011 at 2:35 pm Link to this comment

I’m reading this fascinating book right now. I’m about 2/3 of the way through.

Obama convened an A team of Paul Volcker and considered including Stiglitz and Krugman plus many others of the noble defenders of wall street reform like Sheila Bair, Christina Romer and Elizabeth Warren

The B team was the three stooges cabal of Summers, Rubin and Geithner. And basically it has been all down hill since.

Obama is seen as both aloof and a tad megalomaniacal in wanting to do grand legacy stuff. Rahm stripped him back to low expectations at every turn.

1. Obama doesn’t seem to take his female advisors and cabinet members seriously. He’s definitely a jock
2. Larry Summers went Jihad when he wasn’t offered up as Bernanke’s replacement as Fed Chief
3. Summers thought that unemployment would be back to 6 % by 2010 and that would gain him the Nobel Prize.
4. At every turn the reflex from Summers and Geithner was to use kid gloves with the Too Big To Fail Banks with the rationale that to bring them in line “would be too upsetting to the markets.” Always the concern about the day to day stock price not vacating the toxic cancer from the banking system
If you want a roadmap into how HOpe and Change turned into Status Quo and weak decision making from an overmatched Obama who lost the confidence of his advisors very early in the game this book is for you.

Summers told Peter Orzag that “they were home alone”. That Clinton would have never made the stumbles that Obama did.

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By berniem, November 10, 2011 at 12:15 pm Link to this comment

Call me a cynic, but what pride can one have in being an “American” when our leaders can’t be trusted and our institutions are corrupt? The media is nothing more than a reflection of our banality, ignorance, and denial. The world looks upon us with a combination of fear and confusion and tolerates our crimes and hypocrisy because we’ve still got the most bombs. What the right wingers see as international respect for this country is no more than the quiet resignation akin to what a child demonstrates to an abusive and unstable parent. In reply to those who subscribe to the hackneyed “love it or leave it” punchline all I can say is I would if “ITS” tentacles weren’t twisted around the throats of all but the most inhospitable parts of the world! FREE BRADLEY MANNING AND TIM DECHRISTOPHER!!!!

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By Tom Comeau, November 10, 2011 at 8:40 am Link to this comment
(Unregistered commenter)

Great writing!  One gets the feeling that Suskind is at his elbow 24/7

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