The Summer Slowdown Collides With The Summers Acceleration Theory

You’d think Larry Summers would know better. Not that he stepped in it, again, but rather why he did this particular time. Making a big deal out of inflationary aggregate demand when he’s been practically the lone mainstream Economist to look at the post-2008 economy in an honest and serious fashion to then somehow failing to incorporate that view into our current place.

What got Summers in hot water a few days ago was a rather careless throwaway surrounding his usual partisan politics. Essentially asking the question why the government would want to give $2,000 to all Americans. It’s a legitimate query but one unfortunately couched first in typical and typically unhelpful DC squabbling. 

When I see a coalition of Josh Hawley, Bernie Sanders and Donald Trump getting behind an idea, I think that’s time to run for cover.

The more significant problem, in my view, was the basis from which he attempted his answer. Forced to explain this pure bias, or BS, further, Bill Clinton’s former Treasury Secretary felt impelled to write an op-ed for Bloomberg on Sunday in order to clear things up. It wasn’t politics, he claimed, but rather bad Economics (capital “E”, in this case).

The question is whether there is a rationale for further tax rebate of more than $200 billion a month over the next quarter. This would represent additional support equal to an additional seven times the loss of household wage and salary income over the next quarter.

The government is in danger of doing too much. To be fair, Summers stated unequivocally his support for those who are being hit hardest by the current disastrous economic state. By all means, give them cash aid, he argued.

At issue instead are those who maybe haven’t quite suffered seriously, Americans not only still working but having barely noticed the grave peril which has engulfed so many of their fellow citizens (that’s the real “too much”). On moral grounds, it’s a perfectly worthwhile discussion; should everyone receive a(nother) handout?

It’s the Economic foundation for what becomes Larry’s objection that is most objectionable. The Keynesian/Japanese idea of “too much.” The problem, as any mainstream Economist sees it, is that once you’ve filled in the trough you need to get out of the way of the recovery lest it run explosively hot seventies-style.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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