"The Case Against Larry Summers"

Is made here .

It's a good article, although there's nothing there that readers of this blog don't already know.

I just have one quibble: Elizabeth MacDonald writes that "blogs on the Internet likely have this wrong" -- when talking about how to interpret Rep. Peter DeFazio's comment that "Larry Summers hates infrastructure." To argue against this, she cited as evidence Summer's testimony before the Congress in which he advocated infrastructure spending. This is complete nonsense, however, as Summers was trying to win support for the stimulus package which liberals such as this blog, and Peter DeFazio, thought were too small. It was likely Summers who wanted the inclusion of the corporate tax cuts, and who kept the overall stimulus to be smaller than I, and many others, including Rep. DeFazio, who were worried about fiscal problems at the state and local levels, wanted.

And, as a result of that small stimulus, Pennsylvania is now paying its state employees with IOUs instead of real money.

There is still a real disconnect between the stimulus money, and the fiscal position of the states. I was watching CNN the other day while waiting for an oil change, and they had a feature on about wasteful stimulus spending, featuring the upgrade of a "bridge to nowhere" that -- I shit you not -- "only 2500 cars use per day". (OK, there's a chance I have this wrong, and it was actually 2500 cars per week... but even then, that's enough to invest in bridge so that it will not collapse!) The next feature was on Pennsylvania's budget, which is so dire that even after tax hikes and spending cuts, the state cannot even afford to pay its employees, much less pave its roads.

Still, no one at CNN had any inkling of the disconnect between the two stories. The first is a part of the dialogue about how "harmful" (CNN's actual words) these utterly wasteful stimulus spending projects are, the second is a separate dialogue about how states are so broke they cannot even pay for basic services. The two "stories" of course, are mutually exclusive. The basic essence of both cannot be simultaneously true.

Remember way back in January when David Brooks warned us that "A governor with a few-hundred-million-dollar shortfall will suddenly have to administer an additional $4 billion or $5 billion. "

Oh how wrong he was...

Back in January, it turns out, Pennsylvania only had an $800 million dollar shortfall over the preceding year. That shortfall has now ballooned into an expected $3.2 billion, and this is counting all of the stimulus money it's getting... Check this out. Pennsylvania is now withholding July pay... California has now paid 150,000 IOUs, and is furloughing Fridays...

Then, there's also this:

"The impasse is growing more costly to California as its financial situation grows more precarious. Earlier this week, Moody's downgraded the state's credit rating to three notches above junk status, following a similar move by Fitch Rating, which put it two notches above.

The state treasurer warned Thursday that such downgrades limit California's ability to borrow money."

One wonders why, if the Fed can guarantee debt for the likes of Goldman Sachs, it cannot also do it for California...