Throughout his two-year term of office serving as President Obama’s senior economic adviser, Larry Summers exhibited all the characteristics of an extinct economics dynosaur – an old-fashioned hydraulic Keynesian who had learned nothing either from the 1970’s decade of the Great Stagflation or from the 1980s decade of the Great Moderation. Throwing his not insignifant weight around the White House much as he threw his weight around economic theory, Larry Summers never saw a public expenditure package that he could not swallow, never heard about a soak-the-rich tax policy that would fail to raise his redistributionist spirits, and never encountered a government regulation sufficiently harsh as to give him cause for concern.
Larry Summers sucked up to President Obama much in the way that Herman Goering sucked up to Der ReichsFuhrer, Adolf Hitler. Larry Summers’ bewilderment when the U.S, economy failed to respond to fiscal stimuli after fiscal stimuli mirrored the bewilderment of Herman Goering when his beloved Luftwaffe came cropper after cropper in the face of superior Spitfire resistance throughout the Battle of Britain. Ultimately, Larry Summers was ejected from the White House, much as Herman Goering was ejected from the German Chancellery by a failing Leader who belatedly recognized the ineptitude of his disciple’s judgment.
Months after his ejection from the White House, an apparently born- again Larry Summers has penned a column for The Wall Street Journal. Now he understands that the United States is half way on the road to a lost economic decade. Now he understands that Stimuli I-III have resulted in a decline in the share of the population working in the United States from 63.1 per cent to 58.4 per cent. Now he recognizes that Stimuli I-III have resulted in a decline in the economic growth rate, that may be of trend significance. Welcome to economic reality, Mr. Summers. Does it feel uncomfortable to drag your head out of the sand?
Clearly Larry Summers is unwilling to take off his shirt and allow himself to be publicly flagellated by free market economists. No King Henry II is he! However he is prepared to nod in a sensible redirection. Gasp! Larry Summers actually speaks of tax cuts, even for the comparatively well-off:
“Fiscal support should, in fact, be expanded by providing the payroll cut to employers as well as employees. Raising the share of the payroll tax cut from 2 per cent to 3 per cent would be desirable as well. At a near-term cost of a little more than $200 billion, these measures offer the prospect of significant improvement in economic performance over the next few years translating into significant increases in the tax base and reductions in necessary government outlays.” Lawrence Summers, ‘How to avoid a lost decade’, The Wall Street Journal, June 13, 2011
Welcome home, our prodigal son. If we do not greet you with a fatted calf, it is not because we do not rejoice in your partial conversion. It is because we understand that your new-found respect for economic thrift would lead you to recoil from any evidence of prodigality in any segment of the United States economy.