As Economy Stumbles, Obama's Economic Team Quits

After nearly two years in office, the "first rate" economic team that President Obama assembled to turn things around - Peter Orszag, Christina Romer, Larry Summers and Timothy Giethner - has itself nearly turned over.

His E-team of "brainy" economists, as ABC's Claire Shipman called one of them, went to work even before Obama took office, ultimately crafting a massive stimulus plan that they said would create millions of jobs. The media regarded them highly, giving them plenty of live interview time and constantly pushing their economic ideas.

ABC's Diane Sawyer called them "economic gladiators" in late 2008, as Obama was assembling his team. The networks also gave Obama's picks, especially Geithner's appointment, credit for a huge stock market rally.

"Stocks staged a monster rally last week after President-elect Obama unveiled his new economic team. But the euphoria evaporated today," CBS's Anthony Mason declared Dec. 1, 2008, on "Evening News."

The times have changed, but the media sure haven't. It's September 2010, and the economy is still sputtering with unemployment at 9.6 percent. As the summer of recovery failed to arrive, Obama's economic team started jumping ship: First Orszag, Romer and finally Summers. One CNBC blog has suggested the final major team member, Treasury Secretary Geithner, may be out after the elections.

The Washington Post covered those departures by asking other economists to rate the team's performance Sept. 26. The Post found multiple experts who commended them. Mark Zandi said the team "deserves high praise." N. Gregory Mankiw called them "smart, sensible and moderate by the standards of the Democratic Party," although he did fault them for not producing a "credible long-term budget."

Although outweighed by praise, the Post quoted Douglaz Holtz-Eakin who criticized the "massive government expansion" policies of Obama's team. 

"Unemployment is nearly 10 percent, and growth is under 2 percent. It is a dismal record," Holtz-Eakin said. "But blame lies squarely with the president. It is precisely the vision he articulated daily during his campaign. The economic team's job is to support the president's vision with a program of policy options, policy education, policy advice and policy advocacy - and to take the blame. To my eye, they've done this very well. The policy options have been, well, far too inventive for my tastes."

Orszag Leaves, Joins Liberal Media

Obama's economic team, despite Mankiw's assessment, was full of liberals willing to promote massive government spending, intervention and regulation. They crafted financial regulation, the stimulus package and Obamacare. These were no free market economists hired by the president.

Yet in Nov. 2008, ABC had trouble finding any liberals among Obama's cabinet. Charles Gibson ran down a list of appointments without calling any of them liberal, even with names like Hillary Clinton and Tom Daschle in the mix.

ABC's Jake Tapper followed up with the budget nominee: "Peter Orszag, the current director of the nonpartisan Congressional Budget Office."

While the news media often calls the CBO "nonpartisan," the appointment to director is made by the ruling party in Congress. So Orszag got the job when Democrats were in charge, and before taking that position he worked for liberal think tank Brookings Institution.

In June 2010, Orszag announced his intention to leave his cabinet position, and it didn't take him long to join another profession full of liberals: the mainstream media.

Orszag became a regular New York Times columnist in September.

Cracks between Orszag and the White House were revealed in The New York Times June 21, report, "Orszag, 41, has espoused deficit reduction strategies in administration debates against those who pressed for more stimulus spending and tax cuts to keep the economy from slipping back into recession."

Architect of Failed Stimulus Steps Down

If there was one E-team member who became the face of Obama's economic stimulus package it was Council of Economic Advisers chair Christina Romer.

Romer's name, along with Vice President Biden's chief economist Jared Bernstein, appeared on a January 2009 report called "The Job Impact of the America Recovery and Reinvestment Plan." That report claimed that the $787 billion stimulus package would prevent the unemployment rate from rising above 8 percent, and that it would create between 3 million and 4 million jobs by the end of 2010.

Obama repeated that claim over and over, and so did the news media. The networks particularly embraced the "urgent" need for stimulus to help the economy. NBC's Scott Cohn warned of what might happen to one Indiana town in a Jan. 30, 2009, "Nightly News" report. "Economic stimulus isn't just a political debate around here. It could be a matter of survival."

ABC, CBS and NBC all helped sell the stimulus plan for the White House by relying on pro-stimulus voices more than 2-to-1 in their reports, ignoring more than 250 economists who opposed the package, and refusing to report how the nearly $1 trillion package would be paid for.

One of those pro-stimulus voices was Romer's. She frequently appeared on newscasts "to spin economic reports" the way the White House wanted them spun.

None of those stimulus claims came true, in fact the unemployment rate climbed up to 10.1 percent and has been between 9.5 percent and 10 percent for all of 2010. Job losses continued to mount. Erin Burnett reported on Sept. 3, 2010, that we lost 8.4 million jobs in the recession and would need to add 200,000 jobs or more per month just to catch up.

Time's Swampland blog reported on Aug. 6, that Romer was leaving the Obama administration and cited family reasons for the departure. She said rumors of internal tensions between herself and Summers were "absolutely false." But she has continued to promote fiscal stimulus.

On May 27, The Associated Press reported that Romer was advocating more "fiscal relief" for state governments, more unemployment benefits and warned against winding down stimulus to reduce the deficit.

"It would be wrong to tighten fiscal policy immediately, as that would nip the nascent economic recovery in the bud," Romer said according to AP.

Again on Sept. 1, Romer called for additional stimulus saying in prepared remarks of her final speech: "Concern about the deficit cannot be an excuse for leaving unemployed workers to suffer."

Larry Summers: ‘Economic Wise Man'

Larry Summers, the president's chief economic adviser, announced Sept. 21 that he would return to Harvard at the end of 2010. This was sure to sadden the news media that had been fawning over him ever since his selection.

Time magazine profiled the "economic wise man" in its Feb. 9, 2009, edition saying, "The brilliant, slightly bumbling man who many save our butt."

"Big brain." "Wunderkind." Time sure did like Summers, and the magazine wasn't alone. CNN's Wolf Blitzer along with Vanity Fair correspondent Maureen Orth gushed over photographs of Obama and his economic team.

Orth told Blitzer, "Larry Summers told me this was an amazing moment, once in a generation, for economic policy makers and they had to take advantage of this post-inaugural period, and then Orszag said, you know, we've really got to make government cool again."

But just like the other members of Obama's economic team Summers is a liberal economist, one whose policy recommendations have yet to turn the economy around. This year, Summers has defended proposed tax increases for the rich and claimed "Almost all economists who studied these things have that kind of view."

Many economists disagree, and warn that raising taxes on the wealthy especially right now will only make the economy worse.

The Wall Street Journal reported that even stimulus and tax increase proponent Mark Zandi of Moody's Analytics is concerned that "raising taxes on the rich right now - as opposed to waiting a year or two - carries risks because of the ‘great uncertainty' in the economy. So he proposes waiting a year or two.

Networks Love ‘Brainy,' ‘Well thought of' Treasury Secretary

The Treasury Secretary hasn't announced his resignation yet, but CNBC blogger and Senior Editor John Carney reported on Sept. 23 that he "will probably be tossed out" after the midterm elections if the Democrats do poorly at the polls.

"Geithner will be the official fall guy for the November losses. The Obama administration will have to show the party faithful that it is making changes to respond to the electoral defeat. Firing Geithner will be at the top of the list of those changes," Carney predicted.

Of all Obama's economic advisers Geithner probably received the most praise from the broadcast networks.

In the immediate aftermath of Obama's election, network journalists covering Obama's possible picks for key economic positions touted Geithner as "highly regarded," "brainy," "well-thought-of," "much-admired" and deserving "tremendous respect." Of 56 stories mentioning Geithner between Nov. 3, 2008, and the official announcement of his selection Nov. 24, 2008, 34 portrayed him in a positive light while 22 were neutral or balanced. There were no negative stories about his appointment.

More striking, however, was journalists' refusal to explore Geithner's history as a bureaucrat in the Clinton administration and his involvement in the much-criticized decision to allow Lehman Bros. bank to fail. Less than 10 percent of the stories - five of 56 - mentioned his involvement in the Lehman failure and nine reported his work in the Clinton administration.

In post-election coverage on NBC, political correspondent Andrea Mitchell mentioned Geithner as a possible choice for Obama's Treasury. She said he was "very much admired" and commanded "tremendous respect" from Wall Street. She also praised Geithner as "not partisan. He's an independent, registered independent." She never mentioned he had served in the Clinton administration.

ABC's Claire Shipman called Geithner "brainy" on "Good Morning America" Nov. 5, 2008, and declared he had "been helping to manage the crisis." That night, CBS's Jim Axelrod told "Evening News" viewers Geithner was "well thought of on Wall Street."

Julia A. Seymour
Julia A. Seymour
Julia A. Seymour is the Assistant Managing Editor for the MRC's Business and Media Institute.