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How the Summers nomination fell apart

Ezra Klein's Wonkbook

Sept. 16, 2013

Welcome to Wonkbook, Ezra Klein and Evan Soltas's morning policy news primer. Send comments, criticism, or ideas to Wonkbook at Gmail dot com. To read more by Ezra and his team, go to Wonkblog.

Something very strange has been happening during President Obama's second term. It's called dissent. And, unusually for a chief executive, Obama is letting it -- even inviting it -- to get in his way.

In two of the most significant decisions Obama has had to make -- whether to strike Syria and who to appoint to the Federal Reserve -- Obama has chosen processes that left a lot of space for Congress and the public to weigh in. And the result, in both cases, was that the resulting criticism led the White House to change course.

Obama could've attacked Syria without asking Congress for permission. But without British support, and recognizing that there was little public support for his policy, he went to Congress. It was a last-minute decision, and a poorly managed one. Congress came to believe, perhaps correctly, that the White House wanted to share blame rather than receive input.

But even so, the White House had put their Syria policy in Congress's hands -- and therefore, in the public's. And they found themselves unable to make the case. The polls turned against them, and whip counts looked grim. It's likely that if Secretary Kerry hadn't accidentally opened the door to a solution that Russia unexpectedly favored, the White House would've lost the vote, and retreated from their Syria policy entirely.

Similarly, Obama could've named Larry Summers to the Federal Reserve weeks, or even months, ago. The left would have grumbled, and some would have rebelled, but faced with the immediate prospect of watching Republicans hammer Obama's economic record and scalp one of the most important appointments of his second term, Democrats would likely have rallied around the administration -- and Summers. There would've been a fight, to be sure, but it would've been a winnable one.

But Obama didn't move quickly to appoint Summers. In a move that infuriated supporters of both Summers and Yellen, Obama let it be known that he favored Summers and then simply watched the debate unfold. And what happened in Congress, and on the left in general, is that Summers got savaged. The arguments from his defenders didn't persuade his critics. He lost the support of key members of the Senate Banking Committee. And, on Sunday, he withdrew himself from consideration for the post.

The negative spin on this is that Obama is proving indecisive in his second term. Leaders need to lead. Instead, Obama is letting himself be led. If he thought striking Syria was the right thing to do, and appointing Larry Summers made the most sense for the country, then he should've simply made the decision, executed the policy, and sold the American people on the results.

The more positive spin is that Obama is avoiding a common second-term trap. One problem with the rules around the presidency is that two-term presidents can quickly lose touch with the voters, as they don't have the threat of reelection forcing them to consider public opinion. Obama, however, is choosing, unusually, to create space for public opinion (as channeled through Congress) to enter the process, and he's actually redirecting policy because of it. That's not a lack of leadership. It's change we can believe in.

Wonkbook's Number of the Day: 60 percent. That's the chance that the federal government will shut down this month, according to Stan Collender, a budget expert.

Wonkbook's Quote of the Day: "It's almost as though it was the end of traditional power," Rep. James P. Moran (D-Va.), said of rank-and-file resistance to the president and the speaker. "I've been here for 20 years, and I've never seen so much of a repudiation of the conventional sources of power in the legislative or executive branch...It portends for a much more chaotic fall."

Wonkbook's Graph of the Day: Fed chair odds, until they were just overtaken by events.

Wonkbook's Top 5 Stories: 1) Larry Summers withdraws from consideration for Fed post; 2) the Syria backstory; 3) flip a coin for fiscal crisis; 4) power plant regs this week; and 5) how to launch Obamacare.

1) Top story: Summers end

Larry Summers has withdrawn his name for the Fed chair. "Lawrence Summers pulled out of the contest to succeed Ben Bernanke as chairman of the Federal Reserve after weeks of public excoriation, forcing President Barack Obama to move further down the list of contenders to head the central bank...In a subsequent letter to Mr. Obama, he wrote: "I have reluctantly concluded that any possible confirmation process for me would be acrimonious and would not serve the interest of the Federal Reserve, the Administration or, ultimately, the interests of the nation's ongoing economic recovery." Mr. Obama said in a statement Sunday that he accepted Mr. Summers's decision and described him as "a critical member of my team as we faced down the worst economic crisis since the Great Depression, and it was in no small part because of his expertise, wisdom, and leadership that we wrestled the economy back to growth."" David Wessel in The Wall Street Journal.

Read: Larry Summers' withdrawal letter. Sarah Kliff in The Washington Post.

Read: President Obama's statement. The White House.

So what now? "He could appoint Janet Yellen, the current vice-chair, who is respected in markets and academia and has a resume that seems tailor-made for the Fed job. She would also be the first female Fed chair in the 100-year history of the institution...Another option would be the third name that President Obama has mentioned for the Fed chairmanship in meetings with Congressional allies: Donald L. Kohn. Kohn was the No. 2 official at the Fed until 2010 and a key lieutenant of current chairman Ben Bernanke during the financial crisis." Neil Irwin in The Washington Post.

Explainer: Five reasons Obama should name Janet Yellen to chair the Fed. Ezra Klein in The Washington Post.

Part of what killed the Summers candidacy: 3 Democrats on Senate Banking said they'd oppose him. "Senator Jon Tester, Democrat of Montana and a member of the Banking Committee, said on Friday that he would vote against sending Mr. Summers's nomination to the full Senate for a confirmation vote. Two of Mr. Tester's fellow Democrats on the committee, Senators Jeff Merkley of Oregon and Sherrod Brown of Ohio, have also signaled through their aides that they would vote no...Senator Elizabeth Warren, Democrat of Massachusetts, is believed to be reluctant to support Mr. Summers but has not said publicly how she would vote." Jeremy W. Peters in The New York Times.

@damianpaletta: Summers fracas was unusual event when GOP stood on sidelines and watched full-blown Dem circular firing squad.

What Summers told Obama. "During their call, Summers told Obama he believed there was now too much political opposition to his nomination to move forward, a person familiar with the phone call said. Summers told Obama that his nomination now would create too much political uncertainty for the Fed and could thus be damaging to the economy. Obama accepted Summers' rationale and did not attempt to convince him to continue as a candidate for the Fed job, the person said." Ben White in Politico.

Explainer: Economic data coming your way this week. Amrita Jayakumar in The Washington Post.

Don't forget: Amid all of this Fed intrigue, we still have an FOMC meeting this week. And an important one. "The Fed's assessment of the latest threats will shape its decision about scaling back an $85 billion-a-month bond-buying program that has buoyed markets and key parts of the U.S. economy. That makes the central bank's outlook particularly consequential as the four-year-old recovery again fails to meet the Fed's own projections." Sudeep Reddy in The Wall Street Journal.

In related news: Zients to succeed Sperling on National Economic Council. "Jeffrey Zients, 46 years old, a former acting director of the Office of Management and Budget, will be the next director of the National Economic Council when Gene Sperling, the current director, departs Jan. 1...Mr. Zients, who left the White House earlier this year, was a key aide during many of the Obama administration's budget battles with Republicans, which are expected to continue...He worked closely, for example, on the contingency plans in the event of a government shutdown, and he also helped prepare the Obama administration's annual budget proposals, both as acting director and as deputy director. He also served as one of the administration's de facto liaisons to the business community." Damian Paletta in The Wall Street Journal.

@JoshZumbrun: I don't think Summers ever won the support of anyone except his personal friends

BERNSTEIN: What's needed in the next Fed chief? "Related to the problem of missing bubbles, the Fed has been a systematically optimistic forecaster, which sounds a lot more benign than it is. It has consistently had to mark down its estimates, and that kind of premature green-shoot spotting could be one reason Fed officials are talking about tapering (pulling back a bit on their asset purchase program) too soon. The next Fed chief needs to recalibrate the model. I've got two suggestions: build financial markets into the model, with a particular emphasis on leverage, and (deep wonkery alert) take a look at "dynamic factor modeling."" Jared Bernstein in The New York Times.

LUCE: Thanks, Larry. "As for Mr Summers, his withdrawal has a silver lining. Public office in the US is increasingly at odds with any history of wide-ranging thought. Those who have listened frequently to him in public and contrast it with some of his private musings know the gap between his relatively orthodox public image and the far more versatile intellect he displays when the microphone is off. In today's climate, smart people with ambition must self-censor. Many talented people now disdain public life altogether. Even for the least controversial candidates, a Senate nomination is an exercise in proctology. For Mr Summers it would have been worse. He should make use of his new-found intellectual freedom. In his case, it will be a trade-off worth making." Edward Luce in The Financial Times.

@carlquintanilla: Remembering Art Cashin's theory that Summers nom was ALWAYS a WH ruse to make Yellin more palatable.

BARRO: Ok, Mr. President, now nominate Janet Yellen already. "At first, I interpreted the White House's prolonged Summers flirtation as a signal that the president had a problem with Yellen. But the flurry of anonymous quotes over the last month from senior officials and former senior officials suggested that the president is simply enamored of Summers and his crisis-management abilities. If the Summers gambit was about desperately wanting Summers, it doesn't have to have been about desperately trying to avoid Yellen." Josh Barro in Business Insider.

YGLESIAS: Summers made the right choice to withdraw. "It had become clear that there was enough hard-core opposition to Summers from Democratic Party senators that getting him confirmed would be a tough political lift. The country's monetary policy doesn't really need that kind of chaos, and the Obama administration could ill-afford to be spending political capital on that kind of thing. In this case, the best way for Summers to serve the country and the causes he believes in was to step aside." Matthew Yglesias in Slate.

Music recommendations interlude: The Bee Gees, "Tragedy," 1979.

Top opinion

KONCZAL: What we get wrong when we talk about 'the financial crisis.' "The focus on Lehman obscures the fact that there were really three crises. Sure, there was the crisis in the financial markets in late 2008. But there was also the ongoing financial crisis that would have happened even if Lehman's failure didn't cause any troubles. Meanwhile, there's still a crisis of confidence over whether or not our financial markets are actually benefiting the economy as a whole...Emphasizing Lehman biases the conversation over financial reform in a subtle but powerful way. The implication is that if Dodd-Frank can prevent the events of fall 2008 from happening, then our work here is done. That view is dangerously wrong." Mike Konczal in The Washington Post.

IRWIN: What I saw during the financial crisis. "I went into the office, and indeed the source was correct. That evening, Lehman Brothers announced it would go bankrupt, Bank of America was buying Merrill Lynch, AIG sat on the precipice of failure, and a global financial rout was set to begin. We ripped up the front page of the next day's Post and tried, in the late evening of that Sunday night, to figure out what we could about what had happened and what it meant." Neil Irwin in The Washington Post.

KRUGMAN: Give jobs a chance. "At the meeting's end, the committee is widely expected to announce the so-called "taper" -- a slowing of the pace at which it buys long-term assets. Memo to the Fed: Please don't do it. True, the arguments for a taper are neither crazy nor stupid, which makes them unusual for current U.S. policy debate. But if you think about the balance of risks, this is a bad time to be doing anything that looks like a tightening of monetary policy." Paul Krugman in The New York Times.

FRIEDMAN: When complexity is free. "I saw the outlines there of three radically new business trends that the United States should want to dominate. The first derives from a phrase tossed off in passing by Luana Iorio, who oversees G.E.'s research on three-dimensional printing: "Complexity is free," she told me. That is actually a very big statement. In the old days, explained Iorio, when G.E. wanted to build a jet engine part, a designer would have to design the product, then G.E. would have to build the machine tools to make a prototype of that part, which could take up to a year, and then it would manufacture the part and test it, with each test iteration taking a few months...Today, said Iorio, engineers using three-dimensional, computer-aided design software now design the part on a computer screen. Then they transmit it to a 3-D printer, which is filled with a fine metal powder and a laser device that literally builds or "prints," the piece out of the metal powder before your eyes, to the exact specifications. Then, you immediately test it -- four, five, six times in a day." Thomas L. Friedman in The New York Times.

Adorable animals interlude: Pandas may actually be good for something.

2) The Syria backstory

Big WSJ Syria story: How the U.S. stumbled into an international crisis and then stumbled out of it. "This account of an extraordinary 24 days in international diplomacy, capped by a deal this past weekend to dismantle Syria's chemical-weapons stockpile, is based on more than two dozen interviews with senior White House, State Department, Pentagon and congressional officials and many of their counterparts in Europe and the Middle East. The events shed light on what could prove a pivotal moment for America's role in the world." Adam Entous, Janet Hook and Carol E. Lee in The Wall Street Journal.

Was Obama's Syria strategy brilliant or lucky? "He had worked himself into a strange strategic cul-de-sac of his own making as recently as a week ago...But the deal with the Russians allows everybody, with the important exception of the Syrian rebels, to proclaim victory. The West gets to declare that it is getting tough on Assad by forcing him to give up chemical weapons. Russia gets to protect its ally Assad from attacks. Assad gets to stay in power." Neil Irwin in The Washington Post.

Whatever it was, things look OK for the U.S.'s goals on Syria. "President Obama's Congressional critics expressed guarded optimism about an agreement reached with Russia over the weekend to seize and destroy Syria's chemical weapons, even as Mr. Obama hailed the diplomatic effort as a "foundation" that could lead to a political settlement in that country's civil war..."Look, we're not there yet," Mr. Obama said in the interview, taped Friday, with George Stephanopoulos for the ABC News program "This Week." "We don't have an actual, verifiable deal that will begin that process. But the distance that we've traveled over these couple of weeks is remarkable."" Michael D. Shear in The New York Times.

Kerry is working to sell the Syria deal to international diplomatic partners. "Secretary of State John Kerry set off on a globe-hopping mission in search of support, meeting with Israeli Prime Minister Benjamin Netanyahu in Jerusalem on Sunday ahead of meetings with European and Middle Eastern allies in Paris on Monday...China, too, reiterated its stance that only a political solution could help to resolve the Syria conflict, with Chinese Foreign Minister Wang Yi telling visiting French Foreign Minister Laurent Fabius in Beijing on Sunday that it welcomed the U.S.-Russia deal." Jay Solomon in The Wall Street Journal.

The clock is now ticking for Syria to eliminate its chemical-weapons stockpiles. "Weapons experts and diplomats say that if President Bashar al-Assad is serious about complying with the landmark agreement announced in Geneva on Saturday, he will have to take similarly dramatic action in the coming weeks. Anything short of an immediate demonstration of willingness, they say, will be a sign that Mr. Assad is seeking to drag out the process, betting that time is on his side as memories fade of the attack that is said to have killed more than 1,400 people and prompted a military standoff with the United States. The benchmarks laid out in the Geneva agreement seek to capitalize on the momentum by imposing quick deadlines, including a requirement that Syria submit a complete list of its chemical weapons, and storage and production facilities within a week. The agreement also requires "immediate and unfettered" access to chemical weapons sites by international inspectors." William J. Broad and David E. Sanger in The New York Times.

In wake of Syria deal, Kerry emphasizes Iran. "[S]peaking in Jerusalem on Sunday, Mr. Kerry asserted that an agreement that would disarm Syria's chemical arsenal without the use of American force sent an equally strong message. "If we achieve that, we will have set a marker for the standard of behavior with respect to Iran and with respect to North Korea," Mr. Kerry said after meeting with Benjamin Netanyahu, the Israeli prime minister." Michael R. Gordon and Isabel Kershner in The New York Times.

Wow, wow, wow interlude: This is a spectacular piece of journalism from the Detroit Freep on how Detroit went broke. Just spectacular work.

3) Flip a coin for fiscal crisis

What are the chances of a government shutdown? Better than 50-50. "There's a 60 percent chance the government will shutdown for at least a few days at the of this month, according to budget expert Stan Collender..."A shutdown may be what the [GOP] leadership has to allow to show their tea party people they're willing to go to the wall," Collender said in an interview for Post TV's "In Play" this week. Collender added that the chances of the debt ceiling not being raised are far smaller -- in the "10 to 20 percent range."" Chris Cillizza in The Washington Post.

House Republican leaders: Debt hike better fight. "Speaker John Boehner (R-Ohio), Majority Leader Eric Cantor (R-Va.), Majority Whip Kevin McCarthy (R-Calif.) and their allies are instead privately urging rank and file to forgo a clash over government funding -- and a possible government shutdown -- and instead dig in against Obama and the Democratic Senate when the debt ceiling needs to be lifted sometime next month...According to internal House GOP counts, roughly two-dozen House Republicans are refusing to vote for a continuing resolution that funds Obamacare." Jake Sherman and John Bresnahan in Politico.

...And, naturally, the White House is saying this isn't a good idea. "The White House warned this weekend that Congressional recalcitrance on raising the federal debt ceiling might hurt the economy at a still-fragile time, with Gene B. Sperling, the director of the National Economic Council, warning in a call with reporters about the "unnecessary threatening of default" this fall." Annie Lowrey in The New York Times.

Obama and Boehner both enter upcoming domestic debates with a weakened hand. "Summers's forced withdrawal -- an unprecedented insult to the president by members of his own party -- was just the latest reminder of how both Obama and Boehner are facing questions about the strength of their leadership and whether they can avert a government shutdown or debt default that could significantly harm the economy..."It's almost as though it was the end of traditional power," Rep. James P. Moran (D-Va.), a fierce Obama supporter, said of rank-and-file resistance to the president and the speaker. "I've been here for 20 years, and I've never seen so much of a repudiation of the conventional sources of power in the legislative or executive branch." "It portends for a much more chaotic fall," he said." Zachary A. Goldfarb and Paul Kane in The Washington Post.

House bill seeks to deepen cuts to SNAP. "The House GOP bill would cut spending on the Supplemental Nutrition Assistance Program by about $40 billion over 10 years, according to congressional aides from both parties. That is twice the amount that House Republicans aimed to cut as part of a bill scuttled in June amid moves by House conservatives looking to make broader changes...The additional $20 billion in savings would come from a measure ending states' ability to waive a federal requirement that "able-bodied" people without dependents must work at least 20 hours a week or be in job training in order to receive food stamps. Now, states with a jobless rate above 10% can exempt some people." Kristina Peterson in The Wall Street Journal.

Club for Growth takes aim at Obamacare as it continues to take on GOP from the right. ""Every Republican ran on defunding or repealing Obamacare. This is a test of whether they're actually going to do what they say they're for," said Club President Chris Chocola, a former congressman from Indiana. "What's the more radical thing to do: Continue to spend more and borrow more from China? Or have the confrontation? It's never going to get any easier."" Lori Montgomery in The Washington Post.

The visible hand of the Streisand effect interlude: Can we all pass this along to humiliate Pat Robertson? Thanks.

4) Power-plant regulations coming this week

Here come the new EPA rules on new power plant emissions. "[T]he Environmental Protection Agency plans [this] week to propose the first-ever limits on greenhouse gas emissions from newly built power plants...[E]xperts predict that it will include separate standards for carbon dioxide emissions from plants fired by natural gas and by coal. Plants using comparatively clean gas would be permitted to emit perhaps 1,000 pounds of carbon dioxide per megawatt-hour, a ceiling within easy reach using modern technologies. Coal-fired plants, meanwhile, may be allowed to emit as many as 1,400 pounds per megawatt-hour." Michael Wines in The New York Times.

An unusual public battle over a nomination for a federal energy post. "The coal industry, feeling threatened by federal efforts to promote wind and solar power, has opened a counterattack by opposing President Obama's nomination of a renewable electricity advocate to head the federal agency with jurisdiction over power lines. The Senate Energy Committee is expected to hold a hearing Tuesday on the nomination of Ronald J. Binz to head the Federal Energy Regulatory Commission. Mr. Binz, 64, headed the Colorado Public Utility Commission from 2007 to 2011, where he was known for promoting renewable energy and efficiency, and for helping to draft a law that encouraged closing some old coal plants and cleaning up newer ones. The fight over Mr. Binz has been unusually public, considering that the job at stake is at an agency most people cannot name." Matthew L. Wald in The New York Times.

Transport interlude: Motorcycles are cool. But then there's this.

5) How to launch Obamacare, or not

Obamacare D-Day becomes soft launch. "Not everyone will enroll immediately. And that, they say, is the way they want it. Given all the worries that web sites could crash, call centers could be overwhelmed, and the federal government's data hub could falter as it checks eligibility and subsidies, they'd rather see a slow buildup during an open enrollment season that runs through March." Jennifer Haberkorn in Politico.

New poll data on Obamacare. "[T]he latest national survey by the Pew Research Center and USA TODAY, conducted Sept. 4-8 among 1,506 adults, finds that 53% of Americans disapprove of the law while 42% approve...About half of disapprovers (27% of the public overall) say these lawmakers "should do what they can to make the law work as well as possible," but nearly as many (23% of the public) say these officials "should do what they can to make the law fail."" Pew Research Center.

Reading material interlude: The best sentences Wonkblog read today.

Wonkblog Roundup

Five reasons Obama should name Janet Yellen to chair the Federal Reserve. Ezra Klein.

Larry Summers is out as a Fed chair candidate. So what now? Neil Irwin.

Larry Summers' withdrawal letter. Sarah Kliff.

What I saw at the financial crisis. Neil Irwin.

Was Obama's Syria strategy brilliant or lucky? Neil Irwin.

What we get wrong when we talk about 'the financial crisis.' Mike Konczal.

Want to shrink government? Let D.C. grow. Lydia DePillis.

Et Cetera

Monday longread: This is a spectacular piece of journalism from the Detroit Freep on how Detroit went broke

Home-sales frenzy eases. Nick Timiraos and Conor Dougherty in The Wall Street Journal.