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I am known as a dove. I believe that the absolute priority is to protect people and firms affected by covid. Still, I agree with Summers. The 1.9 trillion program could overheat the economy so badly as to be counterproductive. Protection can be achieved with less.
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In the next few months, I intend to write a short book about fiscal policy today. The slides, used for a discussion with
@JohnHCochrane below are a first pass. bit.ly/2LqAXIb More to come as I make progress.
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Democrats. Delighted by your win. But please don't go for the 2000 dollars checks. Aim the money better, for those who really need it.
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An interesting, sociological, issue. How fast will the emerging academic consensus on fiscal policy filter through to policy makers? twitter.com/pisaniferry/st…
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I keep being asked: You say we may not need to increase taxes to pay for the additional debt. How can this be? Who will pay? The answer: Investors, who are willing to accept a negative rate (or more technically, a rate less than the growth rate).
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Weighing my words carefully: We may be on the verge of a shift in fiscal paradigm. Proof of concept: The large agreement between Summers, Furman, Bernanke, Rogoff, and me, in the PIIE-Brookings zoom. bit.ly/2VnhwRU (Second hour. The first hour is great as well)
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A fascinating graph, showing the dynamics of the second wave in France.
Things were fine in July, but the 20-29 year olds starting relaxing.
Over time, they contaminated older generations until infection rates were high for all.
How will the reverse movement proceed?
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Janet Yellen: A truly great appointment. The perfect expertise mix. Especially at a time when, because of the secular stagnation environment, fiscal and monetary policy makers must work together in new and complex ways.
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1. PIIE has created a great go-to site on inequality: facts, perceptions, policies. bit.ly/331EXo81.
For example, did you know that, since 1985, among AEs, Sweden had the largest increase in its Gini coefficient, Greece had a decrease, France had practically no change.
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1. Twitter is great in allowing you to get your thoughts out quickly. Sometimes too quickly. You have second thoughts. The world changes. I want to take three covid forecasts that I got wrong:
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Some quick reactions to the new lockdowns in Europe.
1. The degree of uncertainty is much higher than in the first wave. In the first wave, the (incorrect) belief was that the infection rate would quickly decrease and remain low thereafter.
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Of utmost relevance for covid dynamics. twitter.com/SonyKapoor/sta…
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In one slide: The essence of our argument (with @jzettelmeyer and @AlvaroISLM ) for why the EU should move from fiscal rules to fiscal standards.
The long version: bit.ly/3knhzId. And the full video: economic-policy.org/fiscal-standar…
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How much of the the slowdown in the recovery is due to the fact that some sectors, while recovering, still face tight supply constraints and low relative demand, or that, because of uncertainty, overall demand is weak. What to do with macro policy depends crucially on the answer.
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I finished the 8th ed of ``Macroeconomics'' before covid came. I have now written a covid chapter. It is largely self contained and may be of interest to teachers, students, and interested observers. Comments and suggestions welcome. bit.ly/2GZB375
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Quick reactions to the French economic plan released today.
The three legs, climate, competitivite (helping firms), cohesion (helping people) make good sense. The amount committed, 100 b euros on top of what has already been spent is substantial. But (there is always a but...)
67
In the name of covid, a naked attack by the administration on foreign students and universities. (and, with lower educational exports, a likely major hit to the trade balance, dear to the President. ) Maybe I take too personally, but it stinks and hurts. bit.ly/2Z3OJEu
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A potentially important paper rb.gy/h4uxie
(at a great Brookings conference yesterday rb.gy/qzwlhd
Basic message: Even starting from the very worrisome position the US is today, the use of masks and moderate testing might keep us out of the woods.
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Enormously impressed by the webinar by Raj Chetty today
bcf.princeton.edu/event-director…
An amazing combination of how to put big data together, test hypotheses, and draw highly relevant policy conclusions. This is 21st century economic research. I feel old, but excited. Watch it.
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When the virus struck, the priority was to protect fragile firms and workers. As the lockdown ends, the focus must change from protection to reallocation. How it should done is the topic of a piece by Jean Pisani Ferry, Thomas Philippon and me. bit.ly/3dIiHCY
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RIP Alberto Alesina, my student, my friend. Passion for life. Passion for work (we often disagreed, but we both learned from each other), creativity, and very hard work. Big loss.
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On the swoosh recovery. My guess is that, conditional on covid not getting worse (big if), there will be an initial fast recovery as many businesses simply reopen. But this will be another "mission accomplished" moment. Don't be fooled. The rest of the climb will be a slog.
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Much of the progress in macro in the last 40 years came from the assumption of ergodicity. It lies behind the use of VARs and other time series tools. It lies behind the solution to dynamic optimization problems. These may have a hard time dealing with the current data...
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Monetisation: Do not panic. ( A Vox EU piece with Jean Pisani Ferry) bit.ly/2xno5vg
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My Princeton webinar on fiscal policy. What it should do, what are the challenges, whether there will be too much debt, both in rich and poor economies, the need for coordination, and the role of international institutions. All this in 45 minutes. 😀 youtu.be/9jSyhtYq_ME
Robert Solow Professor of economics emeritus, MIT
Fred Bergsten Senior Fellow, Peterson Institute for International Economics