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Why Did Obama Reappoint Bernanke on His Vacation?

PH2009082403518.jpg

The surprise isn't that Barack Obama reappointed Ben Bernanke. It's that he announced reappointing Ben Bernanke today. Obama is on vacation in Martha's Vineyard. It's a rare person who reappoints the Fed chairman in order to relax. Nor was this an urgent decision: Bernanke's term doesn't end till January. So why today?

Well, as the American Prospect's Tim Fernholz explains, it's about stepping on the other news stories that could dominate the morning. In particular, it's about stepping on the mid-session budget review, which will project a $1.5 trillion deficit in 2009 and $9 trillion in deficit financing over the next decade. That's a bad story for the administration, particularly at this juncture in the health-care reform debate (health care will be deficit neutral, but facts like that have a tendency to get lost in these discussions). Here's Fernholz:

[T]oday is the day that the Office of Management and Budget in the White House and the Congressional Budget Office will unveil their mid-session budget reviews, updating economic and other assumptions about future spending, revenues and deficits. The OMB has already leaked that it will be decreasing this year's deficit by about $250 billion thanks to unspent bailout money but increasing the 10-year deficit by about two trillion dollars, about 2 percent of projected GDP, as it updates its economic assumptions for the first time since last year. The CBO has already predicted similar numbers and most experts I've spoken to in advance of this morning's releases don't expect the CBO to be too far off from the OMB's projections.

Despite the fact that these results were expected, and in the case of the current-year deficit, unexpectedly better (more on the reviews later and in tomorrow's column -- briefly: ignore the panic), the bond markets love to freak out at the first sign increasing deficits. To counteract the deficit news that otherwise would put CNBC and the markets in a huff, the White House is pushing ahead the Bernanke announcement, putting a little honey in the bad medicine. Bernanke is "trusted" by the "markets," in the insane parlance of our times, and this should give them some confidence going forward.

In other words, the OMB is coming out with big deficit numbers today, which could rattle the markets and be used as a cudgel against health-care reform. To prevent that, the White House scheduled the Bernanke announcement for the same day. Fed chairmen may be insulated from politics, but the people who choose them sure aren't.

Photo credit: AP Photo.

By Ezra Klein  |  August 25, 2009; 10:22 AM ET
Categories:  Federal Reserve  
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Comments

Funniest thing is you are the only third person I have read talking about this Media Management (my own blog, Tim and you).

I hope Media holds fire to Obama's feet in this case. This kind of Media Management is of the exact scale and scope of Bush Times, the way he manipulated Media to advocate Iraq War. Yes, Obama is that guilty here.

Sometimes I wonder, what 'water' this White House Drinks. Unleashing Holder on past Bush cases in order to pacify Move On Org after roiling Public Option plan in a wrong way and now appointment news when Ocean of Red ink is in public.

Every day, this Administration is looking every bit like it's predecessor - deceiving all along, lying to the hilt.

Shame on Obama.

Hope Media simply keeps on pounding and pounding. If we were to have any hope in this country, we got to hammer such kind of cynical Media Management. I mean why does Media take it lightly? President kicks Media whenever he pleases, but then plays the same game when it suits him. Disgusting.

Posted by: umesh409 | August 25, 2009 11:02 AM | Report abuse

This insight (and I very much appreciate the insight) proves once again that the Obama administration is excellent on politics. If only they could get their policy in line with what a great yet responsible nation has the resources to do. The fact that the US federal government is running these unsustainable deficits is the big news of the day.

Posted by: lancediverson | August 25, 2009 11:33 AM | Report abuse

this is why I appreciate Ezra. He calls it like he sees it. Bush was wrong when he did it and Obama's wrong when he does it. The difference is that Bush didn't try to hide what he was, Obama did. Obama said as his platform to get into office "Change we can believe in" and yet he's keeping a lot of the same tactics that Bush did as well as others who are both democrats and republicans.

Don't act holier than thou if you can't be that way all the time.


Also when you look at a lot of the flip-flops that Obama is doing it really does add credence to the thought that a President who is fairly new in politics could have issues until he gets his feet wet and becomes a bit more politically savvy.

Posted by: visionbrkr | August 25, 2009 11:34 AM | Report abuse

Thanks for pointing this out, Ezra, but it's hardly anything new. Presidents have always wanted to manage the news. How long have we had the "Friday night news dump"? That's a good time to find out what the President wants us to ignore; no sense getting on their case about it.

Posted by: julie10 | August 25, 2009 12:29 PM | Report abuse

I have some real doubts about the off-hand seeming statement of fact that "health care will be deficit neutral, but facts like that have a tendency to get lost in these discussions."

Just who has concluded the current plan(s) will definitively be "deficit neutral"? The CBO?

On the contrary the estimated cost of the evolving health insurance proposals on top of cap & trade, on top of the ongoing cost of the so-called stimulus plan, on top of the bad economic numbers are combining to make the plan(s) un-sellable to the public.

The White House had to try and step on the last round of bad financial data however it could, or any of the health insurance plans are doomed when Congress gets back after Labor Day. That is "why now?"

Posted by: MikeKC | August 25, 2009 12:55 PM | Report abuse

Julie is right, this tactic stretches beyond the last two administrations; it goes back several. At any rate, could we not also interpret this event as another piece of uncertainty finally resolved? Would it be better to wonder about Bernanke (as if most did) until Obama got back? Finally, is any of this deceitful or untrue, as a previous post asserted? Let's take the outrage down 5 or 6 notches, work the problem.

Posted by: rcd2 | August 25, 2009 12:56 PM | Report abuse

I hardly see this as good news. Didn't Obama say during the campaign that you don't use the same people to get you out of the mess that got you into the mess? Now Obama is just taking more and more ownership of what Bush did. This would seem to heighten the deficit problem rather than step on it.

Posted by: SpanishInquisition | August 25, 2009 1:23 PM | Report abuse

In light of this bad news, staying the course with Bernake, a Bush holdover, seems particularly hard headed. I sometimes wonder whose side Obama is on.

Posted by: SarahBB | August 25, 2009 2:01 PM | Report abuse

"health care will be deficit neutral,"

...and unemployment will peak at 8%
...and the deficit will only reach $1.2 trillion this year.
...and the debt will only grow by $7 trillion over the next decade.

Posted by: seraphina | August 25, 2009 3:03 PM | Report abuse

Wrong right-wingers. Here's the real reason, (deficits don't matter, remember? Oops, he's a black President and a Democrat..oh,right, they do matter..sorry.)
It looks like the Fed lost the Freedom of Information Act brought on by Bloomberg News. Where's your and the Post's article on that bit of a bombshell. Now the Fed will have to reveal who actually got the TARP and other bail-out money, something the Fed and Obama did not want to do in fear of shaking up the markets...yeah, right...link is below:

http://www.bloomberg.com/apps/news?pid=20601103&sid=a7CC61ZsieV4

Posted by: sunnsea | August 25, 2009 3:21 PM | Report abuse

I agree with you umesh, different dog same fleas.

Posted by: Olurun | August 25, 2009 3:44 PM | Report abuse

Is it because photo linked below shows Bernanke doing his rare hand-jive depicting constant bearing decreasing range of the economy hitting rock bottom while he usually keeps one hand hidden in his left pants pocket?

http://www.washingtonpost.com/wp-dyn/content/politics/

Posted by: Patriot3 | August 25, 2009 5:25 PM | Report abuse

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