Opinion

Lawrence Summers

The U.S. must embrace a growth agenda

By Lawrence Summers
February 11, 2013

There should be little disagreement across the political spectrum that growth and job creation remain America’s most serious national problem. Ahead of President Obama’s first State of the Union address of his second term, and further fiscal negotiations in Washington, America needs to rethink its priorities for economic policy.

The U.S. economy grew at a rate of 1.5 percent in 2012. Last week, the independent Congressional Budget Office projected that growth will be only 1.4 percent during 2013 – and that unemployment will rise. While the CBO says that growth will accelerate in 2014 and beyond, it nonetheless predicts that unemployment will remain above 7 percent until 2016.

A weak economy and limited job creation make growth in middle-class incomes all but impossible, add pressure to budgets by restricting tax revenue and threaten essential private and public investments in education and innovation. Worse, they undermine the American example at a dangerous time in the world.

We can do better. With strains from the financial crisis receding and huge investment possible in energy, housing and reshored manufacturing, the United States faces a moment of opportunity unlike any in a long time. The economy could soon enter a virtuous cycle of confidence, growth and deficit reduction, much like it did in the 1990s. But this will require moving the national economic debate beyond its near-total preoccupation with federal budget restraint.

Yes, fiscal restraint is necessary in the medium term to contain financial risks. But unlike in the 1990s, when reduced deficits stimulated investment by bringing down capital costs, fiscal restraint cannot be relied on to provide stimulus now when long-term Treasurys yield less than 2 percent.

A broader growth-centered agenda is needed to propel the economy to its “escape velocity.”

First, as the president has recognized, the budget cuts implicit in the sequester scheduled to begin in March should not be reduced but spread over time. The economy is already taking a significant hit from increases in payroll taxes. Sudden across-the-board slashing of military and civilian spending will hurt the economy and seriously damage military readiness.

Second, the president and Congress should fix a firm year-end deadline to address the international aspects of corporate tax reform. We are in the worst of all worlds: U.S. companies have nearly $2 trillion in cash sitting abroad because of tax burdens on bringing it home and the perception that relief may be on the way. Ideally, the international tax system should be reformed in a way that is revenue-neutral but increases the attractiveness of bringing foreign profits home. This would be accomplished by replacing the current high rate of tax levied only on repatriated profits with a much lower tax levied on all global profits. If such reform is not going to happen, this should be clarified so business does not keep planning for an amnesty that will not come.

Third, no American, regardless of his or her ideology, should be satisfied with the way the nation’s housing finance system is working. After a period when cheap mortgages were too available, the pendulum has swung too far; a lack of finance is holding the economy back. The clearest evidence is the growing number of lower- and middle-income families paying rents to the private-equity firms that own their homes at rates far above what a mortgage would cost.

Fannie Mae and Freddie Mac, the government-sponsored housing enterprises, have historically provided support to the mortgage market in difficult times. It is high time they be forced to step up and support would-be lenders. Ultimately government support for owner-occupied housing should be curtailed, but now is not the time.

Fourth, the transformation of the North American energy sector needs to be accelerated. This will have economic and environmental benefits. Those who will decide whether to approve the Keystone XL pipeline, which would run between the tar sands of western Canada and Nebraska, need to recognize that Canadian oil not flowing to the United States will probably flow to Asia, where it will be burned with fewer environmental protections.

Natural gas exploitation, too, could bring huge environmental benefits. Replacing coal with natural gas has much more scope to reduce greenhouse gas emissions than more fashionable efforts to promote renewables. A period of record-low capital costs and high unemployment is the best possible time to accelerate the replacement cycle for environmentally untenable coal-fired power plants. More generally, the production of natural gas and its use in industry should be a substantial job creator for years to come.

More could be added to this list, including innovations in regulation and finance with respect to infrastructure investment. Unlike deficit reduction, in which all the choices are painful, measures to spur growth can benefit all Americans as well as help the federal budget. Growth and job creation are, after all, ultimate ends of economic policy. They as much or more than fiscal issues should become the focus of our national economic conversation.

Comments
24 comments so far | RSS Comments RSS

Is this not the same Larry Summers who was a critical advisos to the President? Yes, it was. And while I have great respect for Summers’ and the ideas he espouses, it’s obvious that he was unable to convince the President and his staff of European socialists that the move to more government, increasing deficits and higher taxes run contrary to growing the economy.

Summers’ departure after less than two years speaks volumes of the “Alynskyite’s” true intentions to transform the economy to one where success is penalized in order to give everyone a fair shot at mediocrity.

Posted by COindependent | Report as abusive
 

Mr. Summers,

Are you serious?

You prescribe a “band-aid” when this nation’s economy is severely wounded and hemorrhaging from more wounds than we can possibly count. We need triage, not platitudes, to save this dying nation.

—————————–

Instead, I suggest we implement AT LEAST the following changes immediately:

(1) SEAL OUR BORDERS and declare a TOTAL moratorium on ANY kind of immigration until we once again regain control of our own country. Anyone who is here illegally should be immediately deported (as we have in the past during the Great Depression), without regard to their personal circumstances. Since they gained entry to this country illegally, no matter how long they have been here or what they are doing presently, makes no difference. What is there about illegal you people in government do not seem to understand?

Every single person who is here illegally is taking a potential job opportunity from an American citizen.

Independent sources indicate US unemployment is really around 22%, not the government manipulated 7.9%. There is NO excuse for ANY of them to be here under our present economic circumstances.

From the Shadow Government Statistics (SGS), an independent data service published by John Williams, calculates key U.S. government statistics according to the methodology used during the years before the election of President Clinton.

“The government currently claims the unemployment rate to be at just 7.9%.

But when calculating unemployment using the pre-Clinton methodology, SGS finds it to be around 22%.

SGS does not exclude, as the government does now, all those who have left the workforce out of despair of finding a job, or those who have accepted part time jobs in lieu of full-time employment.”

Make it impossible for them to remain by severely penalizing anyone who knowingly gives aid to these illegal aliens. That includes jobs, food, shelter, health care, education, etc. Get them out now, before this economy collapses!

(2) Begin to immediately reverse ALL the free trade and banking legislation that has been passed for the last 30+ years, which is the PRIMARY reason why this nation is in severe economic trouble and on the verge of another Great Depression.

ALL this so-called “free trade” is not actually real capitalism (i.e. real free trade) as outlined by Adam Smith in his Wealth of Nations (which is supposed to benefit BOTH trading partners) but what he warned specifically against, that of a growing collusion between business interests and government to form monopolies against society (i.e. the American people).

Beginning with roughly the Reagan administration, what we have instead is “neo-con free trade” which is Social Darwinism (i.e. survival of the fittest), and it is literally killing this nation.

This so-called “neo-con free trade” that benefits only the wealthy class is ALL at the expense of this nation. It is the MAJOR problem we must resolve in order to survive.

(3) Immediately return the tax structure to what it was during the Eisenhower years — e.g. top rate at 91% — and get rid of ALL the special privileges the wealthy have to hide their wealth safe from taxation.

That includes specifically the corporate ability to allow their profits to remain outside the US completely untaxed.

It also includes total elimination of wealthy “shell game” of hiding their money in tax havens offshore.

Force the IRS to begin total enforcement of ALL tax laws, instead of offering “amnesty” to wealthy people who have hidden bank accounts in places like Switzerland.

We MUST force the wealthy to pay their fair share of taxes, or we will not survive as a nation.

(4) Begin to set term limits on government positions to remove the temptation of the “revolving door” between lobbying — which is nothing more than “legalized bribery” — and our government officials.

We need to make our government responsible to the people they were elected to serve, instead of the special interests they now serve.

(5) Immediately stop the “welfare program for the wealthy class” — i.e. the so-called QE programs by Bernanke — which are creating massive debts the American people will NEVER be able to pay.

Right now, the Fed’s balance sheet is roughly $3 TRILLION in debt due SOLELY to the continuing programs of “welfare for the wealthy class”.

Yet the wealthy class demands everyone else must do without social programs — so-called “entitlements” programs, such as Social Security, Mediare and Medicaid, which used to be a good thing, but has been twisted and perverted by those who would see everyone else in this country denied even the basics of food and shelter.

Force the government to remove Social Security from the General Fund, where it has been since the Johnson administration in order to cover up the massive over-spending of each administration since then.

The Social Security Trust Fund was created during the Great Depression as a form of social insurance when the American people had no social net whatsover. It was created to be a SEPARATE, SELF-FUNDED program, but the government has been manipulating to make the economy seem better.

Social Security has been misused as a “slush fund” for overspending on all kinds of programs, both social and military. That misuse of funds MUST be stopped.

THAT is where this nation has been, and was just prior the Great Depression (which was caused by rampant speculation during the 1920s).

THAT is what they want everyone else to go back to, just so they can relive their golden era again.

THIS is a MASSIVE swindle being perpetrated on the American people by a small class of extremely wealthy people who have managed to seize control of our government for their own purposes.

(6) Force the government to begin revealing the truth as to how bad the US economy really is at the moment. The govenment lies perpetutate myths that serve only the wealthy class and at the expense of everyone else.

For example, begin by reading “Investing in a World of Make Believe” by John Browne, February 08, 2013.

http://www.prudentbear.com/index.php/gue stcommentaryview?art_id=10759

———————————————

Literally EVERYTHING the US government tells you about this economy is a total lie, all twisted so that you do not become alarmed at how precarious our economy really is at this point.

What you need to understand is that the wealthy class has crashed this economy MANY times before, and they are about to do it again. They will not suffer, but we will be forced to live in the aftermath of the biggest speculative bubble in history — Great Depression II.

What you need to do is to stop the wealthy class from destroying our country, if not for yourselves, then for your children who right now will be denied ANY future at all, entirely because of the unmitigated greed of a small number of wealthy people.

Posted by PseudoTurtle | Report as abusive
 

There is a need to identify real national needs and paths to achieve the needs. For example, some states have roads in very poor condition. These roads are not in better repair for lack of people, machinery, and material investment. The lack is always described as a result of inadequate funding, so a simple solution is ‘more funding’.

The ‘more funding’solution is countered by “no new taxes” or “printing money is inflationary”, or some version of these themes.

Another solution to solve the lack of people, machinery and materials is to better spread ongoing funding sources. This can be done by removing costly work rules and more evenly spreading work and income between employed workers and workers paid by unemployment.

What ever path is chosen, some workers will do better than others, some groups will do better than others. Historically, the United States has favored a wide distribution of the nation’s wealth, and that goal should be continued as a guiding principle.

Posted by ThinkEcon | Report as abusive
 

@PseudoTurtle

Writing to you from a public computer.
Stop commenting on the internet, it will help you.
When you comment here and follow news, you will just get angrier and angrier when you realize how the world is really operated.
You can’t do anything but hurting yourself. It is very bad for your health.

Sometimes looking back at the old comments I made, I was bordering the line of a spitting viper. :(
It damages both my mental health and cognitive ability. After stop caring for a while, my mental health is improving and cognitive ability is coming back slowly.

The anger that comes from knowing how things actually run is very damaging. Plus the fear of being followed, you will live in constant fear all the time. Bad bad bad.
I thought I had some kind of Pavlov symptoms, but it is just the end result of the constant fear and cognitive degeneration that follows it.

Posted by trevorh | Report as abusive
 

Read the wiki on this fool, he’s had his hand in the middle of this entire economic meltdown since day number one. This fellow is EXACTLY the type of cretin that needs to disappear from our society altogether.

Posted by stambo2001 | Report as abusive
 

Larry Summers has written some good articles in the past, but with this one has gone back to his role as sychophant to corporate interests.

Here I quote Mr. Summers as he pushes for us to lower taxes for multinational corporations who have outsourced American jobs, and stabbed the American worker in the back. Summers:

“We are in the worst of all worlds: U.S. companies have nearly $2 trillion in cash sitting abroad because of tax burdens on bringing it home and the perception that relief may be on the way. Ideally, the international tax system should be reformed in a way that is revenue-neutral but increases the attractiveness of bringing foreign profits home. This would be accomplished by replacing the current high rate of tax levied only on repatriated profits with a much lower tax levied on all global profits. If such reform is not going to happen, this should be clarified so business does not keep planning for an amnesty that will not come.”

This is so much utter propaganda.

Here we are awash with capital, interest rates at historical lows, capital flooding everywhere, and Mr. Summers has the nerve to say we should allow these large corporations bring back their untaxed criminal profits tax free. Why? So we might have more capital available!

Seeing someone like Larry Summers publicly kiss up like this is disappointing. It shows just how much power these multinational companies have. It’s a sad sight.

Posted by AdamSmith | Report as abusive
 

Comments need to be written concerning the scum that live in their own little mentally convenient theoretical world where they and their ideas live at its center. Especially those given the responsibility and authority to justly or unjustly impact other less power-hungry peoples lives.

People need to hear what these guys have been up to and continue to prognosticate and implement if only as a form of self-defense. I agree, it can become unhealthy to be engulfed in venomous invectives but as long as perspective is held onto these rants can be enlightening and therapeutic.

These guys (central bankers, bankers, politicians et al) have convinced themselves that they are not the bad guys and instead deserve plaudits for doing God’s work. These pathetic self-aggrandizing revelers in their own omniscience believe they are able to disregard the common man and his common-sense ideals and discern what is best for them.

Posted by keebo | Report as abusive
 

Larry was part of the administration that promised Hope & & Change…tick tock…

Posted by Crash866 | Report as abusive
 

Perhaps we should plan an economy based sustaining and improving, instead of growth. In this global economy the US will not be able to attain high levels of growth for quite some time. At least two or three decades. By then, much of the world will see that perpetual growth cannot be maintained across the board and should be abandoned. It would be nice if we lead the way there instead of railing behind kicking and screaming to bring back the ’50s.

Posted by tmc | Report as abusive
 

Paid for and approved by the Obama administration.

Posted by somethingstinks | Report as abusive
 

@ trevorh –

I suggest you not interpret my comments in terms of your mental health problems.

Posted by PseudoTurtle | Report as abusive
 

@ tmc –

Given your typical pro-global viewpoint, I hadn’t realized you were an environmentalist at heart. Too bad environmentalism as an option is a dead end.

If the global economy remains as it is now — meaning it fails to crash soon as I predict due to a massive speculative bubble — and this neocon trend in the US continues in terms of free trade, non-existent banking regulation and tax policies that favor only the wealthy class, plus the immigration “policies” of Obama, I think you will look at your prediction the US not being able to attain high levels of growth for two or three decades will seem as being very naive indeed.

I would settle for a return to the pre-Reagan economy we had, that is before the US was taken over by the neoconservative movement.

Posted by PseudoTurtle | Report as abusive
 

Only trying to be helpful though.
Commenting makes me angrier and angrier..

You might be stronger than me mentally, then good luck though..

Posted by trevorh | Report as abusive
 

I wonder how the “we need growth” prospectors will act when there are 20 billion people in the world? Sustainability should be the goal. Unfortunately that is a factor that the natural order supplies, not the synthetic order of centralized governments. There is no valid Utopian formula any government can inject into people to accomplish the goal.

Posted by LysanderTucker | Report as abusive
 

@ trevorh –

I understand. Writing comments that no one wants to hear can be a bit taxing at times. But we each have our own reasons for posting comments on these websites.

Unfortunately, most of these articles are little more than those we chuckle at when checking out groceries.

I may take your advice at some point, since I had considered some time ago the potential for adverse effects on myself in attempting to tell the truth to those who do not want to hear it.

You do reach a point when the abject, entrenched stupidity of people becomes a bit much to deal with.

Posted by PseudoTurtle | Report as abusive
 

It’s not rocket science Larry. To create a very significant number of jobs fairly quickly, encourage people like me to invest by significantly improving my after tax return on invested capital, and immediately eliminating as much gov’t inefficiency / red tape as possible. If you don’t, then you’ll have to rely on the gov’t to create jobs…good luck…

Posted by sarkozyrocks | Report as abusive
 

There may come a time when large investors will find that the government, whose police powers they’ve so long depended on each night to prevent their mansion from being burned to the ground, no longer functions.

And, as it turns out, the mansions, which they did not build with their own bare hands but rather with the labor of others humans, wasn’t really theirs after all.

The “claim” they had to the mansion was simply a piece of paper, eventually seen by most working-class humans, to be worth nothing but for paper scrap.

The vast wealth “owned” by the Russian oligarchs, the great mineral wealthy lying below the vast Russian land mass, is a good example. Now those men have “legal” claim to the oil, the gold mines, the minerals, the timber, the factories, the electrical systems built by the blood and tears of millions of working class people, no dead. The oligarchs pat themselves on the back.

The wealthy of today, especially those who inherited any money from their parents, may one day be looked upon as a great criminal system by historians.

Posted by AdamSmith | Report as abusive
 

I’ll loudly and absolutely disagree. With SEVEN BILLION people (and rapidly growing), the current human population cannot be sustained without turning our big blue marble into a big brown marble. A choice must be made between quantity of life and quality of life.

It is those with no money, no education, no land, no job, no skills and little liklihood of any of these things that are breeding like rabbits across the globe. It is they who will endure the brunt of historical “population adjustments” such as war, disease and starvation in the relatively near future.

There are (and will be) fewer and fewer “jobs” as fewer and fewer people are needed to do what needs doing in increasingly automated societies. Already educated and experienced people are increasingly “on the street” competing with each other for even part time jobs in an ever expanding labor/mind pool.

So the short AND long term MUST be to shrink the world population to some level sustainable in the long term. Economists must step forward with governments and employers to achieve and assure increasing prosperity from individual productivity even as more and more bodies are actually doing less and less. Out of WHAT do you “create jobs”? ARE you “creating jobs” when the number of Americans entering the labor force exceeds the number of “new” jobs “created”?

It doesn’t take a rocket scientist to see that a majority of those being born today will find no productive “place” in their own civil society. Summers and his ilk are verbally rearranging the deck chairs on the Titanic!

@PseudoTurtle,

It isn’t the “wealthy class…destroying our country.” It’s a political IDIOT class in utter denial of the economic tsunami caused by the increasing effects of an “information revolution” that, in a time of increasing competition for effective control of the world’s resources between “populations” will make the disruption of the Industrial Revolution of the nineteenth century look like a church social. It IS time to tar and feather the criminal bankers and put sand in the government’s monopoly money printing presses.

Hey tmc, glad to see you back!

Posted by OneOfTheSheep | Report as abusive
 

Thanks @OOTS. “In order for evil to flourish, all that is required is for good men to do nothing.” I will not back down again. I will continue to state my comments and ignore those that attack people instead of ideas.

Posted by tmc | Report as abusive
 

Obama has obstructed the Administration of Justice, by refusing his assent to laws for establishing Judiciary powers.
Obama has nullified the Congress.
Obama has affected to render the Military independent of and superior to Civil power.
Obama has unacknowledged our Constitution, by giving his Assent to pretended Legislation.
The Obama and the Oathkeepers that falsely abide under; have trampled on Our Constitution which established a system of governance that preserves, protects, and holds sacrosanct the individual rights and primacy of the Military as well as providing for the explicit protection of the government from governmental tyranny and/or oppression
The point of civilian control is to make security subordinate to the larger purposes of a nation, rather than the other way around. The purpose of the military is to defend society, not to define it!

Posted by rackandtap | Report as abusive
 

Look people lets work together, today there are no Democrats or Republicans. Their is only those who love liberty, and those who what tyranny. Chose your side wisely, I chose Liberty as I assume many of will too, and if need be remove tyranny by force.

Posted by rackandtap | Report as abusive
 

Just get the gas price to around $1.80 per gallon and the growth will take of itself. Till then, we can chant the growth mantra but the only growth you’ll see is at the big oil company profits at the expense of others.

Posted by Mott | Report as abusive
 

Civilian leaders cannot usually hope to challenge their militaries by means of force, and thus must guard against any potential usurpation of powers through a combination of policies, laws, and the inculcation of the values of civilian control in their armed services. The presence of a distinct civilian police force, militia, or other paramilitary group may mitigate to an extent the disproportionate strength that a country’s military possesses; civilian gun ownership has also been justified on the grounds that it prevents potential abuses of power by authorities (military or otherwise). Opponents of gun control have cited the need for a balance of power in order to enforce the civilian control of the military.

Posted by rackandtap | Report as abusive
 

”Growth for the sake of growth is the ideology of the cancer cell.” ~Edward Abbey

Posted by DeSwiss | Report as abusive
 

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