Larry Summers gave a big speech at the IIE this morning, and his prepared remarks — all 3,412 words of them — are now up on the IIE website, maybe because the NEC’s web presence is barebones in the extreme. Of course, when you let someone else publish your remarks, you lose a certain amount of control over how they’re presented; I do wonder what Summers thinks about the fact that when you get to the bottom of his speech, you find yourself faced with a cute little button saying “twit this”.
There’s a bit more than 140 characters’ worth of stuff in this speech, though, including Summers’s explanation of how he got to $800 billion:
The size of the stimulus reflected a balance of several considerations: the size of the likely output gap that the economy was facing, the difficulties of ramping up spending and then ramping it back down after recovery in a high budget-deficit environment, the question of how much could be spent both quickly and productively, and the recognition that the Recovery Act was just one of several initiatives by the Administration that would have a dynamic impact on the state of the economy.
This seems right to me: the output gap — which was indeed underestimated — was just one of many factors, and the size of the stimulus might well have been capped by questions unrelated to GDP growth or the unemployment rate.
Elsewhere in the speech Summers proves himself a master at stating the utterly meaningless: “It is essential that stimulative policies be sustained for as long as necessary but also that they be sustained no longer than necessary,” for instance, is a classic piece of political pablum.
My favorite part of the speech, however, is the inclusion of the phrase “even Alan Greenspan asserted that” — with the clear implication that the differences between Greenspan and Summers are both obvious and large, and that the two men are definitely not the kind of pair who would pose heroically and jointly for a national magazine cover portrait. Let’s make sure no one reminds Summers of who the third man in the picture was: while Summers has taken his lumps over the past decade, and Greenspan’s reputation has declined precipitously, Rubin’s reputation has been utterly obliterated. But that’s what happens when you enter into the orbit of Citigroup.