Summers Speech

Is here.

Krugman roughs him up here .

I think Krugman might even be a touch unfair to poor Larry... Larry was saying he had to balance the fact that a lot was needed with the fact that the stimulus needed to be rolled out the door quickly, and then rolled back up quickly.

Or perhaps he let him off too easy... for Summers also celebrates the fact that already $43 billion of the tax cuts and $64 billion of the aid to states is already out the door...

Yet, wait, why on Earth do aid to states and tax cuts take so long to get out the door? Those checks could have been cut immediately. (See the Bush stimulus!) California (and several other states) are paying with IOUs right now. Many states raised taxes and cut spending earlier in the year, changes which are going into effect already. These changes would not have happened with more aid to states -- aid which could have been designed to be dispersed from the federal government immediately.

And I thought the whole argument for having roughly 1/3rd of the stimulus be tax cuts was that "stimulus checks" could be sent out immediately? We'd clearly be a bit better off had, say, $243 billion in tax cuts been sent out in March/April, and $264 billion in aid to states been sent out in March/April, and then have the other $250 billion be spent on projects which take more time to ramp up...

So the stimulus, in addition to being too small, also carried significant design flaws... Some of the Aid to states was originally meant to be sent out in 2010! Nevermind some 40 states are in financial trouble now...

One wonders, of course, that if the tax cuts and aid to states is taking an inordinate amount of time to "get out the door" for no other reason than that's how Aunt Christie and Uncle Larry designed it, if perhaps the other third of long-term projects might not also have merely been poorly designed, rather than be taking so long due to the insurmountable difficulties of planning massive stimulus projects,etc... If the French and Chinese could do it, why cannot we Americans?

Summers also repeated the fraud that the stimulus is "5% of GDP".

OK, the stimulus was $787 billion. Trouble is it is over two years plus. Two years of GDP is roughly $30 trillion, or $37 trillion for two and a half years. So that makes it just %2.1 of GDP. But wait, over the same period, state and local governments have a shortfall of some $400 billion, which we knew full well about when the stimulus was planned. Thus, the "net" stimulus is more in the neighborhood of $400 billion, or closer to 1% of GDP. And we're still at least 5% of GDP below trend...