Larry Summers or Janet Yellen: The Safe Choice?

I think it’s time for Republicans to take a breath and acknowledge some of the things the Obama White House is doing right. The two names I have heard as top candidates for nomination to be the next chairman of the Federal Reserve are both worthy of support: Larry Summers and Janet Yellen.

There has always been something of a smear campaign against Summers that bothers me a great deal, particularly the notion that he is anti-women. Read this essay in Politico to clear up some facts:

Half a dozen women interviewed by POLITICO described Summers as a major promoter of and mentor to women in the Obama and Clinton administrations. They described him as tough, opinionated and demanding of high performance — both from men and women.

“Everyone needs to be judged on their merits, and it’s not fair to judge Larry as someone who is not supportive of women because that is not the record,” said Sandberg, who rose to become Summers’s chief of staff at Treasury and is now the COO at Facebook. Sandberg credited a major speech Summers gave in the early 1990s on the importance of educating girls in developing countries as critical in injecting the issue into public debate. “The thing that’s missing here is that Larry cares deeply about issues for women in the economy,” Sandberg said.

On the substance of monetary policy, would Summers be a good central banker? Well, he and I have a different world view, to say the least, but as far as Democrats go, yes.

Defenders of the Team Obama will say that they saved America from a true depression. Their aggressive action on the stimulus and annual trillion dollar deficits were vital to buffering the financial crisis: this is their argument. I disagree, but I do so with respect that we will never know alternatives. They had a crisis, to be sure, and had a set of options. In simple terms, they could have made a better choice (bipartisan, smaller but permanent adjustments to tax rates, and so on) but they made what amounted to a safe choice (a rigidly partisan stimulus, undisciplined expansions of jobless benefits, and in Summers ling “timely, targeted, temporary” fiscal adjustments that turned out to meet none of those three criteria).

Team Obama got a safe result — no depression, but no real recovery. The U.S. economy this very day has news of another lackluster quarter of GDP growth. The labor market appears to have permanently shed millions of willing workers from the labor force while Obama’s legislative accomplishments have shifted millions more from full-time to part-time work. But the depression was avoided.

Disagree as I might with Summers on some fiscal policy issues, I still trust him. I trust his intelligence and his fairness and most of all his good will. On monetary issues, I think he may well be great. He will be a safe choice, and a good choice too.

On the other hand, Janet Yellen is much more of an expert on monetary policy, hands down. The next decade will involve some very tough decisions about the timing of unwinding the exotic instruments of monetary stimulus that have been deployed under Ben Bernanke. Yellen’s resume is sterling, but especially valuable is her experience (see: decades of) working at the Federal Reserve. Yellen is an even safer choice for Fed chair.

It would be nice if Republicans would voice support for both candidates, now. America’s economy, as they well know, is still weak. There are far worse choices for Fed chair, which is just one reason why these two merit some bipartisan applause.

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