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Lawrence H. Summers

@LHSummers

21 Dec

@ojblanchard1

⁦.@ojblanchard1⁩ is out here with a superb rigorous treatment of macro issues in the current low rate environment. …y-under-low-interest-rates.pubpub.org

Not surprisingly, I am largely in agreement with his analysis of the current world where secular stagnation has been and likely will again be a principal macro policy challenge.

If the view now priced into markets that the US economy cannot withstand a Fed funds rate as high as 2 percent even with high debt and deficits is right saving absorption/secular stagnation is a major macro challenge.

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Lawrence H. Summers

@LHSummers

13 Dec

I cannot understand why so many in Admin & out cling to the idea that inflation is caused by bottlenecks & will soon recede to normal levels. Of course there is uncertainty but the idea that inflation will revert soon to levels anywhere near Fed’s target looks like a long shot.

Nonpartisan BLS CPI report refers to inflation as “broad increases in most sectors…similar to last month.” Inflation is not @ bottlenecks. Less than 10% of index saw inflation below 3% & aside from housing where figures are problematic, the share below 4% is less than quarter.

We have all seen house prices & rents soar. Home prices based on Case Shiller are up 15 to 20%, as are rental prices, as reported by the nation’s largest landlords. If we assume 17% residential inflation, both CPI and core CPI would have exceeded 10 percent last month.

Read 7 tweets

Lawrence H. Summers

@LHSummers

13 Dec

@JHWeissmann

.@JHWeissmann has a thoughtful commentary on my inflation views. He is much more straight up than most of those who misjudged inflation risks earlier this year. I do disagree on a couple of points however.

slate.com/business/2021/… via @slate

First, I certainly did not foresee the specifics or full extent of bottlenecks, nor did I foresee that inflation would be running at close to a 10 percent rate during the 4th quarter of 2021.

There has been more bottleneck and transitory inflation than I predicted but my core prediction that the economy would overheat in a way that barring downturn would lead to sustained inflation way above 2 percent has proved out.

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Lawrence H. Summers

@LHSummers

3 Dec

@NOIweala

We are nowhere near the end of the pandemic.

Incremental change within existing mechanisms has failed; we need a fundamental reset.

Read my article with @NOIweala @Tharman_S on
Rethinking Multilateralism for a Pandemic Era - IMF F&D

imf.org/external/pubs/…

Large unvaccinated groups and the unchecked spread of the virus around the world raise the prospect of further mutations, possibly evading today’s vaccines, that will create new waves everywhere.

Yet COVID-19 is also a forerunner of more, and possibly worse, pandemics to come. Scientists have repeatedly warned that without greatly strengthened proactive strategies, global health threats will emerge more often, spread more rapidly, and take more lives.

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Lawrence H. Summers

@LHSummers

18 Nov

CBO estimate for tax-compliance efforts is conservative to the point of implausibility.

Assuming Admin is successfully able to develop & implement sound plans for IRS, I'm confident the proposed investments can generate more revenue than CBO assumes.

washingtonpost.com/opinions/2021/…

Although the CBO has not disclosed its methodology in detail, I base my conviction on three considerations.

First, as best as can be discerned, the CBO assumes significant diminishing returns.

The Administration's proposal calls strongly for focusing new enforcement resources on the high end, where underpayments are greatest.

Read 7 tweets

Lawrence H. Summers

@LHSummers

18 Nov

@USTreasury

The largest offset in the Build Back Better Act is not a tax increase. Instead, it is an $80 billion investment to restore a depleted IRS.

@USTreasury expects this transformative investment to generate $480 B — $400 B net — in addtl tax collections over course of next decade.

https://twitter.com/PostOpinions/status/1461138101313675265

That is a large sum. But it's important to put it into context given the scope of the tax evasion problem faced by fed govt. Over next 10 yrs, IRS is on track to collect $7 T less than is owed. This enormous tax gap is around 3% of gross domestic product on an annualized basis

Today, the IRS has about the same number of auditors as it did during World War II, and the IRS can answer fewer than 30 percent of the phone calls it receives from taxpayers with questions.

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