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Lawrence H. Summers Profile picture
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4 Feb, 6 tweets, 2 min read
The Biden stimulus is admirably ambitious. But it brings some big risks, too. My @washingtonpost column:
washingtonpost.com/opinions/2021/…
.@POTUS Biden's $1.9 trillion covid-19 relief plan, added to the stimulus measure Congress passed in December with the incoming administration’s strong support, would represent the boldest act of macroeconomic stabilization policy in U.S. history.
Its ambition, its rejection of austerity orthodoxy and its commitment to reducing economic inequality are all admirable.
It is imperative that safety-net measures for those suffering and investments in vaccination and testing be undertaken rapidly after the indefensible delays of the last months of the Trump administration.
Yet bold measures need to be accompanied by careful consideration of risks and how they can be mitigated.
While the arguments for providing relief to those hurt by the economic fallout of the pandemic, investing in controlling the virus and supporting consumer demand are compelling, much of the policy discussion has not fully reckoned with the magnitude of what is being debated.

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More from @LHSummers

Lawrence H. Summers Profile picture
25 Jan
1. New NBER WP out today, “Rethinking How We Score Capital Gains Tax Reform” with @NatashaRSarin, @omzidar, and Eric Zwick.

We point out that there is likely much more revenue potential from raising capital gains rates than official scorekeepers believe. nber.org/papers/w28362?… Image
2. Elasticity of capital gains tax base to rate changes is assumed to be .7.

This is unchanged since the 80s, and means that raising cap gains rates to ordinary income levels puts you on the wrong side of the Laffer curve.

We believe this conclusion is mistaken.
3. Why? Estimates appear to miss that realizations deferred when rates rise unlikely to be deferred indefinitely

And when they are realized, taxed at new higher rates

Suppose doubling cap gains rates cuts realizations in half, e.g. occur once every 2 years rather than annually
Read 7 tweets
Lawrence H. Summers Profile picture
22 Dec 20
I spoke via Zoom last night at the Beijing Forum 2020: COVID-19 Shock to Global Health and Development.
I retold the story of Reagan and Gorbachev and their private walk around Lake Geneva in 1985. As the story is told, Reagan asks Gorbachev if he would come to the defense of the USA upon the invasion of aliens from outer space and Gorbachev says, “Yes, of course.”
Gorbachev asks the same of Reagan and gets the same response. The two leaders then agree to collaborate in defense of all of humanity.
Read 17 tweets
Lawrence H. Summers Profile picture
21 Dec 20
The big fiscal news is that the nation will not make the colossal error of letting stimulus lapse. That would have been hugely risky and ill advised.

But the set of compromises reached and not reached are-- in important respects--bizarre and unfortunate. This does not bode well
The lack of support for state and local government will mean hundreds of thousands more without work, more crime, more fires, and more kids falling behind. The business liability issue is in comparison a triviality that should have been compromised.
The business meals deduction that has been put back in may be the dumbest tax provision enacted in the last decade which, given the 2017 Act, is a strong statement. It make even the break for carried interest look good.
Read 8 tweets
Lawrence H. Summers Profile picture
14 Dec 20
The U.S. is in danger of losing its dominant leadership position in global financial services, writes Henry M. Paulson Jr. wsj.com/articles/china… via @WSJ
1/ Budget deficit reduction is not a priority issue for the next few years given secular stagnation as @jasonfurman and I explain (brookings.edu/events/fiscal-… ). Nor are there strong reasons to worry about budget sustainability.
2/ Other deficits—with respect to infrastructure, investment in children, and innovation—pose much greater threats to our children and our national security than money borrowed for decades at rates close to 1 percent in a currency we print ourselves.
Read 5 tweets
Lawrence H. Summers Profile picture
30 Nov 20
1/ In Tax Notes today, former IRS Commissioner Charles Rossotti, @NatashaRSarin and I outline how the next Admin can collect more than $1 trillion in a highly progressive way:
Making people pay the taxes that they already owe.
taxnotes.com/featured-analy…
2/We've previously written independently on the need for a robust attack on the tax gap.

Here, we come together to lay out a roadmap for change, calling for more audits, tech improvements & third party reporting that will help IRS collect taxes due but unpaid, disprop by the $$$
3/ Our program would raise enough to fund important policy initiatives that will help those who need it most:
Could more than double the EITC or SNAP; or fund universal pre-K and paid leave programs.
Read 8 tweets
Lawrence H. Summers Profile picture
30 Nov 20
Following the great appointment of Janet Yellen, the Biden Administration is assembling a super economic team. This group will be laser focused on middle class prosperity, inequality and discrimination and addressing climate change. They will make a big difference for America.
I have known Ceci Rouse since she was student of mine @Harvard in 80s. She is a deeply serious researcher in the economics of education & inequality. She stood out in the Obama Admin & has been a great Dean. Her integrity will be a big asset for the CEA, Pres Biden & our country.
My friend @neeratanden is a force of nature. Her strength as a communicator is exceeded only by the strength of her convictions. No one works harder, with more of a sense of purpose. She will bring new thinking about government budgeting to the OMB that this moment demands.
Read 5 tweets

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