Thread by @bopinion

NEW from @LHSummers:

"The attack I made on @BloombergTV on the idea of universal $2,000 checks as a Covid-19 response has lit up the Twittersphere, so I think it worthwhile to be clear about what I am arguing." bloomberg.com/view/articles/…

The stimulus bill Congress passed:

🚫Won't support states as they try to rehire teachers and health-care workers
🚫Won't accelerate Covid-19 testing
🚫Won't provide long-term help to those facing unemployment or eviction

"Victims of Covid-19 disruption can and should receive generous targeted support, as should the poor," says @LHSummers.

But what about the vast majority of families who are still working, and whose incomes have not declined? he asks bloomberg.com/view/articles/…

The data are striking:

📉Total employee compensation is about $30 billion/month behind the pre-Covid baseline

📈Measures in the stimulus bill to strengthen unemployment insurance and to help business will add about $200 billion/month to household income bloomberg.com/view/articles/…

That's an additional seven times the loss of household wage and salary income over the next quarter, @LHSummers explains.

Further adding to earnings when losses are being replaced seven times over seems hard to justify — especially when savings are rising bloomberg.com/view/articles/…

If writing universal checks is a good idea, why not do it after household incomes have reverted to normal?

This point is illustrated by the figure below. Without new stimulus, things would have normalized in 2021 bloomberg.com/view/articles/…

But the existing stimulus bill is sufficient to elevate household income relative to the economy’s potential to abnormally high levels — unheard of during an economic downturn.

With President Trump’s add-on, we are in completely unchartered territory bloomberg.com/view/articles/…

We frankly have no confident basis for judging how much and how fast this excess will be spent.

The Democrats seizing this opportunity is fair and good politics — but if it leads to actual implementation, it is bad economics, @LHSummers concludes bloomberg.com/view/articles/…