In his recent defense of Larry Summers, President Obama appeared to
be badly confused about the state of the economy. This apparently leads
him to believe that the country should be grateful to Larry Summers for
his successes, as opposed to furious at him for his failures.
Obama's story is that the economy was in a free fall when he took
office and the program that was in large part designed by Summers helped
turn it around. While it is true that the economy was in free fall,
there was no reason to expect that to continue regardless of what
policies were pursued. Note that in every single wealthy country the
sharp drop in output at the end of 2008 and the beginning of 2009 was
stopped and reversed by the end of the year. Other countries were not
able to rely on the genius of Larry Summers in setting their policies.
This doesn't mean that the stimulus package that President Obama
pushed through did not help. According to the estimates of the
Congressional Budget Office and a number of independent economists, the
stimulus added between 2 to 3 million jobs. The problem is that the
economy needed between 10 and 12 million jobs. The stimulus was far too
small and did not last nearly long enough.
How much should we blame Larry Summers for an inadequate stimulus?
That's hard to say. It's not clear that President Obama could have
gotten a larger stimulus through Congress at the time, but it is clear
that his team (presumably including Summers) badly underestimated the
severity and the duration of the downturn.
As a result President Obama was celebrating the "green shoots of
recovery" less than two months after the passage of the stimulus, at a
time when the economy was still losing hundreds of thousands of jobs a
month. Rather than trying to explain to the country that the hole
created by the downturn was much bigger than they had recognized at the
time they designed the stimulus package (which was true), President
Obama talked about the need to pivot to deficit reduction.