Summers or Yellen for the Fed? Obama's Stark Economic Choice

President Obama appears to think the two leading candidates to chair the Federal Reserve agree on monetary policy. On July 31 he told a group of Democratic senators that “when it comes down to their basic philosophy on the future of the Fed,” the differences between the candidates were so small “you couldn’t slide a paper between them,” according to Senator Dick Durbin of Illinois, who was at the meeting.

Obama might want to take a closer look at the candidates’ records. The fact is, you could slide a fairly thick doctoral thesis between the policy views of Larry Summers and Janet Yellen. In a nutshell, Summers is more skeptical than Yellen about the ability of easy money to accelerate economic growth; he also says the economy is closer to operating at full capacity than Yellen does. A Summers Fed would probably raise interest rates sooner than a Yellen Fed would.