September 11, 2018
Last week Joe Stiglitz wrote a piece that included criticisms of the Obama administration for having an inadequate stimulus in response to the Great Recession. Larry Summers, who had been head of Obama’s National Economic Council responded by defending the administration. Stiglitz had a follow-up response to Summers.
Both Stiglitz and Summers are very capable of speaking for themselves so I won’t try to summarize their arguments, but I do want to take issue with one point in Summers’ piece. In his response to Stiglitz, at one point Summers comments:
“He was a signatory to a November 19, 2008 letter also signed by noted progressives James K. Galbraith, Dean Baker, and Larry Mishel calling for a stimulus of $300–$400 billion — less than half of what the Obama administration proposed. So matters were less clear in prospect than in retrospect.”
This is a serious misrepresentation of the letter, which I had helped to draft and circulate. This letter was very clearly referring to a one-year stimulus. It urged leaders in Congress to quickly pass a stimulus:
“The potential severity of the downturn suggests that a boost to demand on the order of 2.0-3.0 percent of GDP ($300-$400 billion) would be appropriate, with the goal being to get this money spent quickly.”
Comparing the sums in a one-year stimulus to the multi-year stimulus request put forward by the Obama administration is comparing apples to oranges.
Furthermore, this letter had been drafted in early October, before we knew the full severity of the downturn following the collapse of the Lehman. At the time of the drafting, we were looking at a job loss of 159,000 reported for September. At the point where the Obama administration was crafting its stimulus package in January of 2009, it was looking at job losses of more than 1.5 million over the prior three months. And the September job loss figure had been revised upward to more than 400,000.
To misrepresent our letter to justify the size of the Obama administration’s stimulus request involves, at the least, an extremely sloppy reading of a one-page document.