A very interesting snippet from a much longer interview with Lawrence Summers that rings true to me:

MR. ISAACSON: Last question before I get a few from the audience. What’s the difference between working for Barack Obama and Bill Clinton?

DR. SUMMERS: Okay. So you’re working for Bill Clinton. Well, let’s do it differently. Let’s do it the other way. You’re working for Barack Obama. If you have a meeting scheduled at ten o’clock, there’s a 25 percent chance that the meeting will begin before ten o’clock, and there’s a — you know what’s coming, and there’s a 70 percent chance that the meeting will have begun by 10:15.

If you wrote Barack Obama a memo before the meeting, it is a virtual certainty that he will have read it. If you seek to explain the memo you wrote to him during the meeting, he will cut you off, and he will be irritated. If he, as the leader of the meeting, will ask one or two questions to kick the tires, but will basically focus on how whatever subject you’re talking about fits with the broad vision and approaches of his presidency.

He will basically take the attitude if you’re his financial advisor, that if you can’t — it’s up to you to figure out whether preferred stock or subordinated debt is the appropriate financial instrument for your bailout, and that if he doesn’t trust you to figure it out, he’ll get a new financial adviser, but that is not the question on which he is going to spend time.

So it’s a very focused executive, big picture guidance, disciplined approach. At the appointed time, his secretary will come in and will bring a card that says it’s time for his next meeting, and you will be out of that office within five minutes. It is a certainty. That’s working for Barack Obama, and it is a wonderful experience.

Working for Bill Clinton is also a wonderful experience. It is a different experience.

(Laughter.)

DR. SUMMERS: The probability that your meeting will begin before ten o’clock is zero.

(Laughter.)

DR. SUMMERS: The probability that there is compensation for the fact that your meeting will begin late, it is virtually certain to end late. Bill Clinton has a 30 percent chance of having read your memo before the memo. Bill Clinton will, however, with near certainty, have some set of quite detailed and thoughtful perspectives to offer on your topic.

He will say things like “I was in the White House library reading the Journal of Finance, and there’s some really interesting thinking about the role of dividends in the system.” “I went to a conference at the Brookings Institution 11 years ago, and do you know that there’s a really interesting experiment with providing credit access in Tennessee?”

“Did you read the latest issue of — the Asian edition of The Economist? It had a perspective on Thailand that you might want to think about.” There was a stunning, I mean you know, while he wasn’t reading your memo, it wasn’t that he wasn’t doing anything about it.

Let me get at the point I’ve been trying to make in some of my foregoing posts recently and have touched upon occasionally over the last several years. What I think we’re seeing is the cost of radicalism in our politics. Part of the process of becoming radicalized is one of “consciousness raising”. When you consciousness has been raised with respect to a particular factor you tend to view every event, every issue through the prism of that factor.

African Americans who have been radicalized with respect to race see race as the overt or hidden cause behind everything. Blacks inability to get ahead is because of race. Opposition to the president is solely because of his race. Whatever it is is because of race.

Politicians in Africa and the Middle East who have been radicalized with respect to colonialism see colonialism behind every action of any other country. Israel is a colonial power. The U. S. invasions of Afghanistan and Iraq are American colonialism as is its bombing in Libya. Any country that sides with the U. S. on any issue for any reason whatever is an American puppet.

And people who have been radicalized with respect to government size or actions similarly see the hand of an overwhelming state in everything.

The remedy for radicalism is not an opposing radicalism. That is driving us to the brink of collapse or civil war. The solution is moderation in policy and style. We need to dial everything back to about a 3.

Another ignorant, self-serving, no-nothing business executive gives an interview blaming slow growth on the federal government. In this case it’s Bernie Marcus, founder of Home Depot.

Managers don’t make business decisions based on Truth but based on what they believe to be true.

As best as I’ve been able to determine it looks to me as though Mr. Marcus is a pretty staunch Republican so it’s possible that his views could be politically motivated. I think it’s more the other way around: he’s a Republican because he holds the views that he does.

Update

He’s not alone:

• 3M’s George Buckley, who blasted Obama last February as anti-business. “We know what his instincts are,” Buckley said. “We’ve got a real choice between manufacturing in Canada or Mexico — which tends to be more pro-business — and America,” he told the Financial Times.

• Boeing’s Jim McNerney, who in the Wall Street Journal last May called Obama’s handpicked National Labor Relations Board’s suit against his company a “fundamental assault on the capitalist principles that have sustained America’s competitiveness since it became the world’s largest economy nearly 140 years ago.”

• Intel’s Paul Otellini, who told CNET last August that the U.S. legal environment has become so hostile to business that there is likely to be “an inevitable erosion and shift of wealth, much like we’re seeing today in Europe — this is the bitter truth.”

• Home Depot co-founder Bernie Marcus, who observed to radio host Hugh Hewitt last month that Obama “never had to make payroll,” that “nobody has ever created a job in this administration” and that the president is “surrounded by college professors.”

• GE’s Jeffrey Immelt, one of Obama’s biggest supporters, who hit out at the president last year. “Business did not like the U.S. president and the president did not like business,” the FT reported him saying. “People are in a really bad mood. We have to become an industrial powerhouse again, but you don’t do this when government and entrepreneurs are not in sync.”

• Berkshire Hathaway CEO Warren Buffett, another Obama backer, who blasted Obama’s bank tax in January 2010 as a “guilt tax,” once called Obama’s carbon tax idea “regressive” and this month denounced Obama’s obsession with corporate jets.

The point here is not the objective truth of their views. The point is that these are their views and unless those views are changed somehow it will take a lot longer for the economy to recover than it otherwise would.

Over at Bloomberg economists Francesco Giavazzi and Anil K. Kashyap present their proposal for containing the European debt crisis. I see it as a kinder, gentler version of Lawrence Summers’s proposals that I’ve been complaining about all week, i.e. prop up the banks at all costs, IMO a sure formula for an even greater disaster somewhere down the road.

I see one enormous clunker in their proposal:

Finally, as a condition for banks to receive the support, their national governments would have to lay out a credible plan for growth. Critical elements of such a blueprint would be measures to deregulate labor, goods and service markets. Governments would have six months to enact legislation, corresponding to the period before the stability fund’s money is converted into shares.

What is a “pro-growth policy”? I recognize that such policies will vary depending on the circumstances of each individual country but is it possible for a country that participates in the euro to implement an effective pro-growth policy without active cooperation its fellow eurozone trading partners? I’m thinking specifically of Germany. Or is it the case that as long as Germany maintains mercantilist (or “imperialist&#148: as was suggested in comments here) export-driven policies there’s very little that Greece, for example, can do to make its economy grow.

I’m asking questions here. I’d genuinely like to know the answers.

For that matter what is a pro-growth policy for the United States? It’s easier for me to answer that question in the negative than in the positive: subsidizing failing (auto production) or over-built (housing construction) industries is not pro-growth. Increasing the subsidies to the healthcare sector and financial sector, each of which employs fewer workers for each marginal dollar of revenue than other sectors, isn’t pro-growth, either, at least not in a jobs-creation sense which is rather clearly an issue for the American economy.

or something like that. The Department of Labor has released its estimate of unemployment claims for this week. The number is essentially unchanged at 418,000, it has been at 400,000 or above for 15 weeks, and its current level is roughly where things stood in January of this year.

The recovery, such as it is, had its second anniversay this month. Recoveries don’t last forever and if previous post-war recoveries are any gauge we are at or near the apogee of this recovery. All other things being equal the economy is more likely to slow than to pick up steam or, if we are in a period of persistent doldrums as I’ve suspected for a long time, not get a lot worse but not get a lot better, either.

Can we all stop trying to figure out who shot John, stop trying to lay blame, and determine a way forward? With 18 million people either unemployed or marginally attached to the labor force who want jobs this is not a good place to be.

In response to a question that was asked in comments I’m preparing a chart of federal tax receipts as a proportion of personal income using data from the invaluable resource on economic data from the St. Louis Federal Reserve. Unfortunately, the tax receipts data and income data are reported rather differently so creating the chart isn’t as trivial as it might be.

Just as a taste of what you’ll see here’s a few sample data points:

The key point here is that whether you’re measuring tax receipts against GDP or against personal income they really are at historic lows. This is true at every income quintile, by the way.

I think there are reasonable arguments about what proportion of our incomes should be consumed by taxes, how much we should be borrowing, what the federal government should or should not do, and how to dig the economy out of the pit that it’s in. We shouldn’t be arguing about whether tax burdens have risen or fallen. By virtually any reasonable measure tax burdens have fallen. This has happened while federal spending has increased and that’s why we’re in the fiscal mess we’re in right now.

Update

A couple of more points I should make. It is not true that federal tax receipts have fallen because personal income has fallen because personal income has not fallen. It’s actually risen a little. FICA receipts have fallen off due to the large number of job cuts.

And that we genuinely need to increase tax receipts does not necessarily specify how we should do that. It can be by increasing marginal rates, by eliminating deductions (lowering “tax expenditures”), or by creating a new tax.

Take Barry Ritholtz’s final essay exam on the financial crisis!

I would add one question to the exam: what can you infer about the intent of regulators including the Federal Reserve chairman and governors, the Secretaries of the Treasury, Congress and so on from their actions during and after the crisis?

The enthusiastic reaction to Lawrence Summers’s op-ed in the Financial Times about which I posted the other day is pouring in. I’ve already pointed to Felix Salmon’s comment:

The implication here — although Summers doesn’t quite spell it out — is that the debt of a country’s banks can and should be safer than the debt of the sovereign. That’s something which has never worked in the past, and it’s very hard to see how it could possibly work in the future.

Now here’s Arthur Fullerton:

Trying to create a world financial system where “no big financial institution in any country will be allowed to fail” is an unsustainable act of hubris and is itself doomed to failure. Doing so while simultaneously casting the poor adrift is shameful.

And Mike Shedlock:

This proposal of Larry Summers is pure idiocy at its finest. As stated above in a capitalistic system, money will be misappropriated unless failure is allowed. What would a bailout guarantee do other than promote more reckless behavior?

I’ll report on other reactions as I find them. I’m sure that German bankers were pleased with Dr. Summers’s proposals.

There is an excellent post over at The American that arrives at a disquieting conclusion: all of the increase in federal government spending between 1966 and 2007 was due to increased government spending on healthcare.

The country is currently engaged in a pitched battle over the size of government and the fierce struggle over the debt ceiling is a skirmish in this much larger war. Health spending is central to this debate. But many Americans may not realize the degree to which healthcare has dominated the growth of government over time. Between 1966 and 2007, the entire increase in the size of government relative to the economy resulted from growth in tax-financed health spending.

That isn’t true only of the federal government. Healthcare spending is driving state, counties, cities, and individuals into bankruptcy. As I’ve posted before healthcare spending is growing faster than any revenue stream available to state and local governments and continuing to fund it at its rate of increase is politically impossible.
I think there is a misstatement in the post. Federal healthcare spending is, unfortunately, not strictly tax-financed. It is financed by a combination of taxes and borrowing. I seem to recall some discussion of a debt ceiling debate in Congress. Whatever became of that?

Even worse, the spending has other consequences:

Of course, all of the figures understate the true impact of tax-financed healthcare on the economy. Every dollar of taxes imposes hidden costs on the economy in the form of lower output (also called “deadweight losses”). That is, we get less of whatever we tax, be it labor, commodities, or even health services.

At the margin, each incremental dollar of federal taxes is likely generating deadweight losses amounting to 44 cents on the dollar. Thus, unless one can make the case that tax-financed healthcare is 44 percent more efficient than the same dollar raised and spent privately, every dollar we shift away from the private sector onto the books of government is a losing proposition.

If you’re wondering why our economy is faltering and job growth is phlegmatic look no further.

My greatest objection to the healthcare reform that was finallly enacted is that it poisoned the well. It didn’t solve the problems that we have, we still need healthcare reform, and nobody has the stomach for continuing wrangling over it.