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Larry Summers’s Stagnation Warning

Former Treasury Secretary Larry Summers is warning of deep economic stagnation, or “secular stagnation.” He’ll explain, plus his thoughts on the debt and deficit, income inequality, infrastructure investment and more.

Larry Summers in the WBUR studios. (Jesse Costa / WBUR)

Larry Summers in the WBUR studios. (Jesse Costa / WBUR)

In a slightly different world, Larry Summers, not Janet Yellen, would be stepping into the role of Federal Reserve chair right now.  For all kinds of reasons, he’s not.  But the former Treasury Secretary, Obama economics chief, Clinton economic bigwig, Harvard president, World Bank chief economist and hedge fund honcho is thinking and talking now a lot about the global economy, the U.S. economy.  We’re stuck, he says.  Our trouble does not look cyclical.  It may be deeper.  “Secular stagnation.”  And big public spending, he says, is maybe the only way out.  This hour On Point:  Larry Summers on the US economy now.

– Tom Ashbrook

Guests

Larry Summers, former U.S.  Treasury Secretary under President Bill Clinton, former director of the White House National Economic Council for President Barack Obama, professor and former President of Harvard University. (@LHSummers)

From Tom’s Reading List

New Yorker: Is Larry Summers Right About “Secular Stagnation”? — “The argument that the economy is currently being held back by inadequate demand isn’t controversial—at least, it shouldn’t be. Since the recovery began, in the summer of 2009, G.D.P. has expanded at an annual rate of just two per cent, which is pretty feeble compared to previous recoveries. This weak growth reflects the decisions, by households and firms, to economize on their expenditures in the wake of a big asset-price bust; at the same time, the government (federal, state, and municipal taken together) has also been trimming budgets and laying people off, after an initial burst of spending during the Obama stimulus. ”

Washington Post: Strategies for Sustainable Growth – “The challenge of secular stagnation, then, is not just to achieve reasonable growth but to do so in a financially sustainable way. There are, essentially, three approaches. The first would emphasize what is seen as the economy’s deep supply-side fundamentals: the skills of the workforce, companies’ capacity for innovation, structural tax reform and ensuring the sustainability of entitlement programs. ”

Wall Street Journal: The Economic Hokum of ‘Secular Stagnation’ — “There are many problems with this neo-secular stagnation hypothesis. First, it implies that there should have been slack economic conditions and high unemployment in the five years before the crisis, even with the very low interest rates—especially in 2003-05—and the lax regulatory policy.”

Read Highlights And Transcripts From Our Interview With Larry Summers

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  • skelly74

    I would like to know Mr. Summers recommendations on trade policy reform with China. Also, did Summers advise President Clinton to sell the American public on the wonderful windfall of the trade agreement with China.

    The U.S. is now suffering a devastating trade deficit with China. The U.S. produces nothing except intellectual technology, with any production thereof, completed in China at minimal cost. The U.S. cannot employ it’s own citizens in manufacturing because of our current trade policy with China.

    Lets not fool ourselves. As long as the one percent are doing well, all is good, and guys like Summers will sell us the merits of economic globalization, and the rising tide lifts all boats hogwash.

    Why don’t we just put U.S. citizens to work instead of Chinese slave laborers, then the U.S. economy will be sustainable in more ways then the holy bottom line.

    • skelly74

      NPR is letting Summers off the hook on China. We need to get him on the record. Nothing on China? Laughable.

      He must be fixing to sell a book. He’s whistling Dixie…the tide will raise all boats. Give me a break.

  • Al_Kidder

    Does it never occur to you growth addicts that there is a law of diminishing returns? Yes, computers were good, and the Internet is good too, but every 2 bit app is not going to result in a worthwhile gain.
    I can remember when consumption was a disease and you went into surgery to get a growth excised
    I wonder if the Kondratiev wave theory will get a mention in this discussion

    • Yar

      Question of the week, how do you talk about addiction with an addict?

  • Karen

    I would like to hear Mr. Summers talk about the outrageous cost of college education in this country and debt incurred by many to pay for it, and unrealistic income inequality, in regards to declining living standards.

  • John Cedar

    Before you become wealthy you gots to be smart:
    http://www.psychologytoday.com/articles/201206/brainiacs-and-billionaires
    Our educational industrial complex makes most people dumber and consequently poorer.

    • Karen

      Not before charging you an arm and a leg! And if you don’t pay to get that degree, you aren’t even “qualified” to get an administrative job in MA.

  • Fredlinskip

    Mr. Somers,
    I wonder what FDR might have thought about dropping tax rate on upper incomes by over 2/3 as we have done;
    and if this would have some negative consequences to the safety net he initiated, and National Debt.
    It seems to me, we either fund these programs or we don’t.

    I guess to those who believe in the philosophies of Hayek, Friedman, Ayn Rand, & Reagan; dropping these programs and allowing Darwinian philosophy of “survival of fittest” to kick in wouldn’t be such a bad thing.

    It seems that because improving lives of American worker since late 70′s has fallen out of favor and promoted as “socialistic”, America has gotten exactly what might be expected;
    low wages and high debt, both individually and nationally-
    and stubborn unemployment.

    • Jeff

      FDR would probably have threatened the Supreme Court to get what he wanted. Switch in time to save 9, look it up…it’s the shameful history about why you get FICA taxes removed out of each and every check you earn.

    • http://www.findingourdream.blogspot.com Hal Horvath

      It’s a false dichotomy to imagine Friedman for instance has to be 100% right in all things or 100% wrong in all instances, but perhaps you know this? Further, having a free market is *not* “Darwinian” (by which we take you mean survival of the fittest only and the rest eaten), that would be just another false dichotomy. It isn’t necessary to cut off one’s right hand in order to use one’s left hand, etc. I gave you a thumbs up anyway just for raising the tax rate issue.

  • Ray in VT

    What are Mr. Summer’s thoughts regarding positions that he took during his time as Treasury Secretary, such as elements of the Financial Services Modernization Act, which many have criticized as having lead to the financial crisis?

  • wauch

    REALLY TOM you are letting this guy on? Didn’t his chauvinistic and petty dismissal of Brooksley Born’s warnings during CFTC OTC derivatives debacle? Okay does he obtain his place within the pantheon if his uncle isn’t Paul Samuelson? OH YEAH and how did that Time cover of him, Rubin, and Greenspan saving the world work out for him or the US? His support of traditional supply-side economics and free trade agreements is going to be the death of the American middle-class. His association with the “Shock Doctrine” World Bank is inexcusable.
    If Obama had nominated him for Fed Reserve Chair he would have officially denounced his progressive supporters.
    TOM I am really upset as a long time listener that you are giving this phony a platform.

    • Human2013

      I agree that he was not help in his role, but his opinion and anlaysis is still valid. We have to get information on this very convulated situation any way it will come.

      • wauch

        No it isn’t he has spouted supply side camouflaged trickle down for too long. He is in a bubble and doesn’t deserve the pulpit we continue to hand him. You most be a died in the wool Democrat so interested in pointing the finger at the GOP – and deservedly so as they are children – but your party has not wanted to take bold populist steps as crystallized by our milquetoast president.

  • http://neilblanchard.blogspot.com/ Neil Blanchard

    Any economic theory that does not take the changing climate into account is trickling into the wind.

    The economy is a subset of the climate, and *everything* is part of the climate.

  • http://www.CayerComputing.com/ Melissa A. Cayer

    Do you know how to fix the USA tax mess? The tax system is so convoluted, I feel like I pay tax on tax.

    • http://www.CayerComputing.com/ Melissa A. Cayer

      Get rid of the one-size fits all tax form. Have the tax forms by profession: One form for professors, one form for waiters, one form for actors, one for journalists, one for computer programmers….

      • http://www.CayerComputing.com/ Melissa A. Cayer

        It would be good for a spouse to know how much they are worth from year to year.

  • creaker

    Capitalism only works when you have boom and bust – when boom and bust are arrested, you end up with stagnation, which is also bad for capitalism.

    On top of that we have energized booms and neutralized busts with massive amounts of debt, which is an ever larger anchor pulling down growth. And can never be paid down without causing a bust, which in itself removes any fiscal ability to pay down the debt. Catch-22.

    The only real fix is a mega-bust. We default on debt, everything crashes down to ground zero or lower. And then, barring our system being overthrown by totalitarians and dictators, capitalism, like a phoenix, will grow out of the ashes. Until the next bust.

    • rievler

      WTF? I’ve never heard so much doom and gloom. I indict this defeatism. I’m liberal, but not morose. Growth is good. Social, environmental, economic justice is much easier to achieve in a growing economy. These calls for calamity are perverse.

      Capitalism worked pretty well from 1940-1979. What we need is public investment, efficient health and tax systems and a little optimism. Organize, vote and stop whining.

      • Shark2007

        “Anyone who believes in indefinite growth in anything physical, on a physically finite planet, is either mad or an economist.”

        ― Kenneth E. Boulding

  • hennorama

    One hopes that Mr. Ashbrook will ask Mr. Summers to explain the recent CBO report on the PPACA, as related to the report’s projection on the reduction in labor supply, as individuals make the free choice to work fewer hours or to not work.

    • HonestDebate1

      And you buy that spin?

  • Jeff

    Hmmm, he’s the guy from The Social Network movie…I wonder why he decided to leave his movie career and get into finance?

  • Jeff

    I wonder if Mr. Summers has a realistic solution to the current income inequality we are seeing? If does have a solution that most people would accept with then I’d really like to hear it.

  • creaker

    Until we can figure how to keep things running without continuing to expand a debt which we can never pay down, we are on a highway to hell. Each time we have a downturn, we have this larger and larger interest payment that does not go away just because things are not going well.

  • http://hlb-engineering.us/ HLB

    Reagan National is a national disgrace, as well. But at least it was named for a man who didn’t want to spend federal money on civic improvements. Fitting, ‘eh?

  • George Potts

    I heard that Larry Summers was kicked out of Harvard because he started auditing “P-Cards.”

    “P-Cards” are purchasing cards that were used by heads of departments, usually without questions.

    The criticism of his comment about women and science was a red herring.

  • Jeff

    Wait a minute, doesn’t cheap money just chase bubbles? If you increase the cost of money (higher interest rates) then the investments go toward companies/industries that are legitimate and have a solid project growth.

    While I agree we need to expand federal spending on infrastructure; I would like to see cutting back on spending in other areas of federal government (like defense, debt and social programs) that make up about 60% of the current federal budget in order to pay for those programs rather than raising taxes and further stagnating the economy. We just raised taxes on the rich and we still have a very large deficit…I’m just saying we can’t continue to raise taxes on the rich every time someone gets an idea about how to spend money.

  • http://hlb-engineering.us/ HLB

    PIT is a nice airport but its landing fees are twice the national average. So no one wants to land there and the locals are prohibited by the TSA from going out there to shop and eat.

    Who thought imprisoning airports in concentration camps was a good idea? Oh, that’s right: Republicans and Democrats did/do.

  • Scott B

    For most of us, especially those of us in the lower half of the 99%, the recession only ended on paper and Wall St.

  • fionnmaccumhailus

    Larry Summers singing a different tune than he’s sung for his entire career? I wonder where his bankster pals plan to cash in?

    • Human2013

      Like the term “bankster.”

      • fionnmaccumhailus

        I can’t take credit other than having recognized it as appropriate when I first heard it. I intend to tailor my mindset by using the term till they change their behaviour (which will give the term bankster a long life).

  • geraldfnord

    Most people used to have to be serfs or slaves, or at least blinkered peasants, to keep things going; we’re overwhelmingly none of those (if, too often, still blinkered) but we live much better than any peasant used to do.

    Recently, most people have to be employees unhappily taking orders, or bosses who, if they were decent folk, would hate giving orders. Is this still really necessary? —if not now, then soon, wouldn’t we be able to live without such egregious hierarchy, and wouldn’t all but those who love power be better-off? (‘When Adam nor Eve must delve or spin, we all can be the gentlemen. ‘)

  • Candice King

    Economic Growth- Now that’s a loaded statement. Because when you live in a sphere growth one way equals loss elsewhere. I love how the neo-liberals are always touting “growth” as our goal. AT this point in our collective history most strategic people understand that exponential growth is environmentally unsustainable.

    I am of the opinion that stagnated growth is a good thing. I think we need to start asking different questions than what is often used to support the prevailing logic of perpetual growth. What does Larry Summers think about that? .

  • George Potts
    • Ray in VT

      It said that some people will willingly reduce the amount of work that they are supplying. It did not say that the demand for work from employers would be reduced.

      • George Potts

        It doesn’t matter.

        • Ray in VT

          So you want him to address something that doesn’t matter?

      • hennorama

        Ray in VT — plus, I already expressed hope that Mr. Summers would accurately explain the CBO projections.

        • Ray in VT

          At least I’ve haven’t yet seen today anyone claiming that apples to apples 10 year CBO ACA cost projections have tripled.

    • HonestDebate1

      And remember, CBO projections are made in a vacuum. They assume static dynamics. They don’t have a clue. They first said Obamacare was deficit neutral and cost $940 billion now the cost has tripled according to them. They didn’t factor in Iran getting a nuke or another terrorist attack or interest rates rising or a host of other things that could happen. The reverse is true too but I’ve seen nothing to encourage me to believe things will get better.

      • Ray in VT

        Ah yes, the CBO says cost tripled lie. I am surprised that it took you this long.

        • HonestDebate1

          It’s not a lie.

          • Ray in VT

            A lie told often enough does not become the truth, and believing a lie does not make the lie true or the liar honest.

          • HonestDebate1

            Very true but according to the CBO the price has tripled, that’s all. I’ve already explained it to you. Maybe you think it merely doubled.

          • Ray in VT

            That is not what the CBO said. I have already explained that to you. When looking at the same factors, the CBO’s cost projections have been quite stable over time.

  • hennorama

    Infrastructure repair, replacement and expansion are beyond obvious as both needed and logical as responsible policy choices.

    However, the political climate is such that these are not going to happen any time soon, so respectfully Mr. Summers — what else ya got?

  • George Potts

    How will climate change be addressed? Stop producing electricity? End use of cars for non-governmental uses?

    • Yar

      I suspect climate change will be addressed with mass starvation and economic collaspe. You can argue with mother nature, but you can’t win.

  • http://hlb-engineering.us/ HLB

    More growth = more entropy. And who wants more random disorder? Apparently humans do.

    The 2nd Law: it will not be cheated. Or subsidized. Or legislated out of existence. Or bought off with an ambassadorship or a tony Wall Street job.

    Mother Nature doesn’t care either way. Maybe humans should.

  • http://neilblanchard.blogspot.com/ Neil Blanchard

    Fracking oil and fracking gas and deep water oil drilling and Arctic oil exploration and tar sands bitumen – ALL are proof that we have passed peak oil.

    Peak phosphorus and peak water are staring us in the face.

  • George Potts

    Stop private jets?

  • Candice King

    What about the high grading of resources? Don’t believe that statement about the state of our oil availability. No wonder were going to hell in a hand basket if people like this are in charge of advising.

    I study economics , I understand that the production functions of macroeconomics operate under unrealistic assumptions that don’t take into account things like the externalities of exponential growth.

  • Yar

    In Rolling Stone Bill McKibben said we have five times the fossil fuel as we can safely consume.

  • DeJay79

    Fact: Oil is a limited resource
    Fact: Oil is a resource that is being used

    therefore its peak in production and use is inevitable!

    It might not be here now but to say that it is a myth is a falsity.

    • DeJay79

      unless Larry thinks that there is an infinite amount of Oil or that we never used it as a resource.

    • Shark2007

      Summers conveniently ignored the environmental costs of fracking, and the fact that even without those costs being accounted for, oil and gas extracted by fracking is more expensive than that extracted the traditional way. Tar sands is even worse. What is happening is completely consistent with “peak oil”. Who are you going to trust, an economist who implicitly believes in infinite growth on a finite planet, or a petroleum geologist, Hubbert?

  • http://hlb-engineering.us/ HLB

    Mother Nature has limits. Go look up hers. {permittivity of free space, permeability of free space, fine structure constant}

    But apparently economists don’t believe in them. That’s probably why we have full employment and a thriving economy. And California has all the water it can drink.

    , ,

  • Jeff

    Why didn’t the Stimulus package do this? It seems like we spent $1 trillion on the stimulus and much of that was supposed to go to infrastructure…yet, in the end only 10% actually made into infrastructure projects…didn’t work out very well did it? Why are we supposed to believe that a new spending program would actually get to infrastructure spending?

  • WorriedfortheCountry

    Hey Summers, $7T in deficit spending over the last 5 years. Where’s the ROI? When you were in the WH you were touting ‘shovel ready’. Not so much, eh?

    • George Potts

      Don’t you believe in Keynesian economics? The more the government spends, the more we have.

      • Shark2007

        You don’t seem to know much about Keynesian economic theory except the usual hard right talking points for misleading the ignorant.

  • creaker

    Deficit numbers are all smoke and mirrors – the only real number is the debt. And that does nothing except grow.

  • George Potts

    Goldman Sachs was bailed out because the Treasury Secretary has a non-qualified deferred comp plan that would have been wiped out if Goldman had to go Chapter 11 or 7.

  • http://hlb-engineering.us/ HLB

    We don’t know where the debt is going to be in 2035.
    –Larry Summers

    The debt will be bigger in 2035 than it is now. Just like the debt is higher now than it was in 1995.
    –Any human with a working brain

    • rievler

      Most probably, given our dysfunctional politics and demography. However, this trend line is not fate. Debt fell for several years around 2000. Reform/raise taxes, stronger economy, rationalize immigration, cheaper healthcare would all positively effect deficit and eventually total debt
      –Any human with facts

  • walterwz

    The unbridled use of exotic financial instruments has had a warping effect on the common understanding of economic rules as changing the laws of physics would have on basic engineering. The entire notion of making money the old fashioned way; that is, produce a product and bring it to market based on superior quality and price is considered unthinkable. Everyone at the top of the financial world is transfixed by the promise of gold spun from straw promised by the Financial Industry. Only when everyone recognizes the financial industry is a metastatic cancer on the real economy and eliminated is any recovery possible.

  • Yar

    A bee hive will not reject a bee entering the hive with nectar or pollen. Would immigration reform with citizenship be smart growth?

    • Jeff

      Sure, I don’t think anyone has a problem with immigrants that come here to work…perhaps we should allow anyone to come to the US but restrict the government benefits until the immigrants have been law abiding, pay all their taxes, be gainfully employed for 90% of the time and contribute to those programs for 10 or 15 years.

    • hennorama

      Yar — BLS data indicates that foreign-born individuals participate in the labor force at significantly higher rates than the native-born.

      “In 2012, the labor force participation rate of the foreign born was 66.3 percent, compared with 63.2 percent for the native born. The labor force participation rate was 78.5 percent for foreign-born men and 68.6 percent for native-born men. Among women, 54.8 percent of the foreign born were labor force participants, compared with 58.2 percent of the native born.

      AND

      “The labor force participation rates for foreign-born blacks, Asians, and Hispanics were higher than for their native-born counterparts, while the rate for foreign-born whites was lower than the rate for native-born whites.”

      See:
      http://www.bls.gov/news.release/forbrn.nr0.htm

      (The BLS information above includes foreign-born workers who are in the U.S. both legally and illegally.)

      • Yar

        We like to claim the immigration system is broken, yet it seems to be working just fine for those who exploit the legal status of workers. Citizenship will raise wages of all low wage workers. I want the minimum wage to be Indexed to the cost of living.

  • George Potts

    Unbridled government transfers has made people behave in non-economic ways.

    People acting to reducing hours and opportunity has institutionalized an underclass. Thanks redistribution.

  • http://hlb-engineering.us/ HLB

    Facebook: a company hemorrhaging users.

  • WorriedfortheCountry

    Facebook is Summer’s example of great progress? Wow.

    • George Potts

      Facebook has 6,500 employees. Marketcap is ~$150B

      GM has 213,000 employees. Their marketcap is ~$50B

  • http://hlb-engineering.us/ HLB

    Maybe Larry Summers would like Bill Gates for “National Czar for Wonderful New Things.” Let’s hope the job doesn’t involve software development. Or pricing structures.

  • skelly74

    Come on, the cell phones we enjoy are produced in China. How many people does Facebook employ? Garbage. Don’t let Summers tell tales.

  • http://hlb-engineering.us/ HLB

    Let’s just “ice floe” grandma. Keep the money for Wall Street subsidies and bonuses.

    • Yar

      With climate change, so many old people, so little ice.

  • WorriedfortheCountry

    Hey Summers, maybe you should have hired more women to your Treasury team. Female math skills are better than you think.

    • Ray in VT

      I guess that he didn’t have access to those binders full of women.

      • WorriedfortheCountry

        Exactly!!! :)

        • HonestDebate1

          Perfect.

  • http://hlb-engineering.us/ HLB

    Economics: even more wacky than religion.
    –The History of the World

  • sheb white

    What about more investment in space travel. Maybe manufacturing in space or minning on the moon or asteriods.

  • creaker

    If the situation was boiled down to a single household, the choices being presented here are either get out the already overused credit card that we can’t afford to pay down or stop feeding the kids.

    • http://www.facebook.com/profile.php?id=32606540 Brian Belgard

      I think there should be a second version of Godwin’s law for poeple who use the “household budget” analogy in politics and spending. It’s an absurb abstraction and shouldn’t be taken seriously. Your household doesn’t have an army, a navy, doesn’t provide food for 350 million people, isn’t the world’s largest employer and doesn’t determine the economic direction of the entire planet. Until your household is responsible for all those things, do us all a favor and stop using this analogy.

      • creaker

        There is one commonality – each will hit a point where financing the debt becomes unmanageable. Granted a household won’t have the ability to do things like create hyperinflation or tax or seize assets, but living beyond your means is pretty much the same problem regardless of the scale it occurs on. We have not gone head to head with that issue in the US (yet), but other countries have.

        • http://www.facebook.com/profile.php?id=32606540 Brian Belgard

          That’s a good point, it’s sort of like how people on the internet really do say things that Hitler agreed with.

      • hennorama

        Brian Belgard – If only the following were required reading, from L. Randall Wray, a Professor of Economics at the University of Missouri-Kansas City, posted in February 2010 (in part):

        “A sovereign government bears no obvious resemblance to a household. Let us enumerate some relevant differences.

        “1. The US federal government is 221 years old, if we date its birth to the adoption of the Constitution … I don’t know any head of household with such an apparently indefinitely long lifespan. This might appear irrelevant, but it is not. When you die, your debts and assets need to be assumed and resolved. There is no “day of reckoning”, no final piper-paying date for the sovereign government. Nor do I know any household with the power to levy taxes, to give a name to — and issue — the currency we use, and to demand that those taxes are paid in the currency it issues.”

        See:
        http://www.nakedcapitalism.com/2010/02/wray-the-federal-budget-is-not-like-a-household-budget-%e2%80%93-here%e2%80%99s-why.html#vITAwyZBV9VckAI6.99

      • StilllHere

        I don’t think you understand what an analogy is.

        • http://www.facebook.com/profile.php?id=32606540 Brian Belgard

          You’re right, they took it off the SATs the
          year I took em. My bad. Could you please explain what it means then?

          I Googled it and got this, “a comparison between two things, typically on
          the basis of their structure and for the purpose of explanation or
          clarification.”

          But that can’t be right because, as people like hennorama have shown, a household bears no structural resemblance to a
          national economy and using it as a model does not explain or clarify anything.

          But you’re probably right, I just don’t know what an analogy
          is.

  • http://hlb-engineering.us/ HLB

    Politics: even more destructive than economics.
    –The History of the World

  • George Potts

    Controlling entitlements is difficult because your opponent will get elected because all of those people who collect vote.

    Too many people get a check from the government and vote their interest.

    • kaycee08

      Gee it seems to me lots of people vote AGAINST their interests. Lots of folks in my parents generation (70s-80s) voted for George Bush, who tried to privatize social security. My guess is a lot of tea partiers are partying on the gov’t tab.

  • http://hlb-engineering.us/ HLB

    “With respect” means “no respect intended.”
    –The Merriam New Dictionary

  • Jeff

    Really? Predatory lenders did this? No, people who couldn’t afford mortgages did this…if you can’t afford a loan then don’t get one…don’t make money cheap and you don’t have this problem. Reigning in Fanny and Freddy would have helped as well…if the government buys bad debt then it’s not really bad debt because there is a buyer.

    The mentality that “everyone should buy a house” is what brought us down this road…punishing banks for NOT lending to people who couldn’t afford the loans was a big problem!

  • AliceOtter33

    The caller who expressed a very valid fear of cronyism corroding any effort on the public works front.

    Meanwhile, the private sectors of America’s downtowns are crumbling due to corporate cronyism.

    Which brand of cronyism is worse?

    Personally, I would take the cronyism that has the most potential to breathe life back into depressed regions and reconnect communities through improved public infrastructure.

    The icing on the cake would be for the US to finally put sustainable energy and green agriculture front and center.

  • George Potts

    Credit Default Swamps [sic] gave banks false permission to do dumb things.

  • George Potts

    Will Larry say, “Let me be clear,” before the end of this show?

  • George Potts

    Labor is running away from work because of Obamacare.

    • AliceOtter33

      Corporations are exploiting the minimum hour requirement for covering healthcare for their employees.

      Labor would be attracted to public works programs as a natural partnership with a fair partner.

  • Jeff

    Raising the minimum wage means fewer minimum wage workers…just admit that Mr. Summers. Adding an extra dollar or two to the minimum wage still doesn’t bring those people out of poverty…especially if those jobs move to part time from full time.

  • monicaroland

    I’m a highly independent voter, fiscally conservative but quite liberal in many other areas. I disagree partly with the argument about savings — i.e., wherein if I save, then I’m not spending. My savings, however, are used by banks to loan money to businesses, so the money is actually out there stimulating the economy.

    Also, the deficit may be declining, but we still have a massive national debt. We cannot continue to spend huge amounts of money that we don’t have.

    We need some simple solutions: We need to take a new look at Simpson-Bowles and get our fiscal house in order. We need a simpler tax code. We need to tax income that comes from stocks, bonds, and capital gains. (It’s just wrong that super wealthy people don’t pay tax on that type of income.) Finally, we could tax all income for Social Security — currently we stop taxing after a certain level.

    • Jeff

      They pay different tax rates on capital gains (they do pay taxes on them) but yes I agree we need tax reform.

    • William

      People can shift from stocks to non-taxed bonds. There are still too many people that are not paying anything or little in taxes. When we have the CEO of Google laughing about how little Google pays in taxes we have a problem.

    • StilllHere

      Why should we tax people’s savings twice? That sounds like a penalty for prudence.

  • George Potts

    When will Larry talk about an asset tax?

    • ThirdWayForward

      A tax on wealth. We should implement a 1% per annum wealth tax on fortunes greater than $10 million that is earmarked exclusively for paying down the national debt.

  • twenty_niner

    Markets can self regulate if they’re allowed to. If the Fed would have let LTCM fail and take down the entangled hedge funds masquerading as banks, the 2008 crisis would not have happened. Bankers would’ve been scared straight. You can’t have free markets and capitalism without the risk of failure.

    • http://hlb-engineering.us/ HLB

      LTCM – that was the NY Fed. Geithner was the asst. then.

      • twenty_niner

        The LTCM bailout was largely architected by Greenspan, Rubin, and Summers. The three wound on the cover of Time as the “Committe to save the world”.

  • WorriedfortheCountry

    So Summers is against legalizing the illegal immigrants because it will obviously depress wages by creating a larger labor supply?

    • hennorama

      WftC – sorry for your misunderstanding, but foreign-born individuals, whether they are legal residents or not, are already counted as part of the civilian non-institutional population, and if they are employed or unemployed (as defined), they are already counted as part of the labor force.

      The BLS uses information from the Current Population Survey (CPS) to calculate the Labor Force Participation Rate (LFPR)

      See:
      http://www.bls.gov/bls/glossary.htm
      http://data.bls.gov/timeseries/LNS11300000
      http://www.bls.gov/spotlight/2013/foreign-born/

      • WorriedfortheCountry

        There is no misunderstanding on my part.

        Are you suggesting that legalizing the millions criminal immigrants currently working in the shadows and the additional millions that a new amnesty program will attract won’t negatively impact the existing downward pressure on wages?

        • hennorama

          WftC – thank you for your response.

          You wrote “it will obviously depress wages by creating a larger labor supply.”

          Now you make the claim that there will be “additional millions that a new amnesty program will attract.”

          In order to avoid misunderstanding, please:

          -define “labor supply”

          -define “wages”

          -provide evidence that what you describe as “a new amnesty program” will encourage “additional millions” to enter the U.S.

          -provide evidence of “the existing downward pressure on wages”

          I look forward to your responses to the polite requests above.

          • WorriedfortheCountry

            Larry Summers already answered your questions.

            If you want to learn basic economics then I recommend this book by Dr. Thomas Sowell (warning: it is 786 pages ) ”

            “Basic Economics: A Common Sense Guide to the Economy”

            http://www.amazon.com/Basic-Economics-Common-Sense-Economy/dp/0465022529/ref=sr_1_1?s=books&ie=UTF8&qid=1391708062&sr=1-1&keywords=thomas+sowell

          • hennorama

            WftC – thank you for your unresponsive response.

            I guess I missed Mr. Summers defining “labor supply” and “wages,” and when he presented evidence that what you describe as “a new amnesty program” will encourage “additional millions” to enter the U.S.

            Perhaps you’re referring to his answer to a question Mr. Ashbrook posed about inflation and wages/incomes, to which Mr. Summers responded (please excuse the paraphrasing from memory), “The first thing is to raise the minimum wage.”

            And as to Dr. Sowell, please excuse my lack of interest in the economic writings of a former Marxist (not that there’s anything wrong with that).

          • WorriedfortheCountry

            Not my problem if you wish to remain ignorant of basic economics. Your loss.

          • hennorama

            WftC — thank you for your again unresponsive response.

            I am not, as you wrote, “ignorant of basic economics.” Rather, I simply find your choice of author to be one whose views do not interest me.

          • PithHelmut

            Does economics make any sense anyway? Some things have colossal value, nature has none, people have none, love has none. Greed has the greatest value. What does it matter if we argue about trifles? Our world is being milked for everything it has and the glory goes to a few. Living in a world dominated by these people will yield misery beyond comprehension. They’ll never let us in and they’ll never change. We can keep looking to these failed peacocks and their policies or we can put our energies towards starting new systems that benefit us by disengaging and withdrawing our money wherever we can and embark on our own new currencies. We may need to go through a temporary stage till we coalesce and then create our own policies and renew life on this wonderful planet earth. We can do a lot. If we are bravehearts and are ready for an adventure.

          • 65noname

            when we want right wing propaganda, it is available for free on the media

          • 65noname

            actually, the problem with sowell is that currently he is a rightwing nut bag

          • WorriedfortheCountry

            If I worked for MSNBC, this is where I would call you a racist.

          • 65noname

            HUH? I have no idea what CNN would call me but I do know that it is where right wing nut bags would call me a racist rather than debate the issue. Are you calling me a “racist”?

          • WorriedfortheCountry

            If you watched MSNBC then you would understand. btw – I am not in any way calling you a racist. Sorry for the confusion.

          • 65noname

            So far, I have spared myself from watching MSNBC (or, as I mistakenly said, CNN)

          • WorriedfortheCountry

            Their schtick is to call any critic of Obama a racist. Everything is a dog whistle.

          • 65noname

            by the way, I assuming that your message means that sowell is a non-euro-amerikan.

          • hennorama

            65noname — TY for your response.

            While I rarely agree with a single word Dr. Sowell expels, I couldn’t possibly comment about him in the way you have.

          • WorriedfortheCountry

            Would you consider ages 25-54 prime earnings years?

            Unemployment in this age range is 17% for men and 30% for women.

            Yes, let’s INCREASE the labor supply and wait to observe the impact.

            Amnesty will be another contributor to the failures of Obamanomics. It may even be the biggest long term failed legacy of Obamanomics.

          • hennorama

            WftC — thank you for your response, which is again unresponsive.

            As to your question: yes.

            Now if you would, please define “Unemployment” as you have used it, and please also provide some evidence supporting your new claims.

            I also renew my polite request for you to please:

            -define “labor supply”
            -define “wages”
            -provide evidence that what you describe as “a new amnesty program” will encourage “additional millions” to enter the U.S.
            -provide evidence of “the existing downward pressure on wages”

            I look forward to your response.

          • WorriedfortheCountry

            Unemployed, in this case, is defined as not working.

          • hennorama

            WftC – thank you for your partially responsive response.

            The WSJ article is behind a paywall, but other access to the information is available.

            Your definition of “Unemployed” is inadequate, and you might consider changing “Unemployed” to “Non-Working.”

            The BLS says the following, relative to Labor Force Statistics from the Current Population Survey:

            “What are the basic concepts of employment and unemployment?

            “The basic concepts involved in identifying the employed and unemployed are quite simple:

            People with jobs are employed.
            People who are jobless, looking for jobs, and available for work are unemployed.
            People who are neither employed nor unemployed are not in the labor force.”

            Please note the absence of any reference to immigration status.

            See:
            http://www.bls.gov/cps/faq.htm#Ques3

            You might also consider this as a source for future reference:

            http://www.bls.gov/bls/glossary.htm#top

            The trend of a decline in the Labor Force Participation Rate (LFPR) for males aged 25 to 54 has been in place since the rate peaked at 97.9 in September 1954. This decline has coincided with a massive rise in the LFPR for Women aged 25 to 54.

            Assuming your claim that “Unemployment [as YOU define it] in this age range is 17% for men and 30% for women” is accurate, so what? The claim uses information from the BLS, which already includes undocumented/illegal/unauthorized residents. If you think they aren’t working, you are seriously mistaken.

            Sources:
            http://data.bls.gov/timeseries/LNS11300061?include_graphs=false&output_type=column&years_option=all_years
            http://data.bls.gov/timeseries/LNS11300062?include_graphs=false&output_type=column&years_option=all_years

          • WorriedfortheCountry

            Actually, looking at the raw numbers can be very illustrative.

            Too bad you can’t read the WSJ because it is chilling as to what is happening to our society and you wouldn’t so cavalierly hide behind government statistics.

          • hennorama

            WftC — thank you for yet another unresponsive response.

            Please tell everyone exactly what “is chilling as to what is happening to our society,” and how it relates to your original claim, that “…legalizing the illegal immigrants … will obviously depress wages by creating a larger labor supply.”

          • Shark2007

            Do you remember that Ronald Reagan did the first amnesty and that Shrub was trying to get one through when he was in office? Do you know how many times RR raised taxes? Check it out before you go railing against Obama.

          • 65noname

            which word didn’t you understand? whether you support (which I do) or oppose legalizing undocumented people, clearly legalizing them will add to the number of people competing for a very wide range of jobs resulting in lower wages overall. all the sophistic questions in the world can’t change that.

          • hennorama

            65noname – thank you for your response.

            It’s not that I do not understand the terms, but rather that I prefer to engage in a discussion in which the definitions are agreed upon. Often times, various terms are defined and used differently by different individuals, and this can lead to discussions in which those involved are talking past rather than to each other, leading to misunderstanding and confusion. For example, I quite recently had a protracted exchange about the Labor Force Participation Rate (LFPR) in which an individual inaccurately repeated “Retired people do not count in the numbers” multiple times, and who was convinced he was right.

            Any undocumented/illegal/unauthorized residents aged 16 and over are already included in information published by the Bureau of Labor Statistics (BLS). These persons are included in both the Civilian Non-institutional Population, and if they are employed or unemployed (as defined by the BLS and depending on which survey is being used), they are already counted as part of the Civilian Labor Force.

            In addition, undocumented/illegal/unauthorized residents are already “competing for a very wide range of jobs.” If undocumented/illegal/unauthorized residents are given a path toward legalizing their residency, it will allow them to compete more openly in the US economy. This will have various effects, including allowing these people to move into ALL economic niches they are qualified for, rather than being limited to employment and business opportunities in which their immigration status is overlooked and winked at. This will encourage further specialization of all workers, and will not necessarily lead to either wage loss or worker displacement. In addition, employers and others will no longer be able to take advantage of those who are undocumented/illegal/unauthorized.

            Here’s an analogy, provide by a Nov. 2012 article in The Economist:

            “The incorporation of women into the rich-world workforce provides an analogy: this expanded the labour supply and the scope for specialisation without displacing the “native” male workforce.”

            Sources:
            http://www.bls.gov/ces/cesfaq.htm#scope8
            http://www.bls.gov/news.release/pdf/forbrn.pdf
            http://www.economist.com/news/finance-and-economics/21566629-liberalising-migration-could-deliver-huge-boost-global-output-border-follies

          • Shark2007

            All you need to do is look at the wage and labor force changes in the meat packing industry from the 1960′s to the present. Also look at changes in union membership in the meat packing industry.

      • HonestDebate1

        Do you have a position? What do you favor?

  • George Potts

    I love tax raises being called spending cuts.

  • http://hlb-engineering.us/ HLB

    Question: What is America’s solution to the destruction caused by Summers, Greenspan, Bernanke, Paulson, Geithner, Blankfein, Fuld, both Grahams, Pitt, Cox, et al?

    Answer: USP Allenwood.

  • George Potts

    Washington DC is the only area of the country that is growing.

    • Ray in VT

      Now there’s a factually challenged statement.

      • Steve__T

        No feeding the Troll

  • George Potts

    Democratic Senators are running away from Obama.

  • Human2013

    Does anyone remember the I-35 bridge Collapse in Minnesota. It was very surreal for me and it was completely ignored. Ask Larry who paid for the development and expansion of our Intersate hwy system and why their not paying today.

  • tncanoeguy

    Are political parties willing to compromise the good of the country for the good of their party? I think the answer is yes.

    • PithHelmut

      Well let’s test it and see. I don’t think they have a good enough track record to assume the answer will be “yes” but good on you for your positivism.

  • http://www.openeyesvideo.com/ Glenn C. Koenig

    But what is growth? As we live on a finite planet, with a dramatically increasing world population of human beings, isn’t growth of the conventional kind endangering our lives? I mean, we can’t mine or pump more stuff out of the ground, cut down more forests to create farms or cities, just to “improve our (human) economy.” The fancy word for all this is anthropocentric, but the meaning is this: We’re thinking too much of ourselves (human beings) as if we are separate from the rest of nature.
    No! We are integral with nature, and in ways we are only dimly aware and just starting to understand. When we count money and jobs and don’t also look at acreage of forests destroyed, rivers polluted with toxic ‘tailings’ from mines and farm animal excrement, we’re fooling ourselves and hiding from the truth.
    Sure, air pollution in the USA is improved, but that’s something that’s easy to see (as we breathe it), but as soon as it’s out of sight, out of mind (hidden from our direct perception), look out!

    • kaycee08

      Unfortunately we are all locked in to our own private battles to pay our bills and maybe put a little aside for the future. If we all stopped and considered what we’re doing to the planet in our effort to be more “productive” we’d see we are just committing mass suicide.

  • HonestDebate1

    I agree, and on that happy note I’ll stop. I would rather not know which members of Congress you are referring to.

  • Jim Cricket

    I tuned in in the middle of this without knowing who it was, and I heard some guy worrying how our trains don’t run as well as those in France. My immediate reaction was, here’s another right wing crank telling us little people how life should be led. I had to get back to work (with my hands? you know what I mean?) and then I turned the radio on to see what time it was and I got to hear this guy’s grand ending of worry about the decline of America. And wow was I surprised by the punchline. It wasn’t some right wing crank after all. It was a left wing one.

    It’s enough to drive one schizo. I try to accept the place of the intelligent folks from Harvard, et al, as that was how I was raised. But it’s hard to accept yet another call for growth in the middle of an ecological crisis. Maybe I’m just another ignorant peon, but I don’t worry about the moral suasion of America should it “decline” as Mr. Summers suggests. After all our moral suasion has been at risk for a long time due to our capacity for overreach, Iraq and Afghanistan being the prime example. It doesn’t take “economic power” to speak with moral veracity. What is worrisome is that we can’t seem to find a way of accepting a smaller vision of our country, one that has a place among nations not as a bully for unlimited growth but one that is one of many. We have as much to learn from smaller countries in the world as they do from us. So far all we seem to be successfully teaching is the acceptance of our corporations rather than our style of government.

    • tbphkm33

      True, true… but in 2014, “our corporations” is our government.

      • Jim Cricket

        er, gee tbphkm, i just ” ^ ” your other comment. be nice. just because government is “large” does not for a corporation make unless you’re saying that any large internally cooperating system is a “corporation”. but if you’re arguing that the US government is some cancerous runaway organization, that’s tea party nonsense talk. certainly you can pick at this or that or the other wasteful spending but I think for the most part we have a rather self-adjusting and flexible government and it would be moreso were it not for the trendiness of this or that ideology that comes along and floods the halls of Congress. but you cant blame “government” for that. you can only blame those that voted them in.

        i should also self-correct my comment. i’m not anti-corporation at all. in most ways they’re an incredible invention. i appreciate that Fedex got my toner cartridge here in just a couple of days. i also like to bite the hand that feeds me. bad habit i suppose.

    • 65noname

      do you realy think that summers is “left wing”?

      • Jim Cricket

        it’s all relative and labels are their own shortcoming. but if the stereotypical right stands for less or no govt and the stereotypical left stands for govt involvement, then yes in that regard he’s left.

  • tbphkm33

    The markets have changed. The end times of hyper consumerism is gathering speed. History points to a similar situation coming out of the Great Depression. Most people who lived through that event changed their buying habits. Were greater savers, more self-sufficient and purchased goods that would last or could readily be fixed.

    The Great Depression generations had closer ties to the farm and had inherent instincts; the Great Recession generations are stumbling more, but self-sufficiency is gathering speed. Consumers are putting of buying certain items, have stopped buying some items all together, and are using the Internet to learn to make their own equivalent products.

    Call it what you want and debate the greater effects on the national and international economy, but reality is that the consumer market has changed. The days are gone where consumers could be counted on buying the same item in ten different colors. Today consumers are buying one or two colors and making due. Purchasing decisions are increasingly being made more on the practicality and quality side, as opposed to consumer desire to own stuff. Consumers are increasingly not upgrading just because there is a “newer and greater” version out.

    “Keeping up with the Joneses” is increasingly becoming passé. The challenge for producers, manufacturers, marketers, and retailers is to adjust to the new realities.

    • HonestDebate1

      The new normal has been imposed.

  • HonestDebate1

    And when we have unions setting up camp in the White House we have a lousy economy.

  • ThirdWayForward

    All in all, we thought that Summers came off better than we had expected (we have been very critical of him because of his role in deregulating derivatives during his Clinton years — by all means check out the Frontline documentary “The Warning” about Brooksley Born, her attempt to regulate derivatives, and Summers role in blocking her efforts).

    Still, he is not yet willing to own up to those colossal mistakes. Although it is true that Republican deregulation mad dogs were the political power bloc that prevented effective regulation, oversight, and reform of dark derivatives markets, he and others in the Clinton cabinet were on the wrong side of that issue.

    Summers needs to issue a clear-throated mea culpa before he can be rehabilitated.

  • StilllHere

    Transportation by horses also and telegraphs. Let’s ditch cars and phones.

  • Bruce94

    I thought Summers’ answer to the question of what has been
    driving this obsession with the debt was spot on. If I recall correctly, he cited the following factors:

    –the failure of the public to understand the “fallacy of
    composition” which leads inevitably to the “paradox of thrift”—a naiveté or ignorance of an almost universally accepted principle in mainstream economics that has
    been exploited by the GOP ever since the supple-side delusion was championed by Hollywood huckster, Ronald Reagan.

    –the sabotage of the normal political process and government functions by wealthy individuals and corporate elites especially the “bondholders.”

    –an unprecedented hyper partisanship and animus directed
    against the President beginning within just a few days of his first inauguration.

    I have an 8-letter acronym that summarizes the above
    analysis. It’s easy to remember and goes
    like this:

    T. Tanking the

    E. Economy of

    A. America by

    P. Paranoid

    A. Anti-government

    R. Right-wing

    T. Thugs and

    Y. Yahoos

    • hennorama

      Bruce94 — I agree with the first part of your comment, and would [Vote up] had you stopped at “inauguration.”

      • Bruce94

        Whaaaat!!?? You don’t think the Tea Party has been an impediment to recovery and job creation in the post-recession period? Have they not pursued a legislative agenda of obstruction that has slowed economic growth, shut down the govt., threatened default on the debt, and dimmed the job prospects for millions of Americans?

        • hennorama

          Bruce94 — thank you for your response and your question.

          My objection is to the stereotyping present in your acronym, especially the T P and Y portions. I agree with you in spirit, but am simply not inclined to view all members of the TPM based on the actions and words of an albeit rather extreme few. There are many in the TPM who have reasoned and reasonable views that are not “paranoid … thugs and yahoos.”

          Thanks again for your response.

          • Bruce94

            Politically speaking, I think the term “thug” is appropriate. What has been the Tea Party response to every Obama legislative initiative, program or nominee that has had bipartisan support either historically or currently: to threaten any moderate Republicans with being “primaried” back home if they dare agree to or vote for a reasonable compromise with the Dems. That is the political equivalent of intimidation. Then, of course, there is the example of Rep. Michael Grimm (R-NY and Tea Party favorite?) who, you will recall, threatened to throw a reporter over the balcony because he didn’t like his line of questioning.

            But I take your point that Grimm may not be your typical Tea Party supported rep. AND all those caught up in the hysteria of the TPM may not be thuggish. In practical, political terms, however, their high-profile leaders have engaged in rhetoric and tactics that do reflect paranoia (fear mongering and demonizing of their ideological opponents). What logically flows from that mind-set is coercion and scorched earth strategies that offer no hope of compromise or progress.

          • hennorama

            Bruce94 — as I said, I agree with you in spirit, but perhaps not in tone.

          • Bruce94

            Enuff said. You wouldn’t be the first to criticize my tone, and I’ve been known to indulge in hyperbole from time to time. I’ll take your comment under advisement. Thanks for taking the time to reply.

          • hennorama

            Bruce94 — backatcha.

            BTW — if the Ms in Rep. Grimm’s surname indicate that he is doubly Grim, then that is one apt surname.

            [PS] and given Mr. Summer’s profession, his surname is apt as well, although it is certainly not a very good description of his public demeanor.

          • Bruce94

            Agreed. I’m wondering if the grisly Rep. from NY might be descended from the Brothers Grimm, as in Grimm’s Folktales that are based on archetypes that can get darkly violent at times.

            As for Summer’s demeanor and grating tone, I agree. He certainly didn’t provide a breath of fresh air or a summer’s breeze to mollify those with pitchforks on the Left and Right ready to assign him to the ash bin of history…a feeling I don’t happen to share, but can understand.

          • HonestDebate1

            2010 was a historic year as far as midterms go. The Tea Partiers have been vilified as racist, mean-spirited, selfish and hateful. Thug is just another. We’re used to it. But seriously look at your President and his behavior for thuggery Chicago style.

            I guess I could give you various quotes about getting in peoples faces, bringing a gun to a knife fight, sitting in the back, etc.

            Or maybe I should bring up Kenneth Gladney. I doubt you care much about the IRS targets. Sarah Palin’s dad had it coming. And the biggest, most transformative entitlement in generations passed by one party with bribes, kickbacks and gimmicks is no biggee. No thuggery there. Obama will even barricade WWII veterans from their memorial to play politics.

            Nope, I’ll go with the Godfather, Obama’s chief of staff who ushered in the politics of Obamacare:

            Suddenly Emanuel grabbed his steak knife and, as those who were there remeber it, shouted out the name of another enemy, lifted the knife, then brought it down with full force into the table.

            ”Dead!” he screamed.

            The group immediately joined in the cathartic release: ”Nat Landow! Dead! Cliff Jackson! Dead! Bill Schaefer! Dead!”

            http://www.huffingtonpost.com/2008/11/05/rahm-emanuel-knife-fighte_n_141595.html

          • Bruce94

            You had to reach all the way back to 1992 for a Emanuel quote at a
            Clinton campaign strategy meeting expressing anger at adversaries from
            both parties and media members who seemed to be on a mission to smear
            the Clintons in the run-up to the Presidential election? That meeting
            had absolutely nothing to do with the politics of getting the ACA passed –
            political maneuvers that don’t seem all that unusual when you compare them with the tactics employed by, say, Lincoln to get the obstructionist House of Rep. to pass the 13th Amendment or, say, LBJ to get civil rights and anti-poverty legislation through Congress even though he, unlike Obama, had huge majorities in both chambers.

            While the rhetorical device employed by Emanuel might have been over-the-top, it still pales in comparison to the idiocy of Palin’s Bullseye Map targeting Dems in 20 House districts OR her demagogic resort to “death panels” to whip up fear and frenzy at all those town-hall meetings.

            http://www.huffingtonpost.com/2010/03/24/sarah-palins-pac-puts-gun_n_511433.html

            BTW maybe you shouldn’t bring up the IRS targets–another example of right-wing paranoia since no credible investigation to date has connected those IRS activities to the White House. You might also want to avoid bringing up Kenneth Gladney–perhaps the finest example of irrational conspiracy theory taken from your alternate universe promoted by the likes of Glenn Beck, Andrew Breibart and other far right wing-nuts. Incidentally, did you forget that Gladney’s alleged attackers were all exonerated in court?

            http://mediamatters.org/blog/2011/07/13/the-kenneth-gladney-charade-collapses/181483

          • HonestDebate1

            It’s thugs surrounded by thugs exercising thuggery.

          • Shark2007

            The TPM people I have met first hand and heard of second hand have been pretty ignorant. One in particular, was upset by the idea that EPA wouldn’t let him drill for oil in his back yard in his suburban neighborhood. Seems he never heard of local zoning laws or community standards and was ignorant of the problems in Wyoming where there has been drilling in the neighbors yard.

            Also during the first TPM government shut down, he embraced the predictions of societal collapse telling my colleague, “I hope they keep it shut down, I’m ready, I have a basement full of guns and ammo.

            He also argued he would have preferred another Great Depression to the limited Obama, stimulus. He argued, the Great Depression couldn’t have been that bad if both he and I were alive now. It is hard to argue with that kind of ignorance.

            He was also into reading about the End Times, totally unfazed by the recent failure of them to materialize as predicted by a minister multiple times.

        • WorriedfortheCountry

          The Cruz crowd shut down the Government for 24 hours. The rest is on Obama and Reid.

          • Bruce94

            Cruz and company are responsible for the rest including failure to pass Comprehensive Immigration Reform, American Jobs Act, Infrastructure Bank, Vets. Job Corp, Employment Non-Discrimination Act, Fed. Min. Wage hike, rescission of Food Stamp cuts, elimination of tax loopholes, extension of long-term Unemployment Benefits, etc. All proposals and actions, the substance of which in a weak post-recession economy has historically garnered bipartisan support, but not now due to Tea Party extremism and gutless GOP leadership.

          • WorriedfortheCountry

            I’m with anyone who wants to balance the budget and pay down the debt.

            Both parties are responsible for past sins but only one group is willing to take action now.

        • HonestDebate1

          They have done just the opposite. The administration’s actions have been devastating. Unfortunately he is succeeding at fundamentally transforming America as promised. I had hoped he would fail.

  • WorriedfortheCountry

    Too bad Tom didn’t ask Ole Larry about the mythical ‘green’ jobs that were supposed to save the economy during ‘his’ watch.

    • Shark2007

      Actually, there are quite a few of them. There are a lot of solar panels being installed. So many in fact that the power companies are trying to slow it down to keep their revenue up.

  • 65noname

    one of the neo-liberal dudes responsible for the financial meltdown thru his advocacy of deregulating financial sharks who stripped the economy. Now he is acting as if he was always a “responsible” economist. This dude was also one of the fuelers of the movement to drasticially reduce the earned social security benefits for seniors. now he pretends otherwise.
    Too bad corporate radio doesn’t bother to provide someone who knows his real history.
    This program would never have dean baker on without providing a point counterpoint from either a neo-lib or a neo-con. Too bad the announcer forgot to provide an objective historian or economist to counterpoint summer’s blatant distortions designed to protect his image.
    you go!!!! Corporate radio!!!!!!!

    • Jim Cricket

      oh come on. there is only so much any one person or program can do in one hour. you can’t expect any such show to be a replacement for an actual classroom. be glad that there is any discussion at all. how about politely sending in a request for dean baker to be interviewed? might not that work?

      • 65noname

        come on, where? And no, I can’t “be glad that there is any discussion at all”. corporate radio and this show consistently present a very narrow range of spin. here, it has given free range to one of the architects of the meltdown to respin his history. this show wwould NEVER give such an opportunity to any semi-progressive. And yes, I would prefer no program rather than the usual right of center spin that is the staple of this show.
        And, by the way, I was polite. Strongly disagreeing isn’t the same as rudeness. And many people have asked for a more balanced guest list. But this program’s announcer and his bosses know where the money comes from.

        • Jim Cricket

          but calling them out with a generalization as “corporate radio” as if to suggest “aha i caught you!” is childish.
          larry summers is allowed to speak as much as you are. and yes this program has given air to people of all different political creeds.
          also i didn’t mean you were impolite in your comment. i was merely suggesting before going off on a rant that they aren’t airing “dean baker” or the like, why not try and get into a conversation with them and suggesting it. their reaction might surprise you.
          or is it you just prefer to rant?

          • 65noname

            wrong:
            1. I (and many others) call them “coprporate radio” because it acurately describes what they represent. simply calling that childish rather than debating the issue is, well, childish.
            2. summers is “allowed to speak” much, much more thant myself or anyone who is outside a narrow range of opinion.
            3. Stating that they don’t permit very much opinion to be presented on their programing is not “a rant” except to those who don’t have an answer to facts that they disagree with. And who subsititue noise for discussion of issues.
            4. And, as I mentioned, many have discussed the fact that corporate radio severely limits the range of opinion on its shows. No amount of rude ranting by you will change that fact.

          • Jim Cricket

            1 PBS is a listener sponsored radio system that does also have corporate underwriters, a phenomenon that those of us watching the evolution of public radio weren’t for the most part all that thrilled with. but if you and others wish to call that as “corporate” fine. yes they are a corporation, albeit non-profit (altho I doubt that little nuance would persuade you of anything) because any large organization has to corporatize itself in the modern world; it’s not because it is evil, it is because it is practical. but your mileage may vary.
            2 it’s a sad fact but people with power generally are offered more speaking opportunities over truck drivers and ditch diggers. aside from the many novelists working hard to give us the voice of the “common individual”, there are also media programs for the latter as well, particularly when they do something interesting that a wider audience might appreciate…. do i really need to explain this?
            3 i merely am saying that you’re making an assumption about “permission” when you have presented no clear evidence that they are NOT permitting Dean Baker or some such person. again have you asked them about Dean Baker and have they refused? (full disclosure i’ve never heard of him until today; i have no idea whether he is a full-blown crank or if there is a corporate conspiracy going on to prevent him from speaking publicly)

            4 Yes yes, I’ve heard that corporate mainstream media limit our discussion by the very person (whose initials are SP) who has been quite happy and available to use said mainstream media to hammer that idea in our heads about mainstream media. and this sort of never ending debate about debate is pointless and useless.

            no matter what media does, why not spend some time on any liberal college campus and see whether there is the sort of wide divergent open-ended political debate that you wish for. because that is truly where minds are molded. real open discussion from divergent points of view does exist. but again we cant expect any one piece of media to be the end all you’re asking for. and your generalizations pale as soon as you realized that there is media available, that discusses things as widely as you’re asking this one program to do. it’s just that you do have to meet it halfway and go to the store and buy the magazines or newspapers, etc, to be able to get as diverse an opinion as you want from this one program.

            and lest we forget, after all the wide discussion, someone does have to do something. that’s why things aren’t as perfect as you seem to expect them to be.

          • 65noname

            1. straight out of the coporate radio mediac handbook. no need to resond any further.

            2. dude! I was simply responding to your rant that “larry summers is allowed to speak as much as you are”. which implies that others are allowed to speak as much as he is. Since you not are saying that you didn’t really believe that, no need to respond other than to say that if “people with power generally are offered more speaking opportunities” than people with facts, than that proves my point doesn’t it?
            3. your para 3 is pretty incomprensible. I said that corporate radio doesn’t provide a wide raange of opinion, including people such as dean baker, a pretty moderate economist. But I don’t need to prove anything to you. You are entitled to your own opinion.
            4. I’m not insider enough to know who SP is. As for the rest of your rant, I’ve aloready heard it. In high school civics. But, you’re right. we can’t expect corporate radio to present a very wide range of opinion. Nor can we expect them to present very much except the opinions approved by their masters.

          • Jim Cricket

            I apologize if I came across as incomprehensible. Tally it up to my impatience with sloganeering and “comment sections” as a poor replacement for real discussion.

            1-if you feel that PBS, both radio and I presume you include television too, both of which started out as a real alternative to “corporate” or “mainstream” media, has failed to live up to its own ideals, then why are you even bothering listening to it? just to nurture your anger against it? (rhetoric question that) It might interest you to know that most of those that are part of this medium were bred in the back alleys of college and small alternative radio stations. i’ve known five alone that came from my little college station in Ohio that went on to NPR news. in your opinion, at what point did they become “turncoats”? that there are even fewer of those small incubators is, yes, sad. that PBS has “matured” into something slicker than it once was is, yes, sad. certainly gone are the days when alternative radio stations were run by long-haired hippies ready willing and able to take chances for “the revolution” ( if you want stories about “alternative” I can tell you about the time Jeremy Lansman – who is synonymous with alternative radio in this country in the past 40 or so years – put a drunk that I found at the front door of KDNA back in the late 60′s) but that doesn’t mean ipso facto a close-minded spirit. and you fail to convince me why you think it is simply by your calling it “corporate”.

            2- well yes Larry Summers is allowed to speak. but pardon me in comparing his right to yours and i understand your calling me out about the contradiction. but it’s simply a kind of obvious societal need that those in power are given a more frequent platform (to use a more accurate description) than one that is given to you or me or Dean Baker. but your error is in saying that this somehow precludes your Dean Baker having a platform. and if he really has something important to say, i’m sure he would/will get heard. sounds more you have a bone to pick with PBS than anything else.

            3- if my paragraph three was incomprehensible to you my apologies. but it was probably due to the equal incomprehensibility of your paragraph 3. but again all i was trying to say to you was that before you start accusing PBS or NBC or whomeverBS of not allowing this or that speaker, either get your facts straight (show us that they have actually denied Dean baker) OR call them up and ask them if they would interview him. and if they say no, ask them why. again, for the 2nd or 3rd time, you’re making presumptions about what PBS will or will not allow simply based on some problem you have with them airing Larry Summers.

            4- SP= Sarah Palin; but whether PBS actually kowtows to corporate underwriters is the sort of accusation that can be made of anything. Washington Post takes in Gucci ads? Then they must ipso facto be slanting their op-eds favoring the slaughter of alligators (for purses). Right? it’s highly improbable an accusation like what you make can be proved or disproved because of course such a thing would be conspired to quietly. all you have to say is “they have corporate sponsors, therefore they kowtow to the whims of the corporate sponsors.” paranoia strikes deep. according to your cynical philosophy any corporate rules or ethics, or any guidelines on the terms under which a corporate underwriter pays for its sponsorship are a complete moot point. (look them up if you have time; I bet they make strict point that any underwriting does not include any determination of programming or editorial opinion) You have decided that PBS is ipso facto corrupt as soon as they make a contract to any underwriter. That. Is. Nonsense.

            but let me ask you this: if you feel such people are so corrupt, how in the world do you possibly feel that ANY alternative media wouldn’t be, or become, equally corrupt? simply because it is an alternative?

          • 65noname

            huh?

  • PithHelmut

    We’re still listening to Larry? When do we call someone’s credibility into question after how many times they have been wrong? Just having ignored Brooksley Born was bad enough and now someone who missed recognizing the financial lead up to the crisis is still being consulted? Shame is going to come upon many who say nothing or who side with Goliath before the “Big Spill”. But afterwards, a new honest age will be born. Alleluia! https://www.youtube.com/watch?v=71WK5kcgfag#t=1253

  • Mark Bays

    I made an on-air comment yesterday regarding the effect on employment of automated driving. Today the matter came up again breifly with Larry Summers. His reaction was essentially that automation eliminates low skill jobs and higher skill jobs take their place. I am concerned that our policy makers and executives simply have little to no interaction with those outside the socio-economic strata in which they conduct their lives, and so no insight into how ninety or more percent of us live and work. It is not the case that persons will go quitely into poverty and hopelessness as virtually all oppurtunity they and their children can realistically access disappears into the wealth of the upmost one percent. I have an unusual perspective on this, in that I worked my way through college driving eighteen wheelers, had a career in management after graduation and post retirement went back to work driving trucks again to avoid lassitude and boredom. I made as much money in the 1970′s doing this as a company driver as I am now, again as a company driver. I work for Werner Enterprises presently, so my current pay is competitive with others in this industry. It does not escape the notice of my colleagues that they are working harder, effectively earning less, and that their prospects in some other career field are no brighter, probably dimmer. I am afraid that not only our way of life, but our democracy and freedom are on the decline. Greed and egocentrism may preclude any recognition of these realities, but I do not believe that the vast majority will be quiescent and placid as the gulf between us and the indifference of the haves regarding the have nots grows obvious to all. Thank you for illuminating these realities and please, continue to do so. It is far from beyond amelioration, but cognition of the problem is essential to addressing it thoughtfully

    • responseTwo

      “His reaction was essentially that automation eliminates low skill jobs and higher skill jobs take their place.”

      His crowd has been peddling this for countless years. This is the same thing Bush’s economic adviser, Snow, was saying 12 years ago. If it were true, we would be floating in jobs. The higher skill jobs get offshored.

      • http://www.findingourdream.blogspot.com Hal Horvath

        Some do get offshored, but that isn’t the main force. The main force is that for instance suppose at a little company 3 medium to low skill jobs are eliminated via automation, too often the result is only that 2-3 already employed high skill workers take on a little more hours to help manage/run the machines. Still,, if those high skill workers get good raises, then the economy can still move forward since new low skill jobs will arise to help meet their resulting increased demand for waiters at restuarants, hand wax on their cars, etc., but….that’s not 1960s America, no.

  • Fred Fletcher-Fierro

    Uncomfortable interview at times when Tom wanted it to go one way and Mr. Summer’s wanted it to go another. The tone of the last 20 minutes of it was particularly low key on Tom’s end and it sounded like he just wanted it to end. It was clear throughout the hour that Mr. Summer’s wasn’t going to answer completely topics that either callers brought up or Tom would bring up himself. I was waiting for the interview to abruptly end when Mr. Summer’s couldn’t continue to peddle his lies and all of the rambling that he was doing. I was looking forward to some real insight from the Summers hour but instead I got a politician masked as a College President, masked as an economist masked as a snake that kept slithering for 60 minutes of uncomfortable radio.

  • Eric Robison

    listening to the show now, and I’m not a Fed. hater, but man, Summers comes off as a condescending, loud-mouthed jerk. Is it just me?

    • Fred Fletcher-Fierro

      I hope Mr. Summer’s listened to the second hour today cause it sounds like he’s been “Pumping the T” too much.

    • Louis Long

      Larry you created the recession! Without CDOs and CDSs we would not have had a bubble. Greenspan, Bernenke and this clown get to pretend that they “Saved the World” when they created the problem in the first place. He must spend all day sitting around having people worship him to have this kind of ego in the face of his horrible record.

  • Louis Long

    Larry, thank you for the 1.4 Quadrillion of notional value in the derivatives market. Larry Summers is the MAJOR reason we don’t have financial regulation. He is the godfather of the American casino-gulag style of capitalism. City, state and local government is loaded with debt. Even this simplest financials transactions are loaded with hidden fees and an unbelievable debt burden brought on by his love of synthetic finance.

    • StilllHere

      What’s the net notional value?

      • Louis Long

        The total value of a leveraged position’s assets. A small amount of money can control a much larger position through the magic of leverage. As long as someone is willing to take the other side of my bet then I can bet in any way that I choose. Ask Hank Greenburg at AIG. Sorry, we can’t ask Hank because AIG has disabled comments. Example would be Goldman Sachs receiving every penny on a horrendous bet (CDS) with AIG on subprime mortgages. Luckily they had Hank Paulson, former Goldman CEO, as treasury secretary.

  • Louis Long

    56% of Americans now have subprime credit! Where is all that debt? Bouncing around Larry’s derivatives market. After killing the financial regulation that kept us safe for the last half century (Glass Steagall) the American public is not a wholly owned subsidiary of a bunch of Wall Street job creators. We went from an ownership society to a receivership society and we get to listen to a bunch of self congratulatory clowns like Summers tell us what is wrong with the economy.

  • Vic Volpe

    I generally agree with Mr. Summers. We have an economy that is doing well in some segments — energy, Silicon Valley — but we are more like a car that is not firing on all cylinders; the economic growth is tepid and not all inclusive.

    We have an economy that was transformed since the ’80s (and especially since the ’90s) into a consumer dominated economy. In the ’60s we had more involvement from the industrial/commercial sector and this allowed the Govt to pump prime with effectiveness — something that doesn’t work as well now.

    We need more emphasis is making/designing (R&D) things and revampinng our educational system (to include adult ed) to be more technically oriented. If Germany can do it, we can do it.

    http://vicpsu.blogspot.com/2013/09/then-1960s-versus-now.html

    • Louis Long

      The education system is just a vehicle for Wall Street debt. Look at the IPO of Educational Management Corporation or any of the other for profit higher ed conglomerates – that own our schools. You can’t dismiss student loans in bankruptcy and the price is ten times what it was a generation ago. Education has become the ultimate predatory credit card, private financialization taking over public institutions funded by Larry’s friends at JP Morgan, Goldman, Citigroup and the other TARP, zero-interest-rate criminal conglomerates. Another Larry Summers mess!

  • Josh Goldstein

    Summers is discredited. Full stop.

  • Shark2007

    If you listened to Tom introduce Summers and figured out where Larry gets most of his money from, you will not be surprised by what he says. Hint, it is not from his academic work.

    • http://www.CayerComputing.com/ Melissa A. Cayer

      Where does he get most of his money?

      • Shark2007

        The financial industry.

  • Rick Wicks

    Please do a show sometime with Prof. Randall Wray or some other representative of Modern Monetary Theory to explain more reasons why the obsession with deficits is misleading and damaging and how we can afford full employment while keeping inflation under control. http://en.wikipedia.org/wiki/Randall_wray

  • Sunraya

    Everyone seems to disagree with Summers – so you all think the economy is doing well? Maybe in limited urban markets, but not in most of the places near me. We are slowly dying.

  • BobK71

    I agree with Tom’s hunch that something deeper is at issue here than addressed by Summers.

    The main driver of our economic problems is now finance, rather than the real economy.

    Not many people understand that finance is not really a free market. A major piece of evidence of this is that we are publicly guaranteeing private debt and causing all kinds of moral hazard. But the root problem, IMO, is that the government has a monopoly on producing the commodity of money.

    Whenever there is monopoly, there is distortion. Generally, special interests (in this case, the financial and political elites) receive unearned wealth and power at the expense of the public.

    By its very nature, this problem started small and unnoticeable, hundreds of years ago. By now, the authorities and banks have created so much money and debt (for a variety of reasons, driven by the nature of the system) that we are getting frequent financial crises. You have to wonder how long this system can last.

    • Grove

      and the financial sector is not about contributing to the society or culture in any meaningful way.
      It is legalizing gambling for the sake of making a few people extremely rich at the expense of the rest.
      These financial “wizards” are not offering anything of value – they are just gaming the system.
      This shouldn’t be legal. Unfortunately, money is the real god in this country.

      • BobK71

        We Americans like to think we live in a meritocracy. But the “best” way to make money is not to make a superior product at a good price (though that is pretty good.) It is making it off a public subsidy. And especially one that most of the public don’t understand enough to oppose.

    • Demythify

      I agree except about where you’d say the root of the problem lies, with government’s monopoly on the dollar.

      And that’s not a problem. It’s a blessing.

      It’s not that too much government put us in the situation we find ourselves today, but too little. The problem began in the too loosely regulated and unregulated banking sectors, and in particular the shadow banking system which grew ginormous all by itself as the result of market force driven capital market lending and was independent of the fed banking system.

      We need a regulatory system capable of reining in the highly leveraged, debt juiced assets speculation. We have an economy today where borrowed money, rather than cash, is what investors put at risk. So the downside risk to the speculator is relatively minor against the upside potential, which is theoretically limitless. Lenders exposed to that risk employed increasingly sophisticated risk securitization schemes to minimize their exposure which, in turn, led to Big Stakes losses cascading throughout the entire financial system, gashing huge holes the economy overall. A single speculator, as in the case of Lehman Brothers etc, can leave an oversize hole in the economy given the way debt, capital and risk are operationalized today.

      • BobK71

        I understand what you’re saying. We’ve had this system, essentially, since the Dutch Gold Age of the early 1600′s. Regulation, somehow, has never been enough. (The Dutch themselves fell victim eventually.)

        Think of the government as the owner of a fierce dog (the financial sector) trying to stop it from attacking onlookers (the economy) with a leash, with only partial success. Why not train the dog to be nice? There would be no need for the leash and the public would be totally safe. The system is unstable from day one.

        A good part of the heart of the system is public guarantee, in one form or another, of private debt. This gives every incentive for banks to expand debt and leverage. Banks employ very smart people. Where there is regulation, there is circumvention. The only enduring solution is to remove the guarantee totally. (Though admittedly not as easy as it sounds under our current state!)

        • Demythify

          Sure, but the source of the cancer wasn’t in the FDIC commercial banking system, but in the no-FDIC guarantee investment banks and so forth. The CDS’s and so on were guarantee substitutes developed and provided purely in the private sector, like private insurance. The money markets that seized shut and precipitated a system-wide liquidity crisis virtually overnight–twas never a public guarantee for those.

          And the public guarantee provided to commercial banks doesn’t protect the banks–it protects the banks’ *depositors*, in the event of their bank’s bankruptcy. JPMorgan, widely credited for starting the CDS craze, still doesn’t offer mom and pop banking services. So that $250k deposit guarantee –? They weren’t an FDIC bank prior to the crisis, and even today that guarantee is irrelevant to their business model. $250k is pocket change at JPMorgan where it takes about $25 million, in cash!, minimum to even open an account. That $25 million is not insured.

          In other words, it’s a myth the govt guarantee encouraged the recklessness. There were no guarantees in 1929 in either, and that didn’t prevent against the bank failures. And the govt didn’t bail out the big banks, AIG etc in 2008 because it had explicit guarantees in place but because they felt it would be catastrophic to to sit back and watch almost *everybody* in the economy fail, which was exactly what was about to happen due to the liquidity crisis in the no-guarantees money markets. Huge companies would fail to make their payroll, giant retailers would see their product shipments held back, big factory orders would be canceled, etc.

          Remember, these CDOs and other doowops weren’t considered risky. They were were considered risk hedges, instruments that reduced risk to the individual company. There was nothing intrinsically risky about a single CDO, or about letting any one of them fail, or any one company fail (as many did in early 2007). What made them catastrophic is how pervasive they became throughout the financial system, essentially chain linking vast networks of companies together, including pension funds that were assured their holdings were 100% solid, safe Triple A investments. If we’re all invisibly roped together climbing up Mt. Economy (and remember, CDOs etc were frequently off-balance sheet and opaque), when one falls he’ll pull the rest of us off too, first one, then another…

          • BobK71

            I probably created some misunderstanding because I didn’t want to dive into the details of this complex beast and tried to write in generic terms (though as accurately as possible.)

            Over time, the precise locus of risk has shifted around. In 2008 it was not the FDIC guaranteed system, but AIG plus the major investment banks. But public guarantee needed not be explicit. Investment banks were not dumb. The reason they bought CDSs en masse from AIG was that they knew AIG could not be allowed to fail, even if this was not enshrined in law. (Even though there was an implicit guarantee, more or less, for the major investment banks anyway, the CDSs were cheap — thanks to AIG’s folly — so why not buy.)

            Lehman’s being allowed to fail was due to a fit of anger on the part of Treasury Secretary Hank Paulson who had essentially been taunted by the CEO of Lehman that he could not afford to let Lehman fail. (Hank Paulson will probably live forever in infamy in the minds of the people at the core of power.)

            In the 1980s the FDIC guaranteed system had the savings and loan crisis that had to be cleaned up by a lot of taxpayer money. Fundamentally, it was really the same thing as 2008, or any of the banking crises in history.

            (In the earliest days, banks bailed each other out. This was really another form of public backing. The government allowed the banks to act as a cartel that essentially bargained with the public as a united front — at least as far as the crucial question of bailouts. When banks could no longer rescue each other, central banks became the “lenders of last resort.”)

            The Great Depression came about because of the one-two punch: first, the over-abundant liquidity caused by our old friend, monetary creation, inflated the US stock market. When that bubble burst, major banks failed and US and European authorities failed, for a variety of reasons, to rescue the banks in time. The intent to rescue banks is always there. It’s just that, occasionally, it fails to deliver. Banks have always had every incentive to push leverage.

            Some would say the problem is not the guarantee, but weak regulation. But when regulation has failed regularly for hundreds of years across the Western world, you have to ask if there is a deeper problem.

            It’s not just that regulation is generally a poor guarantor of good behavior, as compared to market incentive. The problem is much more profound. When there is free wealth and power to be had, in the form of newly created money, effectively backed by the power of the state, all kinds of forces are engaged on the side of destructiveness. On the other side, all you have is a regulation book of varying quality. (Bankers getting rich and being able to influence the political and regulatory environment is only one example of these forces.)

            If there was no state-backed money, bank money would be abandoned by the market if the bank over-leveraged. The bank would naturally be more careful, and so would “depositors” when lending it money. (An example of this setup would be banks issuing paper money in return for precious metal “deposits” as in the days of goldsmith banks — before state support crept in.)

            The problem is that we can’t turn back the clock. The economy would dive if we simply undid the mistakes at the heart of our system. Yet the system is unsustainable. It is a classic addiction. We have been dealt a drug that is painful to get off. This last part is the reason most mainstream economist either don’t see, or don’t want to see the real problem.

          • BobK71

            Oh, I missed the most important thing…

            The key phenomenon is actually not when the economy crashes, but when asset bubbles are inflating. Why do bubbles keep happening? They appear in different guises but are essentially the same thing in my view. Publicly guaranteed debt always under-price credit and create more debt money than is economically viable. Eventually, the market has to recognize reality, and plummets.

  • Demythify

    Summer’s reply beginning @35:35 shows why he was an unsuitable candidate for the Fed. He has some good ideas for fixing this mess, but still can’t come clean about his own part in the creation of this mess in the first place.

    It’s not just that we have a hapless and economically illiterate Congress holding us back, but a cancerous financial services sector super-fueled by inept, and too often complicit, Fed/Treasury policy making.

    It is critical that we turn this ship around with more fiscal spending, and stimulus targeting those in low/middle wage scales who will then lure already cash rich businesses to expand and invest again.

    But it is also urgent that economists like Summers come to terms with the need to integrate economic theory with financial theory. The economic crisis and its subsequent stagnation are Man Made Disasters and the failure of the industry and policymakers responsible to properly own it not only means these disasters will keep happening, but we’re tearing apart what’s left of the social fabric by scapegoating innocent seniors, laid off workers, union workers, student loan debtors, undocumented immigrants, hourly workers and so forth.

    Summers needs to take his share of the responsibility and stop hemming and hawing when asked to explain how we got here.

    • Bruce94

      Excellent comment. In my post below, I summarized what I thought was Summers’ response to the question, what is driving the GOP/Tea Party obsession with debt (even as the deficit is on a downward arc)? Your observation reminds me of a fourth factor that Summers’ omitted, but I think may be relevant to why conservatives seem hell bent on tearing apart the social fabric (e.g. by refusing to extend long-term Unemployment Insurance benefits or refusing to expand Medicaid).

      In addition to the factors Summers cited, I think part of the answer lies in the continued application of the Republican Southern Strategy as articulated by Lee Atwater in his now infamous, often quoted advice to the GOP to tailor its message to disaffected southern Dems by invoking the N-word without actually saying it using such abstactions as “forced busing, states’ rights, and spending cuts” couched in terms of a phony debt crisis — cuts that not only cause disproportionate harm to the groups you identify, but also (and perhaps more obviously) to racial and ethnic minorities.

      • Demythify

        A new book out by Ian Haney Lopez appears to examine this unholy alliance. I haven’t read it yet but in an interview describing his book, he suggests that because people don’t understand, and aren’t being accurately told, why the economy isn’t working they’re more susceptible to scapegoats coming from old demographic stereotypes.

        Punishing the poor and unemployed accomplishes no purpose whatsoever. Neither will further rewarding the already richest, and least taxed, economic sector the US has seen in the last hundred something years. The already rich aren’t inclined to pour their pooled savings into a bad economy. It’s a ludicrous image! How conservative politicians managed to bamboozle their constituents into believing this bizarre unfolding of events, that another round of tax cuts for the rich, would encourage the “job creators” in this economy, is frankly beyond me. A more plausible scenario to coax “job creators”, would be to tax them more! And more again, on the revenues they get to keep after paying domestic workers. With a 99% tax on net income, there’s not much incentive for “job creators” to cut their labor costs ;-)

    • Louis Long

      The economy is in so much worse shape than Summers acknowledges. A single bank – Goldman Sachs, has more exposure in the derivatives market than all of Wall Street did at the height of the housing bubble. Look at MF Global, they used credit default swaps with forty to one leverage to bet on Greek Sovereign debt. The smallest mistake and the bank was devastated along with customer accounts. The banks are left with accounting fraud and government handouts. Summers created a horror show that will kill America in the end.

    • BobK71

      I agree with most of your comment, especially that finance is ultimately responsible for tearing our social fabric apart.

      However, I can’t agree with more fiscal spending or tax-cutting. Summers’ solution might have been OK when Western national debt levels were low. With these debt loads, we are vulnerable to bond investor rebellion where they demand higher yields and send the country down a debt spiral. (Fed money printing in that scenario also runs the risk of worsening the problem.)

      There is not a 100% chance of the above happening (as always with finance — it’s a bit of poker game), but if it does happen, it will destroy the reserve currency status of the dollar, and the economic pain will be huge, at least for the US. It’s not a risk the authorities seem willing to take, and I believe with good reason.

      The real problem is deeply buried in our system (i.e. socialized rather than free-market money and finance.) There won’t be a pain-free solution, but I am hoping we will set up the system properly when the dust finally settles, or, better yet, work towards a minimally painful way to fix the problem over a few decades, using the resources we still have.

      • Demythify

        It’s a mistake to worry about the bond vigilantes because short term interest rates are arrived at through Fed/FOMC monetary operations, not the demands of private bond holders. See http://www.cfeps.org/pubs/wp-pdf/WP37-MoslerForstater.pdf; page 9 explains the real function of treasury securities, which is not to service any need by the US government to raise capital but to manage the size of the money sitting in bank reserves and the overnight Fed funds rate.

        It isn’t the size of the treasury debt that’s the problem; it’s the size of the overall debt in the private economy, especially debt backed asset price speculation. And private debt is now something like 3 times the size of the federal debt. All things being otherwise equal, monetary policy alone cannot cure a debt crisis. (Neither will the wait-it-out, eventually-it-will-recover-on-its-own plan.) But relying as we do on monetary policy to reinvigorate an economy by easing liquidity constraints to market lending logically requires more new private debt be imposed on an economy currently on life-support after collapsing from too much private debt!

        Fiscal policy doesn’t impose more debt on the private sector; it injects more net income into the private sector. Treasury debt is nothing like the private sector debt. State and local debt is like private sector debt, but the federal government debt is a completely different animal.

        • BobK71

          I read part of your link, thank you. I enjoy reading different points of view, but would advise treading with extreme caution with this school of thought. I’ve seen it before . Space is limited here and I would be happy to discuss it further via email (bob.kennedy@gmx.com).

          Basically, the idea that the government has unlimited money is true only from an operational standpoint (i.e. under fiat currency there’s no physical or legal constraint against creating money, assuming the government and central bank operate in perfect unity.) But there are real constraints outside pure legality. You only have to note that no government (under fiat currency) has historically been able to create money with total abandon, with the exception of a few disastrous cases like Weimar Germany in 1923 and Zimbabwe recently. If things are so easy, shouldn’t the majority of politicians have discovered the “gold mine?”

          I would agree with the authors’ statement that taxation creates a demand for the fiat money created by the government. But this argument goes only so far. If people (almost) totally distrust their own currency, they will only use foreign currency, precious metals, real assets, etc. to store value. All they have to do is to convert a fraction of their wealth to their government’s currency at tax time. (They will have no lack of takers!)

          It is true that the state has a lot of power and credibility as the issuer of money. This is most true at the beginning. As it creates more debt and money, this power is gradually eroded. The big problem, in my view, is that the more credibility the government has, the more incentive there is for banks and politicians to receive unearned wealth and/or power by eroding this very credibility (and the stability of the economy.) Thus, my indictment is against this entire system.

          • Demythify

            Yes, there are real constraints on how much money creation is safe, so there are limits like you say.

            But unlike Greece and other EU countries, the US government’s ability to borrow at low interest is never constrained by any demand from private bond holders. The interest rate on T bills is manipulated by the Fed to achieve a particular policy objective. They essentially have monopoly power over it.

          • BobK71

            The Fed currently manipulates market interest rates via quantitative easing (buying Treasuries directly) and setting the policy rate (overnight rates charged to banks which borrow from the Fed.)

            These are hoped to influence market rates. But there is a real problem with too much QE and that is why the Fed is reducing it as soon as it can. When the market refuses to listen to the policy rate, longer term Treasury yields go steeply up.

            Currently that is not happening, but that is only under a specific set of conditions, including relative fiscal prudence. In the early 80s 30 year Treasuries were yielding almost 20% per year. And the Fed had to allow it to happen.

            The Fed does have more firepower than the rest of the world, the dollar being the main global reserve currency, and it can also try other techniques.

            Ultimately, there’s no free lunch. Whatever power a central bank and government use to get something for nothing, the country always ends up paying for down the road, in one way or another. You can’t pay less, but you can certainly pay more than necessary, if your policies are poor.

      • http://www.findingourdream.blogspot.com Hal Horvath

        There’s a reason the Debt Doomsday (interest rate debt spiral) won’t happen. See my blog. This is more than just academic, since this is the primary political tool of the Tea Party in its most often misguided rhetoric to reduce government. I see government as a garden — tends to grow both weeds and foods. Tends to need a lot of weeding. But I won’t turn around and say let’s not have our normal-sized garden anymore because weeds grew.
        But the interest rate spiral — won’t happen, and for more than one reason.

        • BobK71

          Would love to see your blog! Do you have a link?

          • http://www.findingourdream.blogspot.com Hal Horvath

            Yes, just click on my name I think.

  • marygrav

    I have considered Larry Summers a little screwball in the past, but now he has redeemed himself. Listen to how he defines the National Debt. It is a percentage of GDP. The US economy depends 70% on the domestic spending of its citizenry. If the people are afraid to spend, then the National Debt goes up. People are afraid to spend after seeing what the T-Party within the GOP has done with government spending and cutting of social programs.

    The T-Party/GOP was sure to increase and restore monies to the military because it needs it to protect the wealth and freedom of the 1% at the expense of the 99%. The 47% that sends its sons and daughters to serve in the military thus to serve the whims of the master class. The 47% not only suffers from Social Service Cuts including Unemployment benefits and the reduction of SNAP/foodstamps, but are accused of laziness because they demand a living wage.

    The US infastructure is falling apart. Bridges are falling down and expressways are melting from underneath. Airports as Summers states need updating. Clean water and the electric grids need updating. But the Congress is so focused on its own political point of view until it does not want to understand that unless we do something about the present problems, there will be no future. All these problems predate the election of Barack Obama.

    The T-Party and it movement is among the most politically ignorant that has ever sat in D.C. They wince and complain, while not even understanding economic or the US Constitution. They and their neoconservative ideology hand together through racism. Like Mitch McConell and John McCain, they are determine to destroy the US to get even with the fact that the American body politic for electing a Black man to be President. This evil intent is what is dragging down the economy.

    We are recovering from the Second Great Depression, but the T-Party Congress are trying to convince the People that this is the Great Recession. It took 20 years to recover from the Great Depress I, regardless of WWII. It lasted from 1929 until the 1950s to recover fully. And when the recovery was complete the Unions were blamed for creating the Middle Class who demanded a high standard of living and for not making enough profit for GE; thus the creation of the American Enterprise Institute to keep the people in line with the bosses wishes.

    Summers does bear a certain responsibility as does Irving Kristal and his Neo-conservatives, which bears a responsibliity for the invention of the T-Party. The 1980/90s drove US to where we are today. “Save more” will get US back to the Gilded Age, but for whom, not US!

  • Shark2007

    I do agree with Summers on the need to invest in infrastructure. The Republicans will never agree to that until they are in control of the three branches of government, at which time they will suddenly become Keynesian and claim credit for reviving the economy. It is clear that the Republicans are happy to tank the economy if they are confident they can blame it on the Democrats.

    • Bruce94

      Sadly, you are probably right. Listening to Boehner on Fri. pandering to the Tea Party, posturing to his high-end campaign donors, and fabricating yet another excuse to delay immigration reform in spite of the fact that it would be a win-win for the economy as well as undocumented workers and their families, you definitely get the impression that the GOP is willing to tank the economy for perversely partisan reasons.

      Interesting that during this program, I don’t recall hearing any mention of the major economic study by Reinhart-Rogoff that was used by the GOP leadership to justify severe cuts to entitlements and social-safety net programs. The substance of its findings was totally discredited when a spreadsheet error was uncovered by a Univ. of Mass. graduate student–an amazing story which might in itself be enough to generate a healthy skepticism of the Harvard elite, a skepticism that I’ve noticed many on this forum have already arrived at without much prompting.

      Anyway, without the justification for austerity provided by the Reinhart-Rogoff study, the motives of those arguing for deficit reduction and less public investment are suspect as you suggest. And the obsession with the debt can be seen a smokescreen for protecting the interests of a relatively few wealthy campaign contributors who are seeking to avoid any tax increase no matter what the cost to society.

      As to one of your points, I would hope that Boehner et al. are not waiting for 2016 to move on the economy in the belief they can gain control of all three branches of govt. by then. Perhaps what’s motivating the GOP delay tactic on immigration reform, for example, is their perception that they need to get past the mid-term elections and not do anything beforehand that might boost participation by Latino voters in those states where they hope to pick up Senate seats. Hopefully, after they fail to win a majority in the Senate, they will come to their senses and on at least some issues will put hyper partisanship aside for the sake of the country.

      Here’s a link to Dean Baker’s take on the flawed study that Paul Ryan and others have used to justify austerity:

      http://www.huffingtonpost.com/dean-baker/reinhart-rogoff-austerity_b_3343688.html

      • Shark2007

        Thanks for the huffingtonpost link. I had forgotten that episode on the corruption of the economics profession. I highly recommend the film “Inside Job” which points out the conflict of interest of people like Summers and the “economic” advice they give.

        Of course the corruption of Summers pales in comparison with that of Julian Simon who sold his soul to the right wing nuts for a comfy living on Heritage and Cato grants. Here is a link http://www.albartlett.org/presentations/arithmetic_population_energy.html to a presentation on growth by Albert Bartlett that should be viewed in its own right, but in the second half he pointedly addresses the impossible chemistry and physics espoused by Julian Simon, who was a top adviser to the Reagan and Bush 1 administrations. The anti-science right still celebrates Simon.

        • Bruce94

          Thanks for the reference. I was around when Paul Ehrlich introduced his ideas on the implication of population growth and economic expansion ad infinitum in a world with limited non-renewable resources and absorption capacity.

          I recall reading his “Population Bomb” and incorporating that into my understanding of mature capitalist economies where growth may often be pursued for its own sake and defines a social pathology–growth mania. It seems Simon and Ehrlich debated from time to time. It’s not surprising that Simon served in the Reagan admin. which, perhaps more than any other in the 20th century, epitomized the rabid consumerism, hyper individualism and rapacious form of unregulated capitalism that growth mania celebrates. .

          Heritage and Cato hacks are not too fond of or interested in acknowledging the value of long-established concepts from the life sciences including homeostasis and ecological balance as well as the classical laws of thermodynamics that serve to remind us of the limits to growth.

          • Shark2007

            If you are interested in economic theory that has some connection with the real world as understood by physics, chemistry and biology, I suggest the writings of Herman Daly and Robert Costanza as a good starting point. Here is a link that unfortunately is now behind a pay wall, but you may be able to get it at your library: http://www.nature.com/scientificamerican/journal/v293/n3/full/scientificamerican0905-100.html

          • Bruce94

            Sorry I didn’t have a chance to get back to you until now. Lately, I’ve been
            preoccupied by Winter Storm Pax (or should that be Pox?) and was
            without power for 72 hours. Mother nature has a way of reminding us from
            time to time how limited our man-made industrial systems and
            technologies are in the face of powerful natural forces.

            Anyway,
            thanks for the additional sources. I’m already familiar with Herman
            Daly, but don’t remember Robert Costanza’s contribution to environmental
            economics (will look it up at the first opportunity). Daly, who IMO is the grandfather of the limited growth
            movement, wrote “Towards a Steady-State Economy” in the ’70′s. As I
            recall, in it he argued among other things that the real costs of economic growth are almost
            always hidden and understated because the goods and services provided by the
            environment adversely impacted by growth are largely ignored: climate regulation, water recycling, water
            purification, storm water regulation, waste absorption, food and medicine
            production, pollination, protection from solar radiation, etc.

            At the time an LSU professor, Daly pointed to three examples in Louisiana where the calculation to expand production and consumption (in this case oil) without taking into account the real costs of the growth it supports, could have very harmful impacts in which the benefits of the growth sought could ultimately be outweighed by its costs. In the preface to the book, Daly described three undervalued “services” provided by the barrier islands and wetlands along Louisiana’s coast which were being jeopardized by increased oil exploration/production and shipping interests: tertiary sewage treatment, marine spawning grounds, and hurricane buffer zone. The last of these, loss of hurricane buffer zone, was eerily prophetic. Some 30 years later, Louisiana would suffer unimaginable devastation from Hurricane Katrina, devastation that could be linked directly to its disappearing coastline, deteriorating wetlands and defective infrastructure resulting from public policy and corporate imperatives based on growth mania.

          • Shark2007

            In regards to Hurricane Katrina, about a year before it hit I attended a “Disasters” conference in Washington D.C. where what actually happened during Katrina was predicted in great detail. “Browny” was there and when asked about restricting growth in areas threatened by storm surges as opposed to doubling and tripling the freeway capacity so people could escape (Charleston, SC and Savannah, GA) when one came along, he said he didn’t want to tell people where they could and couldn’t build. So every time a hurricane wipes out a barrier island and the human infrastructure, the tax payers get stuck with rebuilding.

            As Albert Bartlett said, growth is not only the strongest religion in the U.S. but is dominant world wide across most cultures. http://www.albartlett.org/

  • ExcellentNews

    Listen to Ms. Summers, and you immediately see why our gilded aristocracy of financiers, CEOs, hedge funds and secretive owners hates his ideas. Their growth in power and wealth is directly dependent on the STAGNATION of the rest of us.

  • Regular_Listener

    This was (another) very interesting program, on a current topic of great importance. With all due respect to Mr. Summers, who is a man of great accomplishments, I found myself scratching my head over some of what he said. E.g. America will be energy independent by 2020. Really? Do we have enough oil under the hills of the Dakotas and Pennsylvania and New York to bring that about? And how long would that independence last? The idea of peak oil is “ludicrous.” No, it is not – it is backed up by hard evidence – and if we have all we need than why do the prices keep going up? By paying lip service to the idea of reducing supports for fossil fuel companies, the Obama Administration is taking important steps toward dealing with climate change. So that counts as serious action? The notion that endless economic growth cannot occur hand in hand in with environmental improvement is “a dangerous idea,” because people will always choose prosperity over living in a healthy environment – I’m not sure that is true either. And about the federal budget deficit dropping dramatically since 2009 – from what I saw that is correct, but since it shot up dramatically in 2009, maybe that is not a good reference point.

    I agree with much of what he said – we shouldn’t leave seniors and disabled folks to fend for themselves by defunding social security. We should invest in infrastructure and attempt to make our economy stronger. But I wonder if Mr. Summers sees the big picture regarding how the economy has been changing over time, and its relationship to nature, and to population growth.

  • Shark2007

    If you really want to understand Professor Summer’s role in the economic collapse, read Hedrick Smith’s book “Who Stole The American Dream”. Note Summers earned $8million from the financial industry in 2008 alone. pg 143 of the paperback edition.

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