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Columnist Ryan Lizza’s in-depth New Yorker article (“The Obama Memos”) examines some of the strategies and reasoning behind the Obama administration’s handling of the U.S. economy. But unlike most op-eds, his article involves more than just speculation and conjecture. One of the chief resources Lizza uses for his New Yorker piece is a 57-page, “Sensitive & Confidential” memo written by the economist Larry Summers in 2008.
For those unfamiliar with that name, Larry Summers is the former Director of the United States National Economic Council for President Obama. And although he resigned from this position in November 2010, as the White House’s chief economist he “played a leading role in crafting the administration’s interventions in the economy,” according to the Wall Street Journal.
Summers’ influence being understood, this “sensitive and confidential” memo helps explain why certain economic strategies and initiatives have been adopted, and in many cases maintained, by the Obama administration. But it does a little more than that: the memo also sheds some light on why the administration has failed to revive the economy.
Summers’ 57-page memo is “striking for two reasons,” writes Dean Baker of The Guardian. “First, it…showed the economic projections that the administration was looking at when it drafted its stimulus package. These projections proved to be hugely overly optimistic.”
Many critics would agree.
The other striking part of this memo is the concern with “bond market vigilantes”. The memo discusses the need to focus on the medium-term deficit with the idea of reaching deficit targets by 2014. The highest deficit target listed in the memo for this year was 3.5% of GDP. The memo also includes calculations with a deficit target of 2.5% of GDP, and a balanced budget.
Read more here.