Larry Summers has put out a bad faith argument in WaPo. Democrats should NOT take him seriously. The primary concern is providing too little stimulus and a prolonged and deeply painful recovery. The potential costs of going too big are negligible. 1/ washingtonpost.com/opinions/2021/…
First, let's talk about the output gap. Summers takes a top down vs a bottom up approach to the output gap.
When considering full employment/ an economy operating at capacity, we can either 1) calculate a top-down measure via GDP output gap (as Summers and CBO do) 2/
Or 2) take a bottom up approach that puts people
at the center of the economy by focusing on employment.

Right now continuing UI claims for all programs are nearly 16 million above pre-pandemic levels according to @hshierholz 3/
Summers essentially takes CBO at their word regarding the output gap. This is wrong. CBO has narrowed the output gap by revising it down (as they did following the great recession). They're saying the economy can never return to the pre-recession growth path. I reject that. 4/
Summers and CBO are assuming the U rate never drops below 4% and LFPR remains depressed. In essence, they
want to keep running a cold economy. U was at 3.5% for a sustained period of time and inflation was still stubbornly low! 5/
To boot, wage growth was modest at best (and labor share of income has not come close to recovering). IDK about you, but I think workers deserve a bigger share of the economic pie.

This means full employment is significantly below 3.5%. 6/ Image
Of course U-rate is a bad measure right now, so we want
to look at LFPR too (2000 or 2007 should be a decent baseline as @adamshersh and I argue in this @Groundwork paper. Using 2007 as a baseline true U is about 13% right now) 7/ groundworkcollaborative.org/resource/how-m…
Taking a bottom-up approach that focuses on workers, the proposed $1.9T in stim by Biden gets us in the right
ballpark. But even there we're $200B shy of the HEROES Act. 8/
We have the tools to rapidly bring the economy back
pre-pandemic U levels; yet Summers and CBO are arguing for a slow prolonged recovery, and one that never brings us to true full employment. The human + political costs of this approach are hard to overstate. 9/
On the flip side, the costs of overshooting full employment (whatever that means) are likely modest, at best. In fact, if we think of it as a target, we should be pushing for an overshoot for a while to make up lost ground! /fin

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More from @MarkVinPaul

5 Feb
Everyone in the West Wing should instead read this @Groundwork paper which puts people at the center of the economy in estimating how much stimulus is needed. Our finding? The economy needs $2-3T on top of the $900B passed to bring back a healthy economy groundworkcollaborative.org/wp-content/upl…
In the paper, we ask a simple question: How much stimulus does the economy need to run a high pressure labor market that will bring widespread employment and rising real wages? We found the economy needed $3-4.5T in stimulus for that. Since, Congress passed $900B.
That was a good down payment. But the economy needs more if we want to prevent a lackluster recovery like we saw in the Great Recession. Taking our foot off the stimulus pedal back then resulted in an entire decade where workers fell further and further behind.
Read 13 tweets
8 Dec 20
There's no question that Congress needs to pass a major stimulus bill. But how big should it be? Well, @adamshersh & I answer that in a new @Groundwork paper. We estimate that Congress should spend upwards of $4.5 T to resuscitate the economy. THREAD 1/ groundworkcollaborative.org/wp-content/upl…
To estimate how much spending is needed, we first need to estimate just how deep a hole the economy is actually in. The headline unemployment rate has been tumbling, down to 6.7% from a peak of 14.7%. But the headline unemployment rate misses the story: disguised unemployment. 2/
If we look at the labor force participation rate, we see it has cratered like never before. Many workers have simply left the workforce (the narrow way we define it that is), resulting in an artificially low U-rate. 3/
Read 16 tweets
21 Sep 20
The GND is on the move. Biden is now promising $2T in green spending. House Select Committee offered up a big report this summer. Voters are demanding green stimulus. But how should we finance a GND? @aldatweets & I have thoughts. THREAD 1/ dissentmagazine.org/online_article…
First, let's recognize that we live in a mixed economy. Decarbonization is going to require large amounts of both public and private spending. A recent proposal by @STOmarova calls for a National Investment Authority (NIA) has been getting some attention. dataforprogress.org/memos/voters-s…
First, I want to say that our aim is to promote healthy debate on the left as we all grapple w/ these big and thorny questions. I believe we share many of the same goals as @STOmarova, though we disagree over some details, and details matter. 2/
Read 8 tweets
3 Sep 20
Just finished Strain's book. The central message?

1) "The American Dream is alive & well...Workers do enjoy the fruits of their labor...The game is not rigged.” ⬆️ mobility is strong

2) Freedom=free markets. We get more freedom via entitlement reform, deregulation, and growth
3) Trump = bad. Why? He "rejected the GOP’s traditional emphasis on the need to reduce projected future spending on Medicare and Social Security."

It's fascinating to see praise for a book by @charlesmurray & @RichLowry but also @LHSummers @jasonfurman @JustinWolfers
Strain is deeply concerned about populist rhetoric on both sides of the isle, claiming modest proposal like $15 minimum wage, universal healthcare, and extending guaranteed pub ed beyond 12th grade are "radical" and are based on an "incorrect belief that the system is rigged" Image
Read 8 tweets
7 Aug 20
A2: First, let's take a step back and ask a this: what would a reasonable society do right now? Would they let people go hungry during a pandemic when there is enough food to go around? Would they let people go homeless when we have more homes than ppl?
Would they let ppl go without healthcare when we have enough to provide all with coverage? NO! A reasonable society would pull out all the stops. It'd realize that we're living through unprecedented times. It'd realize that economic security + health are fundamental rights.
What this #JobsDay tells us is that Congress needs to act. The House already passed bold legislation, but @senatemajldr & @realDonaldTrump are hellbent on bringing working families to their knees. Why?

Because they can.
Read 6 tweets
7 Aug 20
Right now, we’re facing a dire public health and economic crisis. And like most things in our structurally racist & sexist economy, the harms associated with these crises are not distributed equally. Let’s dig in!
While #jobsday showed a modest downtick in the U3 rate, which is a good sign, the overall picture of the economy, especially for working-class ppl, remains bleak.
Overall U3: 10.2%
Black U3: 14.6%
Hispanic U3: 12.9%
White U3: 9.2%
The big takeaway from #jobsday is that the recovery has slowed massively, and major congressional action is necessary to help people meet their bills & stay in their homes, help states/local governments avoid massive layoffs, & help get the ongoing health crisis under control.
Read 7 tweets

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