Here is what I learned from today's commentary by Larry Summers in the WaPo:
1) Be afraid. Be very afraid. Summers says unemployment could hit 10 percent, higher than most Wall Street estimates. Even worse, I think, is his prediction that the economy could fall "$1 trillion short of its full capacity." Now if the economy were to grow at 3 percent over the next 12 months -- including the current quarter -- it would grow by roughly $350 billion. To fall short by a trillion bucks, the economy must actually shrink by $650 billion, or around 5.5 percent, over 12 months. Basically, that would be a mini-depression and certainly as bad a 12-month stretch as any economic period since the Great Depression. Thanks for the pep talk. Hey, who wants to buy a McMansion or a flat screen?
2) "Stimulus" is out. In a 761-word piece, Summers doesn't use the word "stimulus" even once. Maybe that's because the plan isn't about stimulating anything other than the quick passage of the Obama economic agenda. Oh, and the plan is not about "public works" but "public investment." Remeber that.
3) The Obama plan kind of pays for itself. Since without the plan, Summers argues, the economy will lose $1 trillion in output, then spending $700 billion to $1 trillion over two years to mitigate that loss really is kind of a bargain. Like plumbers and mechanics say, "It costs money, it costs money because it saves you money."
4) There will be tax cuts. Summers does mention tax cuts in the 761-word piece. He said there will be "tax cuts." Two words. "Tax" and "cuts." Thanks for the clarification.