Larry Summers’s Churlish Payback to Biden

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Larry Summers was quietly dumped from Joe Biden’s economic team last year. I had written an investigative article on how Summers had managed to fall upwards despite successive pieces of disastrous policy advice—and why he should be kept as far from a Biden administration as possible. Mercifully, Team Biden agreed.

Now Summers, in a Washington Post column, has neatly proven my point. He’s also proven once again that he’s a vindictive SOB.

In the column, as Biden is fighting hard to deliver on his $1.9 billion relief package, Summers choses this moment to argue that the package is too big. Thank God Summers is only purveying his advice in the pages of The Washington Post, and not from inside the administration where someone might take him seriously.

But Summers has also proven once again what a lousy economist he is. After a characteristically disingenuous opening paragraph, congratulating Biden for his boldness (“Its ambition, its rejection of austerity orthodoxy and its commitment to reducing economic inequality are all admirable”), Summers then sticks in the knife.

This admirable, bold package is too large by a factor of three. Why? Summers quotes misleadingly from a Congressional Budget Office analysis. Please read this carefully:

[The] Congressional Budget Office estimates suggest that with the already enacted $900 billion package—but without any new stimulus—the gap between actual and potential output will decline from about $50 billion a month at the beginning of the year to $20 billion a month at its end. The proposed stimulus will total in the neighborhood of $150 billion a month … at least three times the size of the output shortfall.

Got it? The Biden proposal is three times the projected loss of economic output, so it’s three times too big.

But most of the Democrats’ proposal is not about a macroeconomic gap. It’s directed toward vaccine supply and distribution, and relief for struggling schools and flattened state and local budgets and public services. Only about $420 billion goes for direct payments to individuals, and some of that will replenish savings or pay down debt (as opponents of the Biden plan have argued in other contexts).

Summers is a macroeconomist, but there’s more to an effective economy and society than macro. Help with schools and vaccines may have partial spillover into macro stimulus, but it is also needed for its own sake.

Lyndon Johnson famously said, when the question arose of whether to reappoint J. Edgar Hoover as FBI director, “Better to have him inside the tent, pissing out.”

In Summers’s case, it’s better to have him outside the tent, pissing in the wind.

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