General Discussion
Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsLarry Summers: The economy needed 'a much larger fiscal stimulus in early 2009'.
Hindsight is a wonderful thing. The time the Dem Congress came locked and loaded.
The Biden stimulus is admirably ambitious. But it brings some big risks, too.
https://www.washingtonpost.com/opinions/2021/02/04/larry-summers-biden-covid-stimulus/
President Bidens $1.9 trillion covid-19 relief plan, added to the stimulus measure Congress passed in December with the incoming administrations strong support, would represent the boldest act of macroeconomic stabilization policy in U.S. history. Its ambition, its rejection of austerity orthodoxy and its commitment to reducing economic inequality are all admirable. It is imperative that safety-net measures for those suffering and investments in vaccination and testing be undertaken rapidly after the indefensible delays of the last months of the Trump administration.
...
I agree with the general consensus of progressive economists that it would have been much better if the Obama administration had been able to legislate a much larger fiscal stimulus in early 2009, in response to the Great Recession. Yet a comparison of the 2009 stimulus and what is now being proposed is instructive. In 2009, the gap between actual and estimated potential output was about $80 billion a month and increasing. The 2009 stimulus measures provided an incremental $30 billion to $40 billion a month during 2009 an amount equal to about half the output shortfall.
liskddksil
(2,753 posts)My Pet Orangutan
(9,179 posts)a man who gave the wrong advice to President Obama in 2009. A $2 trillion stimulus, passed by budget reconciliation was a better way forwards, but everything is clear enough in hindsight
Celerity
(43,107 posts)the even more disastrous Commodity Futures Modernization Act of 2000 (which re-legalised most all forms of the long-banned financial weapons of mass destruction known as derivatives). Those 2 actions were 2 of the most fundamental drivers to the global financial crash of 2007-2009.
Great PBS documentary on how Summers, Rubin, Greenspan etc helped kneecap Brooksley Born (the women who warned of it all in the late 1990's from her position as the head of the Commodity Futures Trading Commission (CFTC) ).
FRONTLINE
The Warning
https://www.pbs.org/video/frontline-the-warning/ (Video at this link)
on YouTube as well (lower quality)
"I didn't know Brooksley Born," says former SEC Chairman Arthur Levitt, a member of President Clinton's powerful Working Group on Financial Markets. "I was told that she was irascible, difficult, stubborn, unreasonable." Levitt explains how the other principals of the Working Group -- former Fed Chairman Alan Greenspan and former Treasury Secretary Robert Rubin -- convinced him that Born's attempt to regulate the risky derivatives market could lead to financial turmoil, a conclusion he now believes was "clearly a mistake." Born's battle behind closed doors was epic, Kirk finds. The members of the President's Working Group vehemently opposed regulation -- especially when proposed by a Washington outsider like Born.
"I walk into Brooksley's office one day; the blood has drained from her face," says Michael Greenberger, a former top official at the CFTC who worked closely with Born. "She's hanging up the telephone; she says to me: 'That was [former Assistant Treasury Secretary] Larry Summers. He says, "You're going to cause the worst financial crisis since the end of World War II."... [He says he has] 13 bankers in his office who informed him of this. Stop, right away. No more.'"
Greenspan, Rubin and Summers ultimately prevailed on Congress to stop Born and limit future regulation of derivatives. "Born faced a formidable struggle pushing for regulation at a time when the stock market was booming," Kirk says. "Alan Greenspan was the maestro, and both parties in Washington were united in a belief that the markets would take care of themselves." Now, with many of the same men who shut down Born in key positions in the Obama administration, The Warning reveals the complicated politics that led to this crisis and what it may say about current attempts to prevent the next one. "It'll happen again if we don't take the appropriate steps," Born warns. "There will be significant financial downturns and disasters attributed to this regulatory gap over and over until we learn from experience."
servermsh
(913 posts)My Pet Orangutan
(9,179 posts)Forget Summers, there is a broad consensus on this.
New spending in the Recovery and Reinvestment Act was only $550b.
onecaliberal
(32,777 posts)My Pet Orangutan
(9,179 posts)Summers made one wrong call after another.
bearsfootball516
(6,373 posts)The 2009 stimulus was way too small.
My Pet Orangutan
(9,179 posts)Hindsight is seldom wrong.