Barack Obama in the Fog

The four of them formed President Barack Obama’s economic “Dream Team.” Nearly every morning, they advised the president of the United States on the economic situation, the markets and the measures to take in the worst financial crisis in nearly a century. Only the Treasury Secretary, Timothy Geithner, remains. The Budget Director, Peter Orszag, left in July. The Chairwoman of the Council of Economic Advisers, Christina Romer, resigned her post at the beginning of the month. And the flamboyant Larry Summers will surrender his management of the National Economic Council at the end of the year. All three have big dark circles under their eyes after two exhausting years. They also feel like doing something else. But they’re also central to what appears today as the major failure of Barack Obama: America isn’t out of the crisis and there is no hope for a quick recovery. Unemployment affects one out of 10 workers, more than 10 million households have their heads under water (their house is worth less than their mortgage), and the budget deficit has risen to over 1.6 trillion dollars.

In remodeling his economic team, the president has a unique opportunity to take a new direction, or at least give the impression of taking a new direction. He has already named Austan Goolsbee, one of his oldest advisers, to replace Christina Romer ,and Jacob Lew to take Peter Orszag’s chair, which he occupied before under Bill Clinton. The choice of Summer’s successor will be crucial. While the game seems very open at the moment, the White House having made it clear that the president will take his time, his options on the playing field seem to have narrowed considerably.

Beyond the debates over the taxation of higher incomes, a new budgetary stimulus package and employment measures, a real distress is revealed. This is true for monetary policy, where it seems there is no other option than to always print more money in order to prevent deflation — such was the message of the press release published Tuesday by the U.S. Federal Reserve, pointing to new purchases of assets by the central bank. This is also true for budgetary policy. The 800 billion dollars of the stimulus package, passed in early 2009, limited the recession but didn’t permanently boost the economy. Certain Democrats and nearly as many economists are calling for massive new measures to support the plan.

Yet, even supposing that lenders continue to advance funds to the United States to finance their public deficit at ridiculously low interest rates, nothing can guarantee the effectiveness of this budgetary weapon. Larry Summer’s successor will have to come up with the winning formula for creating jobs and preserving financial stability, two subjects which Summers is now going to be working on…at Harvard University.