The hot new book in Washington, Ron Suskind’s Confidence Men, shines a bit of new light on the Obama administration’s lack of support for financial transactions taxes.
According to the book, based on 700 hours of interviews with high-level staff, President Obama supported the idea of placing a small tax on trades of stocks, derivatives, and other financial instruments. But, as with many other progressive policy proposals, it was blocked by Larry Summers, the former Treasury Secretary who was serving as Obama’s Director of the National Economic Council.
A major theme of the just-released book is how Summers dominated daily morning economic policy meetings with Obama. Former Office of Management and Budget Director Peter Orszag reportedly told Suskind that Summers would often tell the President “I’ll make my argument first; you can go after me.”
According to Pulitzer Prize-winner Suskind, Obama economic advisors said Summers hijacked a long list of their proposed policies. Here’s what he reports about FTT: “A financial transactions tax on banks and financial institutions, to try to tame the trading emphasis that has swept those industries and along the way, raise money: Obama said, in one meeting, ‘we are going to do this!’ Summers disagreed; it never materialized.” (page 365)
The story of Obama supporting the idea of taxing financial speculation is corroborated by off-the-record reports I’ve heard over the past couple of years from civil society leaders and foreign government officials. But it’s chilling to hear such strong confirmation that the idea was derailed by Summers, a man whose credibility should have been in the toilet long before Obama entered the White House.
The Suskind book reminds us of Summers’s long trail of disasters, from his key role in pushing for reckless financial deregulation during the Clinton administration to his offensive remarks about women during his stormy tenure as president of Harvard University. My first exposure to the guy was in 1991, when, as World Bank chief economist, he penned a scandalous memo suggesting that dumping toxic waste in developing countries made sense from an economic perspective.
And yet Summers, renowned for his powers of intimidation, was apparently so forceful in his domination of economic policy matters in the Obama White House that, according to Suskind, it messed with Obama’s confidence. “Over time, some of Obama’s more admirable features, his joy of inquiry, his impulse to reach just a bit beyond his grasp, started to get planed down,” wrote the former Wall Street Journal reporter. “He was making fewer decisions, and almost none where he couldn’t manage to tease some supporting consensus from his senior staff.”
Summers left the administration late in 2010. According to Confidence Men, he was outraged over being passed over for the position as chair of the Federal Reserve. So much so that he submitted a list of demands for compensation, including a round of golf with Obama, to be allowed to walk with cabinet members into the State of the Union address, and a car and driver.
However, even with Summers finally out of the picture, Treasury Secretary Timothy Geithner has worked to block financial transactions taxes. Recently, he even chastised Europeans for moving towards implementation of such taxes in their own territories, prompting angry words from the Austrian finance minister.
But let’s hope Obama’s recent tough talk on fair taxation signals a new chapter. It’s not too late for the president to revisit some of his earlier positions in support of progressive economic policies, including financial transactions taxes.