Larry Summers’ Impossible Stimulus Dream
Larry Summers, former treasury secretary, former president of Harvard and the former head of President Obama’s National Economic Council, made waves yesterday with an unequivocal and passionate call for a new round of stimulus to address what he rightly perceives as a weak recovery for American jobs and economic activity in general. In his view, the U.S. economy is hobbled by weak demand for goods and services, compounded of course, by high unemployment.
For Summers, the only viable tonic for what ails America is another round of stimulus. Absent such substantial and aggressive government spending, the United States risks a “lost decade.” In his estimation, the financial crisis was a caused by overconfidence, over-borrowing and over spending, yet the irony is that the wounds inflicted by that crisis can only be healed by renewed confidence, more borrowing, increased lending and more robust spending.
Does Government Matter?
As Americans celebrate the 235th anniversary of their independence, the country is embroiled in a typically noisy debate. This time, the argument centers around whether Congress should raise the ceiling on national debt in the interest of preventing a potential government default. The issue has proved to be partisan catnip. The GOP opposes any new taxes to pay down the U.S. debt, which is close to 95 percent of the country’s gross domestic product, on the basis that government has created this problem and that more government cannot be the answer. The U.S. debt burden, House Speaker John Boehner says, “can be traced to a misguided belief by politicians that the American economy is something that can be … influenced positively by government intervention and borrowing.”