In the beginning of The New Yorker's profile of Peter Orszag, Obama's youthful, egghead-y budget director pays a visit to Jon Stewart at The Daily Show, and in the green room, ends up saying something kind of awkward when the host asks him why, instead of bailing out banks, the government doesn't bail out borrowers.
“The problem is, if you just focussed on the people who defaulted you create this huge incentive to default,” Orszag replied. Stewart looked at Orszag with an astonished grin. Before Stewart could finish pointing out that the government is creating an equally huge incentive by bailing out the financial firms Orszag realized that he had been backed into a corner: “Yeah, none of this is perfect!”
Fortunately, he didn't say that on the television, just in The New Yorker, which, sad to say, has a much smaller audience. Further down in Ryan Lizza's profile, the budget director lets slip a few other mildly embarrassing tidbits.
We came away with at least five insights about Obama's economic brain trust.
1. Tim Geithner: Kind of a Girl About His Title
While visiting Jon Stewart, Orszag defers questions about the bailout to the Treasury secretary. "He's the bailout guy?" Stewart says. "He's the bailout guy," Orszag says with a smile. "He gets sensitive about that."
2. That Uncomfortable Feeling That Congress Has, in Which They Suspect Everyone in the Administration Thinks They're Stupid? Totally Not in Their Heads
"At Princeton, Orszag wrote his senior thesis on the relationship between the Federal Reserve and Congress. One of his conclusions was that "it is clear that Congress suffers from a lack of understanding of even the most rudimentary economics." Side point: All economists have contempt for Congress: "Orszag's paper won an award for the best thesis that year in international economics or politics."
3. Economists Can Be Kind of Undermine-y
Here's Orszag on his mentor, Nobel-laureate economist Joseph Stiglitz, in The New Yorker: He's "more of a thinker and an academic than an implementer." (Another way of saying this might have been: "You know, in life, there are some people who do things, and some people who just sit on the sidelines and watch other people do things.")
Here's Stiglitz on Geithner, in the Times yesterday: “I don’t think that Tim Geithner was motivated by anything other than concern to get the financial system working again. But I think that mindsets can be shaped by people you associate with, and you come to think that what’s good for Wall Street is good for America.” (He might as well have added: "If you are weak-willed and foolish.")
4. Except for Larry Summers, Who Is Just Incorrigibly Irascible, All the Time
“There’s a little turbulence between Larry and everybody,” Orszag says, “because that’s just the way he is.” This actually just makes us love him.
5. In the End, You Can Never Really Trust Economists
Good old Stanley Bing wrote yesterday that while economists like to think they're practicing a science, it's more of "a craft, like pottery," and you never really know what's going to happen once that clay they've molded gets in the hot, hot kiln. For instance? That prize-winning thesis Orszag wrote back at Princeton? "The crucial formula that he had used," Lizza writes, "the one that had won him the prize, was incorrect. 'It was so innovative,' he said, 'that it was wrong.'" Oh, is that why it was wrong.