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Summers and Ricardo

Summary:
I share some of Summers' concerns about the magnitude of Biden's proposed stimulus.  The comparison to the January 2009 situation is marred by the fact that we are not now in a Demand-deficient Keynesian-style recession as we were then. What's holding back output now is clearly pandemic-induced supply constraints. On the other hand, if the Ricardian Equivalence theorem holds, perhaps some non-negligible portion of the transfer component of the stimulus will be saved. (Even borrowing-constrained individuals will save some of a big-enough transfer.)

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I share some of Summers' concerns about the magnitude of Biden's proposed stimulus.  The comparison to the January 2009 situation is marred by the fact that we are not now in a Demand-deficient Keynesian-style recession as we were then. What's holding back output now is clearly pandemic-induced supply constraints. 

On the other hand, if the Ricardian Equivalence theorem holds, perhaps some non-negligible portion of the transfer component of the stimulus will be saved. (Even borrowing-constrained individuals will save some of a big-enough transfer.) 


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