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New York Times: Weighing Choice for Fed, Obama Offers His Party a Defense of Summers

July 31, 2013
In The News

Facing dissent from Congressional Democrats, President Obama on Wednesday offered a strong defense of his potential choice of Lawrence H. Summers to head the Federal Reserve, though he said no final selection had been made.

For the first time, he offered up the names of three possible successors to the current Fed chairman, Ben S. Bernanke: Mr. Summers, a former senior economic adviser to the president; Janet L. Yellen, the Fed’s vice chairwoman; and Donald L. Kohn, a former Fed vice chairman. Mr. Obama said he would probably make the decision this fall.

Speaking to members of the House Democratic caucus on Capitol Hill, Mr. Obama said in answer to a sharp question from Representative Ed Perlmutter of Colorado that he believed Mr. Summers had been maligned in the liberal news media, according to several House Democrats who attended the meeting.

Representative Gerald E. Connolly, Democrat of Virginia, said the president described Mr. Summers as a rock of stability who deserved credit for helping to steer the American economy back from the financial crisis of 2008 and the ensuing recession. Mr. Obama, Mr. Connolly said, singled out the negative coverage of Mr. Summers in The Huffington Post.

The president, Mr. Connolly said, emphasized that he was “not even close” to making a decision on the next Fed chairman. Mr. Obama did not address the criticism of Mr. Summers over his record on women’s issues, which has dogged him throughout his career. Mr. Summers, a chief architect of financial deregulation during the Clinton administration, has questioned the benefits of the Fed’s recent efforts to stimulate the economy.

Mr. Obama came to know Mr. Summers during the 2008 presidential campaign, relying on his analysis of the financial crisis, aides say. Mr. Summers served as the chief economic adviser in the White House in 2009 and 2010 and continues to talk with the president occasionally.

Mr. Obama and Ms. Yellen do not know each other well.

The president also reassured Congressional Democrats on Wednesday that he would not “sell out” his party’s principles as the White House tries to negotiate a budget deal with Senate Republicans this fall. He traveled to Capitol Hill to hold separate meetings with House and Senate Democrats amid a rising sense of frustration with the White House, which has spent more time reaching out to Republicans than to Democrats and has angered some liberals with a dogged defense of National Security Agency telephone and Internet surveillance programs.

Senator Harry Reid of Nevada, the majority leader, said Washington could break through the budget impasse and make progress on an overhaul of the tax code if the parties worked together.

“If we have both sides off doing their own thing, no,” progress will not happen, he said on Monday. “That’s why I’ve been disappointed at the meetings Republicans have had with the president.”

Emerging from their meeting with the president, House Democrats said Mr. Obama emphasized his shift back to a focus on economics after spending months on immigration, national security and gun control issues. The president said those issues would become easier if middle-class Americans felt more positive about their economic prospects.

“If we remain focused and clear on middle-class bread-and-butter issues, we win the broader public argument because the other side has no solutions on this,” one senior House Democrat quoted the president as saying.

Perhaps more than anything else, Democrats wanted Mr. Obama to remain resolute against further Republican budget cuts and threats to shut down the government unless the president’s health care law is starved of financing.

Representative Peter Welch, Democrat of Vermont, pressed the president for his strategy in the face of signals by Republicans that they would demand serious concessions before they voted to raise the government’s statutory borrowing limit.

“It’s a simple strategy, Peter. We’re not negotiating,” the president responded, according to Mr. Welch. “I’ve got nothing in my pocket. The cupboard is bare.”

Representative Steve Israel of New York, the chairman of the Democratic Congressional Campaign Committee, circulated polling in which 64 percent of voters said House Republicans were doing too little to cooperate with Mr. Obama, and more than a third of Republican voters felt that way.

Mr. Obama made an overture to Republicans on Tuesday when he proposed an overhaul of the business tax code that would lower the corporate tax rate to 28 percent from 35 percent in exchange for new financing for infrastructure, education and other Democratic priorities.

“Now we have a compromise with President Obama’s proposal to lower corporate tax rates in exchange for a badly needed investment in our infrastructure,” Mr. Israel said before the meeting with the president. “Republicans get their priority: tax cuts for corporations. We get our priority: more jobs for the middle class.”

The president said he would entertain “reasonable proposals” to shift some budget cuts from discretionary programs aimed at helping the poor to long-term changes to “entitlement programs” more broadly targeted at older Americans. The White House chief of staff, Denis R. McDonough, went to the Capitol shortly after the president’s departure to resume talks with a small group of Republican senators trying to find a path forward.

But House Democrats said they were confident that the president would not go too far. “He was very emphatic on that,” said Representative George Miller, Democrat of California.

Democratic leaders said they were also assured that Mr. Obama understood the gravity of his decision on the next Fed chairman. Representative Nancy Pelosi of California, the House Democratic leader, said there was an “understanding whoever the president chooses will be received with great respect.”

Mr. Reid stepped up to Mr. Summers’s defense.

“Larry Summers is a long-term friend of mine,” he said. “I like him a lot. I think he’s a very competent man. But that decision is up to the president.”

The White House said Mr. Obama was defending Mr. Summers as he would any other loyal and hardworking member of his staff. The president’s comments, officials said, should not be interpreted as a signal on the viability of Mr. Summers’s candidacy.

“Larry Summers’s service here was extremely helpful to the president as he made decisions and put forth the policies that helped reverse the tragic economic decline that this country faced in the beginning of 2009,” the press secretary, Jay Carney, said. “And he is certainly very grateful for Larry’s service with him.”