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.
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
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.”