Where we have been as a country economically, and where we need to go

October 15th, 2012

March 7, 2011
Greater Boston Chamber of Commerce

GALLEY:  I’m delighted  in a moment to introduce today’s  guest speaker, Larry Summers. In June of last year, we had Charlotte Chamber in town with over 100 people.  And we had a  session where a number of us got to participate as well, and Larry spoke.  And I have to tell you, it was certainly one of the most interesting parts of those few days.  But in terms of what’s happened since then, we’ll all benefit from Larry’s  insight.

Larry is Director of the Mossavar-Rahmani Center of Business Government at Harvard’s Kennedy School of Government. He is also Harvard’s Charles W. Eliot University President Professor.

As you know, one of our leadership programs is in collaboration with MIT, which was Larry’s  undergraduate alma mater with their Sloan School and also with the JFK School. So, Larry, you’re bridging one of our most important programs today.  Larry serves his current positions after serving as Director of the National Economic Council for the Obama administration from 2009 to 2011.  Nothing really going on during that period of time, obviously.  In the Obama administration  Larry was the Chief White House Advisor to the President on development and implementation of Economic Policy, and served as an architect of the Recovery Act and National Stability Program.

Throughout  his career, Larry has held a number of senior public policy positions, including Secretary of Treasury of the United States from 1999 to 200I. He then went on to Harvard, where he became the university’s 27th  president. As President, he focused on laying the foundation for the institution to move into the 21st century. He’s obviously a true authority on economics.  And so with his views would stand several administrations, a key role in dealing with the challenges we dealt with in the last- for the last several years.  Whether it’s in Davos or Washington or wherever, we’re glad you’re back here in the Commonwealth, Larry.  And I’m  very glad to welcome you back.  Please join me in welcoming Larry Summers.

SUMMERS:  Thank you very much.  l am glad to be back in Boston.  Glad to be back with the Boston Chamber of Commerce, and glad to be back at the University. Though I have to report that when I accepted my position as head of National Economic Council, I told President Obama that in leaving Harvard I was going to be one of the very few people who went to Washington to get out of politics. (laughter)  Think about that.  (laughter)

It’s nice of you to introduce me so generously, and it’s rather better than we economists usually get.  It wasn’t so long ago that someone introduced me by saying, Larry, do you know what it takes to succeed as an economist? And I said, no.  And he said an economist  is someone who’s pretty good with figures, but who’s not quite the personality of an accountant.  (laughter)

What was interesting was that that was in Moscow, and no one got the joke.  (laughter)

I am, in all seriousness, very glad to be with the Greater Boston Chamber of Commerce with Paul Guzzi’s leadership.  Let me say that this Chamber of Commerce should be a leader and a role model for Chambers of Commerce everywhere,  because it stands for the proposition that we all succeed together or we all fail together.  That the right kinds of collaboration between business, government and non-profits is central to all of our success.  And that’s the theme that I ‘m going to want to come back to later in these remarks.

I want to talk about two things.  Where we have been as a country these last few years economically, and where we need to go and where I believe will go.  A preview of my broad conclusion is- and those of you who are active in markets know- that markets often climb walls of worry.  That negative sentiment is a positive indicator.  And I would suggest that to you that just as Americans were down on themselves after Sputnik,  but the United States came back – just as every issue of The Harvard Business Review in 1991 reported the Cold War was over, and Germany and Japan had won, and foresaw our loss and downward competition2  and that prophecy, too, proved to be self-denying, so to those who think our best days are behind us are far too pessimistic.

Where have we been?  For an economist  like me it was the experience of a lifetime to have the opportunity to work with President Obama in responding to this crisis. Do not minimize what could have happened or what the gravity of the situation was between October of 2008 and March of 2009. Stock prices fell further than they did in the first six months after the crash of 1929.3   World trade fell at a 25% more rapid rate in this first six months than in 1929.4   And the American economy was losing jobs more rapidly than at any point since published statistics have been created.5

Our greatest-some of our greatest industrial companies, General Electric, Proctor & Gamble, others worry about whether they would be able to borrow money for one night or three nights, or five nights.6   And the future of many of our largest financial institutions was in doubt.7   Things could have gone in many different directions.

When I took a job working with President Obama, somebody asked me how I would know if we had succeeded given the gravity of this problem.  The answer I gave them was this.  I said that it was quite interesting for me that my twin daughters had recently completed an advanced placement course in American history.  All kinds of events that felt important to me, the 1987 stock market crash, the great recession of 1982, did not warrant mention in their course.  On the other hand they had spent six weeks studying the events of the 1930s, what had happened, and what those tragic economic events had presaged.

So I said to myself that success would constitute these events not figuring in a major way in history classes that people took in 2035 or 2040.  Well, it’s too early to say for sure, but there is every indication that by that standard  the President succeeded.  An economy that was in freefall has now been in recovery for 18 months.8   The unemployment rate has declined by more than percentage point in the last three months.9   Consensus forecasts look for GDP growth over the next two years above 3%.10 And for the first time in five years I’m able to say that my forecast would be distinctly north of the consensus forecast.

Why did this happen?  It did not happen because of self equilibrated properties of the market economy.11   In fact, we were in a classic situation where the laws of supply and demand didn’t  work.  Remember how the law of supply and demand usually works.  There’s too much wheat, the price of wheat goes down.  People demand more wheat to make bread, people plant a bit less wheat and the market re­ appropriates.  Think about what was happening in the market for stocks and bonds at that time.  The price of a stock or a bond went down, all the people who held it were leveraged, they got margin calls.  They were forced to sell.  The price went down more.  More margin calls, more selling.  And the whole thing was completely unstable.

That vicious cycle was compounded  by other vicious cycles.  As the economy weakened, financial institutions weakened.  As financial institutions weakened, the economy weakened.  As asset values went down, capital and financial institutions diminished.12  That weakened them further, weakening the economy.   And so a weaker economy meant less employment, less employment meant less demand. That meant a weaker economy.  It was as avalanche.  The central judgment that President Obama came to was a judgment that isn’t right most of the time, but was the centrally correct judgment at that moment.  That it was far better to err on the side of doing too much to protect the economy than it was to err on the side of doing too little to protect the economy.

That’s why in the first month of the administration substantial tax benefits were provided, both to business and to individuals.13 That’s why the President reasoned that there could be no better time than a moment than when bond yields were below 3%,14  and construction  unemployment was 20%,15 to step up our national effort in infrastructure as rapidly as practical.

And that’s  why he made the judgment that the cheapest form of sales was confidence and to provide his support to our financial institutions was so essential.  The results speak for themselves.  The trough of the recession is dated by the National Bureau of Economic Research here in the Boston area as having been the summer of 2009.16

The federal government has made a significant profit on the support that was provided to the banks.17   The automobile companies discarded and dismissed as hopeless are now in the process of running down their federal support, and have returned to strong profitability.18 Now I do not minimize the challenges that were made; 8.9% unemployment19 is far, far too high.

While we have come through it relatively well in this area, there are huge problems in the housing area, and every recovery in the United States in the last 40 years has been driven in significant part by housing.20 Further, financial uncertainties in Europe are far from over and the risk of a significant spike in oil prices looks much greater than it did a few months ago.21

Still, we should not forget what could have happened.  We should not forget that it is neither an accident, nor good luck, that we avoided catastrophe.  It is a reflection of a strong commitment  by government in a once, or twice, or three times a century emergency to respond strongly.  Not everything was perfect.  Battlefield medicine never is. One of the things I’m going to devote myself to over the next year at Harvard is going back and understanding the various choices we made, evaluating what we did right, what we did – could have done better.  So there is the right kind of historical record for the future.  But make no mistake- the American economy has a feeling of normal as I talk to you today that was completely absent two years ago in March of 2009.  And that’s a very substantial change.

It is, however, a necessary, but not a sufficient condition for us to be satisfied with the progress that we are making as a country.  President Obama said to us many times, and sometimes to advisors who resisted the thought, that “yes, we’re  doing an enormous number of things to lift the economy out of a ditch, but I was not elected just to lift the economy out of a ditch,” he would say.  “In fact, when I ran for President, we didn ‘t know that the economy was going to go into a ditch.  I was elected to renew America, to address long-standing deficits in key systems in our economy that had been unaddressed for too long.”  And that “we will not redeem this moment of opportunity unless we address those issues.”

And I will tell you much less eloquently than he does, as an economist, that the central truth of macroeconomics is this: fiscal and monetary policy are in a way like anesthesia.  If you screw them up, you can do enormous amounts of damage.  Just as anesthesia cannot make a person healthy, fiscal and monetary policy, the tools of macroeconomic policy, cannot make a country rich, prosperous or inclusive. That depends on the energy and the creativity of its citizens and of its businesses.  And it depends on the support that they receive from government.  Now we are heading into an era that is going to be very different than any economic era that any of us have lived through.  There are many aspects that are remarkable – I want to comment on just two.

First is what’s happening in the emerging markets.  Think about this, if you take living standards in Athens at the time of Pericles and then you take living standards in England in 1800, they doubled over those 2400 years.22   If you look at living standards in the United States during a period when they grew most rapidly, around the turn of the 20th  century, it took 25 or 30 years for living standards to double.23

In China and in India, especially in China, living standards are growing at a rate where they double in seven years.24 Seven years. Think about what that means for the number of doublings in a human lifespan.  That is an event of potentially transcendent economic importance.

Now it is crucial to remember that a large part of why they are growing is they are starting from a very low base. Living standards in China, depending on how you do the measurement, statisticians can entertain themselves for weeks on these matters, are somewhere between where the living standards in the United States were in 1880 and where living standards were in the United States in 1930.25   So as we think about that as a threat, we need to remember just how far ahead we were. But that’s one change we accomplished.

The second change in the economy is the change that is being brought about by technology and the capacity to produce goods much more easily than ever before. If you look, this was epitomized by the cover of The Economist magazine several weeks ago, that had a picture of a Stradivarius on the cover.  And observed that it had been printed.26  That we were moving to an area where there was machinery, where just like you could write any words you want into your computer, and then you could just say print and it will print them out, that that kind of three dimensional printing press is coming.  That if you could design it, it can be produced.

Already 5% of American workers work in manufacturing.27   Here’s a fact that points to what this means.  If you look at incomes of average families over the last generation, it is a truism, and it is a valid truism, that they have increased very little, even as our economy has grown.28  One important part of that story, of course, is rising inequality and that this phenomena of globalization has created more and more opportunities for the kinds of people who are in this room, but has come at the expense of many who compete with people who are willing to work for much less in the rest of the world.  That’s one aspect of the phenomenon.

Here’s another which points to our challenge, I believe, in the years ahead.  If you look at the purchasing power of wages, measured in the terms of television sets, it’s gone up 15 fold over the last 35 years.29 Measured in terms of appliances in general, it has well more than doubled.30  Measured in terms of food, it has increased significantly.31 Measured in terms of healthcare, purchasing power has fallen by 60%.32   Measured in terms of college costs, it has fallen even more than that.33   The truth is that with respect to the traditional economic challenge that we think of that provides the model for the economic courses that I have taught, we’re really doing very well.

The world gets better and better at producing goods that are higher and higher quality more and more efficiently than it ever could before.  The problem is that they are only a part of what  people need.  And what people look to the economy for is increasingly goods where the economics of Adam Smith are much less relevant. Goods like education, goods like healthcare.

Goods like in this era of the 3D printing press like new designs and new research.  Goods like the kind of infrastructure that enables people to fly the planes that are cheaper and cheaper each year from one place to another in a reasonable way. That enables people to get from one place to another in fancier and fancier cars that become available each year in more and more reasonable ways.  The infrastructure that undergirds a modern society.

And so I say to you that when people look back and they judge this era, it is­ they’re  going to render a positive verdict on the remarkable increases in information technology had brought in our capacity to manufacture things.  They’re going to render a positive judgment on the progress that we made in making more and more food available on planet Earth.  Those things that companies do, we need the right kind of support, but that’s not going to be the really hard question.

The question on which we are going to be judged is did we educate everyone in a way where they were able to participate in that modem economy and compete based on the strengths of their minds?  Or did we allow the gap between the process of the – children of the affluent and the children of the poor, did we allow that gap to increase for another generation as it has increased over the last generation34.  And that goes back to what we are able to do about education.  And that is not something the market is going to do alone.  It is not something the government is going to do alone.

Imagine we had a superintendant  of restaurants to manage all restaurants.   And no restaurants could fail, and if people wanted to stop going to a restaurant then there would be a compulsion to get other people to go to the restaurant.  The restaurant industry wouldn’t improve very fast.  And so you can’t just be top down command and control.  But it will not happen without a strong public sector role.  And it will not happen without leadership from this region, which has led educational innovation in this country for the better of two centuries.35

What about what’s in many ways most precious to all of us?  Our health.  People have been asked the question, “if you take a choice, choice A you can have 2011 standards of living and 1950 healthcare. Choice B, you can have 2011 healthcare and 1950 standards of living,” and you ask those people that choice, you talk to them about it, it turns out that people aren’t sure what they prefer.  Some prefer one, some prefer the other.  But that’s a remarkable thing.  That says the improvements in a single sector that even today is only a sixth of the economy,36 have provided as much benefit to people as all the economic growth we have seen over sixty years. Are we going to keep this going?  And are we going to improve it in the future?

Here’s what I’m absolutely certain of: I am absolutely certain that leaving this to competitive companies whose best strategy is to figure out how not to ensure sickness, is not going to get America to where it wants to go and to where it needs to go.  Here’s  what I’m certain of: leaving these costs to individual businesses that are fighting with large hospitals as they try to avoid having expensive works on their payrolls, is not going to make those businesses effectively competitive with companies from other countries where healthcare costs are free or are supported.

Here’s what I’m certain of: A country like the United States spending one dollar in six on healthcare should be able to do better than this statistic.  Hypertension is a single leading indicator of early and expensive death. It is, in most cases, readily controllable.  As I speak to you today, of all hypertension in the United States, only one case in four is under effective control.  Half of the cases have not been discovered. And in half of the cases where it was discovered it is not under effective control.  And I would say to you that you that leaving that problem unaddressed is not the right way.

Governor Romney in some consideration on the subject has been correct.  States have a vital role to play, just as in Brandeis’ famous phrase, “laboratories of democracy.”37   And Massachusetts played a crucial role in the debate with its innovative healthcare plan.38  It did not resolve all the problems. Not all the consequences were successfully predicted. But people who would have died have lived. Children who would not know their grandparents now do.  And this is a state and this is a region where there is real collaboration and real dialogue between the business community and the healthcare community about the containment of costs. And that’s more than we said in many other parts of the country.

In many respects while some dismiss it as a radical experiment,39 President Obama’s healthcare plan follows many of the lines that were pioneered in Massachusetts. It will need enormous thought in its implementation. I have no doubt that there will be adjustments that will need to be made with the passage of time. But I would say to you when we have coverage for all Americans, we begin to have an opportunity to establish the common frameworks for cost controls that are essential.  What I’ve said about education, what I’ve said about healthcare is equally true of support for science, support for research and development. I said many times during my tenure as President of Harvard that the greatest economic tragedy of this area was that Silicon Valley happened 2,700 miles away.  And the only thing that would be more tragic would be if when life sciences Silicon Valley happens, it didn’t happen right here in Massachusetts.

We’re taking some valuable and significant steps. These efforts will need to be enhanced in the years ahead. We should ensure that the basic research that drives products remains center here in the United States. The most distressing thing I’ve heard as an educator returning to university is that given what has happened to the NIH budget, in many areas of the life sciences you can’t  hope to get the first grant as an independent investigator until you’re  in your early 40s.  Mozart at that point had been dead for ten years.  (laughter)  There are life science-Mozarts working and training within ten miles of where we are sitting.  Surely it is in the world’s interest, and in this country’s interests, for us to be supportive of science in a way that gives scientists and researchers chances to flourish independently in their most creative years.

Meeting central public responsibilities given what’s becoming easier in the economy and becoming harder in the economy is going to be our central challenge, our central economic challenge.

Because it is also true, if you think about what I have been talking about, we’re not subject to competition from people with low wages.  Nobody’s going to come from China and take away jobs as teachers of the United States.  Nobody’s’ going to come and take away the opportunity or provide healthcare in more efficient and more effective ways to Americans.  It’s going to be a very long day before the kind of remarkable connections that exists on the MIT campus, the BU campus, the Tufts campus, and the Harvard campus are going to be replicated.  These are opportunities  to build our American strengths and to create American results that are the envy of the world.

Now I’ve stressed these challenges, I’ve stressed that they can’t  be left to the markets alone.  They depend in important ways on- I could say government, but I think it would be more important and more accurate to say how our civic life, because these aren’t things government can do alone, these aren’t  things that will work if government tries to direct and to manage them.  But they are things that will be addressed  if our strength comes, as I believe it has in the city of Boston, and I believe it increasingly needs to across the country, from the kinds of ties and connections that lunches like this are designed to foster.

We’re able to build on this recovery, take the risks we face as a reminder of what happens when crucial deficits are neglected, and invest, yes, in fixing the budget deficit.  But also to invest in closing the education deficit, closing the healthcare gap, doing the necessary things for our infrastructure, and most important for this region, assuring that we are leaders in the creation of the scientific ideas of the future.  I have no doubt that when students of history study the first 15 years of the 21st century, they will study them as a period of creation, renewal and rebirth of a country whose best days lie in the future.  Thank you very much.

GUZZI:  Wow, where to begin?  There are mics in the room. There are cards on your table.  Larry, let me begin with the first question building off of your realistic and optimistic  view of this country and the word deficit.  I want to go back to anesthesia, I’m fascinated by anesthesia. There have been a set of recommendations made by your colleagues Alan Simpson and Erskine Bowles.  As one way to approach the deficits that are real they talk both about revenues and talk about entitlement programs.  What’s your sense of those recommendations substantively and politically?

SUMMERS:  If you gave me 15 minutes, I could spend 15 minutes explaining how they could be improved.  If you have me an hour I could spend an hour explaining how they could be improved.  If you gave me my choice on whether it be that or pass those recommendations as they were written, or to do nothing, you’d do better to pass those recommendations as they were written.  There is a great deal that needs to be done to refine those recommendations enough.  That the recommendations cut costs for healthcare inefficiency to reduce budget deficits is hard to argue with.40 But it’s also rather hard to implement.  And a large part of the challenge is that those recommendations are a long way from being legislative language.

In some areas I think those recommendations  raise some questions of values. It wasn’t  for the most part lower income Americans who brought us to this point. And to my value, they’re being asked to bear an excessive part of the burden in getting us out of this problem.  So there’s a lot to be debated and the real question is timing.  To my mind, while we’ve got 8.9% unemployment,41  while consumer borrowing is in the toilet because the recession continues, that’s  not the moment when it’s most urgent to bring down the deficit.  Since I expect the economy will recover, we are not that many years from the moment of collision  between the public and the private sector.  And we need to begin now to reduce the public sector borrowing appetite in the future.

That’s why so much of the debating in Washington seems to be misguided.  This is not the moment to gut the FBI, or to gut Head Start in the name of reducing spending this year.  That’s not really where the problem is. The problem is around the unsustainable level of spending over the next five to ten years.  And they’re only addressed in four ways.  By some reconceptualization about what we do about national security.  By addressing the growth in government healthcare costs, which is probably very hard without addressing the growth in overall healthcare costs.  By addressing other entitlement  programs, including social security.  And by addressing revenues and a tax code that has brought rates down without doing any of the necessary broadening of the base that needs to go along with lowering rates.

So there are solutions.  What’s most important is the people have a limited time to have the argument, come to some solution and to move on.  And unfortunately the debates about just how much spending is going to be cut on a one yearly budget basis out of this year’s budget are largely besides the point, and in my view actually run some risk of interfering with the pacing the expansion.

GUZZI:  Questions from the audience?  Right over here. Please.

M: Thank you.  The economy obviously has rebounded and redressed over the last two years.  Unemployment has lagged.  Is there anything specifically you’d  like to see here either in Massachusetts or more broadly across the country that will help small business and entrepreneurs drive in this economy?   We have some of the greatest academic institutions in the world right here in New England.  What would you like to see on a local basis to help these people stay there?  And secondly, (laughter) if I may.  Did you ever think – this is more off topic – the Winklevoss brothers and Mark Zuckerberg – one, was that an accurate depiction of your role in the movie? And two, do you ever think that would be the company Facebook that we know today?

GUZZI:   We only ask serious questions.  (laughter)

SUMMERS:  (laughter) Around about-1 don’t remember which year it was, 2004, 2005, I was giving my speech to welcome freshmen.  And a young guy who works for me said-wrote me a line, I don’t  remember exactly what it was, but it was something about friending people on Facebook.  And I said, “what the hell is this?”  He said, “Larry, say this and they’ll think you’re cool and they’ll  laugh.”  And I said, “are you sure?”  He said, “yes.”  And I said, “well, you’re going to lose your job if l say this and they don’t laugh.”  (laughter)  And he said, “well, it’s not that much of a privilege to work for you anyway.” (laughter)  So I said it and they all broke up. And that was my – the kids all cracked up. And that was my introduction to Facebook.

I’ve been told that the Winklevoss twins say the movie is wrong, Larry Summers wasn’t  nearly as nice to us as is portrayed in the movie.  (laughter)  I’ve read somewhere on occasion that people think I can be arrogant.  I can’t imagine why. (laughter)  And if that is so, I probably was on that occasion.  So making adjustments for cinematic license, the fact that I surely did not tell anyone to punch me in the face, I would say the movie was fairly accurate.  And we have a celebrity, we have a movie celebrity here.  Colleen, where are you?  Colleen Richards­ Powell, who at that time worked for me at Harvard on student affairs issues is the woman who is portrayed sitting in my office during that session with the Winklevosses.  So she can vouch for my account of that event.

RICHARDS-POWELL:   I can honestly say that he was not that arrogant as in the movie. He was much nicer to them.  But he didn’t give them what they wanted, which was to legally penalize Mark Zuckerberg by the university.  So that’s why they were in there. (laughter)

SUMMERS:  You didn’t have to say that. And I didn’t  know you were going to be here. (laughter)  On small businesses, the most important thing is for the recovery to continue in general. And that’s more important than anything specific for small businesses.  One of the things that is spreading, that I actually think is very important for something that – and it’s an example of the kind of constructive cooperation  that happens between business and government – is we ask the financial institutions to set up second look programs where people who were denied small business loans could get someone else to take a look at it, just to make sure that the banks weren’t making mistakes in their own terms.

I’ve spoken with heads of a number of the major banks, and those programs have increased their small business lending by 15% and 20%.  I think that’s an impressive model that can spread further.  I’ve also always thought, and I think this is a particularly good moment for it, that MIT is a very positive example of a university that does a good job of supporting entrepreneurship, encouraging entrepreneurship by its students and its faculty.  And then there’s room for other universities to learn from their more business friendly approach.

GUZZI: Let me – there  are two or three questions that connect what you’ve said to the future.  Namely that the history of economic recoveries are very much tied to the recovery of housing markets. How do you see the recovery in housing occurring? And is -are there solutions to jumpstart that picking up on what you just said?

SUMMERS: I would love to know the right jumpstart solution.  But I am not optimistic about finding a silver bullet.  Here’s the problem.  We overbuilt houses. And we supported people moving into houses who really were not sustainable in those houses.42  It is an enormous temptation to create jobs by building more houses, and to avoid difficulties by sustaining people in houses who are not sustainably in those houses. But that’s a little bit of like drinking to cure your hangover and it’s not likely to be an availing solution.     •

So I don’t think there is a silver bullet that puts us plunk back in 2005. I think there are a set of palliatives that are constructive.  The feds quantitative easing program that holds mortgage costs down and makes housing increasingly affordable43  is a constructive and important step.  The measures to be sure not that foreclosures are avoided when they are necessary, but that foreclosures only take place within the law, with-there’s no reason why those who live in houses aren’t entitled to the same close reading of the fine print as those who trade in hedge funds.

And so I think the effort to ensure that foreclosures are enforced about legal principals is a sound and legitimate way.

Third, there are some appropriately strategic government programs, particularly through the FHA and efforts that approve the GSE, the government sponsored enterprises, that can, in appropriately targeted situations support reduction in principal or in debt service for homeowners, enabling people to stay in their homes longer until they get a – until they get a job and avoid another part of the vicious cycle of foreclosure and liquidation.44   But I think it is terribly important that we be mindful of the fact that the vast majority of people who own homes are paying their mortgages and don’t want to feel like chumps for paying their mortgages.  And so as we target assistance we do so strategically and carefully.

GUZZI:  On that note, in order to keep all of us on schedule, Larry, as we welcome you back into the non-political environment across the river, let me make two comments. One, we very much look forward to working with you in part of your new role with our leadership program combining the best of MIT and the best of Harvard.  What an extraordinary collaboration.

And second, I  believe – I think all of us hope, but I believe that when the history books are written, and when, in fact, our best days are ahead of us, that Larry Summers will be one of the true heroes of this recovery.  Welcome back.  Thank you very, very much.

1  F. James Rutherford, “Reflecting on Sputnik: Linking the Past, Present, and Future of Educational  Reform,” American Association  for the Advancement of Science, January 12, 1998, available at http://www.nationalacademies.org/sputnik/ruther1.htm.

2 Harvard  Business Review, January-December 1991, available at http://hbr.org/archive-toc/3911.

3 Dow Jones Industrial Average (1900- Present Monthly), available at http://stockcharts.com/charts/historicaJ/djia1900.html.

4  United Nations, Historical Data 1900-1960 on international merchandise trade statistics, April 28, 2009.

5 Bureau of Labor Statistics, Unemployment rate 1948-2011;  Pedro Schwartz, The long-term legacy of the 1929 crisis, European  Ideas Network Seminar, January 27, 2009.

6 Daniel Fisher, “What Buffet’s Bet Says About GE,” Forbes.com, October  1, 2008, available at http://www.forbes.com/2008/10/0l/buffett-immelt-ge-biz-wall-cz_df_100Ibuffett.html.

7 Susan Craig, Jeffrey Mccracken, Jon Hilsenrath and Deborah Solomon, “AIG, Lehman Shock Hits World Markets,” Wall Street Journal, September  16, 2008.

8 Jack Healy, “Manufacturing Grows After 18 Weak Months,” New York Times, September 1, 2009.

9 Bureau ofLabor Statistics, “The Employment Situation- February 2011,” March 4, 2011.

10 New York Consensus Forecasting Conference, “Economic and Revenue Consensus Report 2011-2012,” March  I , 2011.

11 Anatole Kaletsky, “The Benefits ofthe Bust,” Wall Street Journal, June 19, 2010.

12 “Lehman  Makes it Official in Overnight Chapter  11 Filing,” Wall Street Journal, September 15, 2008, available at http://blogs.wsj.com/wallstreetcrisis/2008/09/15/lehman-makes-it-official/.

13 U.S. Department  of the Treasury, “Learn  More About the Recovery,” December 6, 2010, avaiIable at http://www.treasury.gov/initiatives/recovery/Pages/learn-more.aspx.

14 Ben Rooney, “1st Time Ever: 10 Year Yield is Below 3%,” CNNMoney.com, November 26, 2008, available at
http://money.cnn.com/2008/11/26/markets/bo•ndcenter/bonds/i ndex.htm?postversion=2008112617.

15 Bureau of Labor Statistics, “Industries at a Glance: Construction,” March 4, 2011, available at http://www.bls.gov/iag/tgs/iag23.htm.

16 The National Bureau of Economic Research, “US Business Cycle Expansions and Contractions,” September 20,2010, available at http://www.nber.org/cycles/cyclesmain.html.

17 Shira Ovide, “Taxpayer Profit on Citigroup? $9.4 Billion,” Wall Street Journal. December 6, 2010.

18 Kate Li nebaugh, “These  Bonuses are for Bills, Not Boats,” Wall Street Journal, March 9, 2011.

19 Bureau of Labor Statistics, supra note 9.

20 Luke Mullins, “Home  Builders Not Driving Economic Recovery,” US. News and World Report, August 27,2010.

21  Ben Rooney, “Gas Prices: Brace for Another Surge,”CNNMoney.com, February 24,2010, available at http://money.cnn.com/2011102/24/news/economy/gas_prices/index.hhn.

22 John Maynard Keynes, Essays in Persuasion , New York: W.W.Norton  & Co., (1963).

23 Richard H. Steckel, “A History of the Standard of Living in the United States,” available at http://eh.net/encyclopedia/article/steckel.standard.living.us.

24 Nin-Hai Tseng, “China  is richer, but most Chinese are still poor,” CNNMoney.com, February 17, 2011; Central Intelligence Agency, The World Factbook, available at https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html.

25  Id.; Steckel, surpa note 23.

26 “Print Me a Stradivarius,” The Economist ,  February 10, 2011.

27 Bureau of Labor Statistics, “Occupational Employment and Wages,” May 14,2010.

28 David Leonhardt, “A Decade  With No Income Gains,” New York Times, September  10, 2009.

29 Bureau of Labor Statistics, “CPI Detailed Report: Data for January 2011,” January 2011, available at http://www.bls.gov/cpi/#tables.     •

30 Id.

31 Id.

32 Id.

33 Id.

34 Catherine Rampell, “SAT Scores and Family Income,” New York Times, August 27, 2009, available at hrtp://economix.blogs.nytimes.com/2009/08/27/sat-scores-and-family-income/.

35 George  Martin, “The Evolution of the Massachusetts Public School System: A Historical Sketch,” D. Appleton & Company, (1894).

36 Toni Johnson, “Healthcare Costs and U.S. Competitiveness,” Counsel on Foreign Relations, March 23, 2010.

37 Dana Milbank, “Gunning Down Immigrants- and Other Democratic  Experiments,” Washington Post, March 15,2010.

38 Jim Acosta and Ed Hornick, ‘”Romney Care’ Touted as a Model for National  Healthcare,” CNNcom, August 20, 2009, available at http:l/articles.cnn.com/2009-08-

39 Grace-Marie Turner, “The Failure ofRomneyCare,” Wall Street Journal, March 16,2010.

40 Robert Samuelson, “What the Bowles-Simpson  Plan Left Out,” Newsweek, December 6, 2010, available at http://www.newsweek.com/20I0/12/06/what-the-bowles-simpson-plan-left-out.html.

41 Bureau of Labor Statistics, supra note 9.

42 Sudeep Reddy, “More  Homeowners Consider  Strategic Defaults,” Wall Street Journal Economics Blog, April 30, 2010, available at

43 Jon Hilsenrath, “Fed Unlikely to Remove its Economic Stimulus Just Yet,” Wall Street Journal, March 7, 2011.