I doubt the utility of dedicating additional space and energy to Larry Summers’s wildly quixotic efforts to leverage economic orthodoxy in the service of entertaining the masses with Zoom videos maligning Joe Biden’s stimulus plan.
It’s unfortunate that Bloomberg pays him to engage in this faux crusade every couple of weeks. Summers has a reserved slot on Bloomberg Television’s “Wall Street Week.” The network’s recaps include a reference to his “paid contributor” status.
Summers is, in essence, a paid entertainer. And while Bloomberg TV is vastly superior to, for example, CNBC, when it comes to respecting viewers’ brain cells, it’s still just entertainment. I sincerely hope folks understand that. The media is an entertainment business. It’s not there to educate or to inform. If you believe otherwise, read a good nonfiction book. You’ll be astounded at the juxtaposition between real information and entertainment masquerading as such. As Denzel Washington put it in his Oscar-winning role as Alonzo in Training Day, “this is a newspaper. It’s 90% bulls–t, but it’s entertaining. That’s why I read it, because it entertains me.”
As far as I can tell, “Wall Street Week” only airs on Friday evenings. While I suppose the ratings could be decent, it’s difficult for me to imagine that weary traders and market participants who, by Friday afternoon, just want to dive into the nearest scotch bottle, are particularly keen on watching the mannequin-esque David Westin interview Summers, whose visage isn’t exactly flattered by the “fishbowl” effect from video conferencing software.
Alas, anyone inclined to tune in is subjected to that spectacle and this week it manifested in Summers deriding current US macro policy as the “least responsible” in four decades. Both parties, he said, are creating “enormous” risks.
“I think these are the least responsible fiscal macroeconomic policies we’ve had for the last 40 years,” he told Westin. “I think it’s fundamentally driven by intransigence on the Democratic left and intransigence and the completely irresponsible behavior in the whole of the Republican Party.”
“The Fed has stuck to its guns on no rate hikes for years and years and continuing to grow its balance sheet,” Summers went on to say. “So it seems to me what was kindling is now igniting.”
Summers is now assigning subjective probabilities to America’s economic future. The odds of stagflation are about the same as the odds of a recession caused by the Fed slamming on the brakes to arrest price pressures, he reckoned. It’s also possible that Jerome Powell and Janet Yellen manage to thread the needle and engineer robust growth with subdued inflation. All three of those possibilities have about a 33% chance of playing out, according to Summers.
You might fairly ask what the point was. After all, enumerating every possible outcome and assigning an equal probability to each really doesn’t tell us much. Granted, it acknowledges that the odds of a dire situation are no greater than the odds of a favorable outcome, but ultimately, Summers appeared to be saying that he simply doesn’t know, which is odd for someone who thinks he knows everything.
Summers is now the poster child for orthodoxy in its death throes. “Set aside the specific subject matter, and Summers might have been teleported in from almost any point during the past three decades, when he led so many institutions of the neoliberal establishment that he just about defines it,” Benjamin Wallace-Well“The difference this time—one measure, though not the only one, of the quiet transformations of the Biden Administration—is that now Summers is an outsider,” Wallace-Well added, before quoting Summers, who told him this:
I think [the Biden administration] should be heavily investing in infrastructure, they should be heavily investing in science, in education, in green things. But there’s not going to be unlimited money for that stuff.
Although Paul Krugman is held up as Summers’s “sparring partner,” the reality is that both of their brands, to the extent everyday people can distinguish between the two, are passé. No one cares what they have to say anymore, even when one of them (Krugman) is playing devil’s advocate for the stimulus bill Summers has made a show of demonizing.
Bloomberg also spoke to Stephanie Kelton this week. “Well, the type of inflation that Larry Summers has worried about openly — he’s talking about generalized increases in prices. Where essentially you have too much money in people’s hands and they run out into the economy and try to spend all of that money and the productive capacity of the economy to meet all of that demand just isn’t there,” she said. “That’s very different from localized instances where we have issues with supply chains and bottlenecks.”
Asked about the deficit and inflation, Kelton said “what we have is fiscal [policy] that’s mostly about supporting incomes, helping workers who lost their jobs continue to spend what they were spending — pay their rent, buy food, helping small businesses keep people on payrolls, keep essential workers paid. So much of the spending being supported by these deficits is just a continuation of the spending people were already doing,” she continued.
Kelton acknowledged that some of the spending catalyzed by the latest round of stimulus checks wouldn’t otherwise have happened, but she noted the obvious. “To the extent they want to buy goods and services, that gives a little boost to the economy,” she told Bloomberg.
Pressed on rising costs for things like education, Kelton reiterated points I’ve made here on innumerable occasions. The cost of, for example, college, has been spiraling higher for years. The same goes for healthcare. Those are policy failures that have little, if anything, to do with any deficits and have no relation whatsoever to pandemic spending.
Whereas both Summers and Krugman come across as two old ivory tower “wisemen” (who may not be very wise) engaging in a painfully belabored academic debate about whether textbooks and models do or don’t permit Congress to save lives and livelihoods, Kelton presents as a realist with both feet planted firmly on Main Street.
And how ironic is that? Prior to the pandemic, the good doctor was generally seen as the face of fantastical thinking.