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Summers returns center-stage

- The Washington Times - Sunday, December 14, 2008

Like it or not, Larry Summers is back on the Committee to Save the World.

His first assignment came at the Treasury Department in the late 1990s, dealing with an Asian economic crisis, meltdowns in Russia and Latin America, and then the failure of the U.S. firm Long-Term Capital Management.

In February 1999, Time magazine put Mr. Summers, then the deputy Treasury secretary, on its self-dubbed CTSW cover. He stood next to then-Treasury Secretary Robert Rubin, who is now tainted by Citigroup's near-collapse, and behind then-Federal Reserve Chairman Alan Greenspan, who is now blamed by many for the current fiscal disaster.

But Mr. Summers -- although he carries his own baggage after five years as president of Harvard University -- is back in government as a top adviser to President-elect Barack Obama and will serve in the next White House as director of the National Economic Council. Having been President Clinton's last Treasury Secretary, Mr. Summers enters a position that could appear to be a step backward, at least in prestige.

But those who know Mr. Summers or have watched him in action say he'll be a dominant force inside the White House as Mr. Obama tries to bring the country back from a fiscal crisis unlike anything since the Great Depression.

"He won't be shy. The thing about him is he doesn't sit behind the scenes," said Julian Zelizer, a history and public affairs professor at Princeton University. "He's a forceful presence."

"My guess is he's going to take that position and make the most of it, and [Timothy] Geithner will have a competitor, even though he's the secretary of the Treasury," Mr. Zelizer said.

The knocks against Mr. Summers are by now familiar. During his five years at Harvard, his most high-profile moment came in 2005 when the school's faculty attacked him for comments he made about differences between men and women related to their aptitude in science and engineering.

The incident is part of a litany of offenses cited by critics, such as Cornel West, a black professor of African-American studies who clashed with Mr. Summers at Harvard in 2001.

"Summers, we know, is just socially challenged. He cannot treat certain people with decency and empathy, and I'm one of them," Mr. West said earlier this month.

Mr. West left Harvard and returned to Princeton after Mr. Summers publicly called his rap album "an embarrassment" and questioned his commitment to classroom instruction.

Mr. West is part of a segment on the far left of the Democratic Party that is displeased that Mr. Obama has hired many former Clinton administration officials.

"My critique of Summers is the same as my critique of Robert Rubin, Timothy Geithner and [Obama adviser] Jason Furman. They're all deregulators who helped contribute to the catastrophe," Mr. West told an interviewer for the Web site NewsBlaze.com earlier this month.

"And now, all of a sudden, they're supposed to come to the rescue?"

Mr. Summers declined to be interviewed for this article, but he spoke earlier this fall about his overall philosophy, which will mark a significant departure from the Bush administration's sometimes-doctrinaire belief in free markets.

"While market outcomes may be efficient, they may be profoundly unfair, and there's a need for government to do things to redress the balance," he said in an interview with Portfolio.com. "A market system can only work within a broader legal framework that only government can establish."

Mr. Obama, during the Nov. 24 news conference naming Mr. Summers to his position, called the 54-year old economist -- who at 28 became the youngest tenured professor at Harvard -- "one of the great economic minds of our time."

Mr. Summers, said the president-elect, will be "playing the critical role of coordinating my administration's economic policy in the White House."

"I will rely heavily on his advice as we navigate the uncharted waters of this economic crisis," Mr. Obama said.

Sheryl Sandberg, Mr. Summer's former chief of staff at Treasury who is now chief operating officer at Facebook Inc., said there is "no one better suited" for the role of coordinating economic policy.

"He welcomes honest discussion and debate. He likes the intellectual rigor of seeing every side of an argument," Ms. Sandberg said in a phone interview.

"In these really tough economic times, we as a country need to make sure we are making the right decisions, and the best way to do that is to have someone with his kind of intellectual firepower responsible for figuring this out."

Vincent R. Reinhart, a former high-ranking official at the Fed, said that Mr. Summers could end up being the spark plug on an Obama economic team that will not be lacking in large personalities and egos.

"If he's the one generating ideas, he could be very influential and powerful," Mr. Reinhart said.

Mr. Reinhart said he views much of the rest of the economic team named by Mr. Obama as "insulation around the current of the economic policy generated by Summers."

"It looks like, from the outside, that it's Summers' job to generate the ideas, Geithner's job to package them in a form that the public and Congress would find acceptable, [Council of Economic Advisers Chairman] Christina Romer's job to put that proposal in perspective, and then Paul Volcker is the check on the process to make sure nobody gets too carried away."

Mr. Volcker, a former Fed chairman under Presidents Carter and Reagan, will chair the Economic Recovery Advisory Board created by Mr. Obama. The Obama transition team would not comment on whether Mr. Summers will participate in meetings of Mr. Volcker's board.

The current financial challenge facing the Obama team will require it to make tough decisions on the size and shape of a stimulus package and on future regulation of financial markets.

In addition to all that, there is a mountain of other issues to tackle.

Mr. Summers and the rest will be tasked with figuring out the best way to pay for the tax refunds Mr. Obama wants to give to more Americans and for his goal of creating a universal health care system. They'll need to weigh in on the most sensible way to design a carbon emissions cap-and-trade system.

And they're facing severe long-term structural problems in the budget and entitlement programs that will begin to inflict real consequences during Mr. Obama's presidency.

One of Mr. Summers' signature issues, meanwhile, is income inequality -- also a passion of Mr. Obama.

The U.S. ranks 95th out of 135 countries measured in the Gini coefficient, an index of income equalities by nation, as recorded in the CIA World Factbook.

"As a thought leader, Larry has urged us to confront the problems of income inequality and the middle class squeeze, consistently arguing that the key to a strong economy is a strong and growing middle class," Mr. Obama said.

"This idea is the core of my own economic philosophy and will be the foundation for all of my economic policies," he said.

And as for Mr. Summers' reputation as a social misanthrope, his defenders say that is a result of his passion and embrace of honest debate.

"He's very used to arguing things on the merits," Ms. Sandberg said.

"Obviously there were issues at Harvard. I don't think they're reflective of who Larry is," she said.

Mr. Summers explained it himself this way.

"I'm somebody who wants their errors to be of trying to do too much rather than trying to do too little, trying to make as large and as constructive a difference as I can. That's a perspective that I bring to whatever I try to do."