A family that goes on a $500,000 vacation is $500,000 poorer but a family that buys a $500,000 home is only poorer if it overpays.
Now, the so-called bailout package has just failed in the House, which is an astounding development. I hope and expect that something similar will be cobbled together and passed later this week. But the sober assessment by Summers needs to be understood by more people.
In Friday’s presidential debate the generally excellent moderator, Jim Lehrer, pressed both candidates on what the $700 billion would mean for their fiscal plans (see, by the way, Felix Salmon on McCain’s apparent lack of understanding on the difference between fiscal and financial). That line of thinking has become a new trope in conventional wisdom. It needn’t be so.
Update Alex Tabarrok thinks Summers is playing the role of a smooth-talking salesman.