June 20, 2017
Lawrence Summers, Harvard University Charles W. Eliot Professor and Former U.S. Treasury Secretary, discusses the benefits of a border adjustment tax. He speaks with Bloomberg’s David Westin on “Bloomberg Daybreak: Americas.” (Source: Bloomberg)
June 20, 2017
Lawrence Summers, Harvard University Charles W. Eliot Professor and Former U.S. Treasury Secretary, explains the process of addressing climate change using carbon dividends. He speaks with Bloomberg’s David Westin on “Bloomberg Daybreak: Americas.” (Source: Bloomberg)
June 20, 2017
Published by The American Academy in Berlin
On the evening of June 20, 2017, the trustees of the American Academy in Berlin awarded the 2017 Henry A. Kissinger Prize to Germany’s Federal Minister of Finance, Dr. Wolfgang Schäuble. The laudation for Dr.Schäuble was delivered by former US Secretary of Treasury Lawrence H. Summers.
(As prepared)
It is a daunting honor to be here tonight. As Henry Kissinger became National Security Advisor, I entered 9th grade and as Wolfgang Schauble entered the Bundestag, I entered college.
Henry, you are the greatest example our era has seen of how an engaged thinker can make the world a better place. There are few half your age who can match your curiosity, your wit, or your energy. You inspire us all.
A prize named in your honor presented annually at the American Academy in Berlin is an important tradition. For it reaffirms that if the history of the last 70 years has been profoundly more benign than that of the preceding 50, the reason has much to do with the mutual trust and reliance that has characterized the relationship between the United States and Germany.
As I prepared my remarks, I felt a real pang that I could not reach out to my good friend, Richard Holbrooke, who did so much to create this wonderful institution.
Most of all I am honored to be part of celebrating Wolfgang Schauble, a man whose efforts over so long a period, whose enduring values, and whose character are an inspiration to us all.
We are days past the 70th anniversary of the announcement of the Marshall Plan. Henry describes in his latest book President Truman describing it to him as the American act of which he was most proud. Rightly so. But as has been painfully demonstrated by the many failed Marshall plans of the last half century, the success of aid depends much more on the determination and commitment of the recipient than it does on the generosity of the donor. What Germany has accomplished and what is has become over 70 years is one of history’s most positive stories. And it is embedded in the remarkable success of the Transatlantic community.
If today we are at a moment of flux and uncertainty in relations between the United States and Germany, in charting Europe’s course, and in the future of the Transatlantic alliance, it behooves us to remember as Wolfgang surely does that the past has not been a steady march from darkness into light. The 10th anniversary of the Marshall Plan came in the wake of Suez, the 20th with students in the streets over Viet Nam and Russian tanks in Prague, the 60th with sharp divisions over Iraq to take just a few examples.
Even in the face of challenges in my own country that I do not welcome, I am optimistic that with the kind of indomitable spirit that Wolfgang brings to everything he does that the challenges of this moment will be met. Indeed, the political situation in continental Europe today has more seeds of hope than seemed plausible just a few months ago. And in the kind of adversity represented by new gulfs between continental Europe and the English-speaking world lies an opportunity for European renewal. As Wolfgang has said, “Crises can foster change. Things can happen very fast in time of crisis. That is why I am not so pessimistic regarding crises.”
Several weeks ago, two of President Trump’s most thoughtful advisors proclaimed that “the world is not a global community but an arena where nations, nongovernmental actors and businesses engage and compete for advantage.” Wolfgang Schauble is not dewy eyed, overly sentimental or soft. And yet I do not believe he ever could have written such a sentence. Indeed, his life’s work is a testament to the power and efficacy of fostering community.
Wolfgang Schauble played a key role in the unification of Germany. He, like Chancellor Kohl, understood how important generous support for the East was in creating a new and strong and United States—that sometimes monetary mechanics have to be subordinate to political purpose. I cannot think of a decisive speech in the US Congress. Yet, I am told by German friends, that but for his speech in the Bundestag, this gathering would not be taking place in Berlin.
Wolfgang may be the last of the dwindling band of committed Europeanists who hold power today and held power when the Berlin Wall fell a generation ago. No one in office today has understood longer, or better, the importance of the partnership between Germany and France.
Yes, he has strong views on what might be called a national responsibility to be responsible as a precondition for the success of European Union. But he has always stood for deeper and stronger union. He was right when he wrote some time ago that “European Union is the best political idea of the 20th century.” He has been a key driver of the convergence in rules and policies that has been central to monetary union. And he has been willing to recognize at the moments of maximum danger that a common central bank has to be able to do what is necessary to maintain financial and economic stability.
Wolfgang has also recognized—at moments when it has not been easy— Germany’s obligations to global community. There has been no stronger German advocate for meeting the obligations of history towards Jewish populations, no one more open to Islamic refugees, no one more committed even before the events of the last months to strengthening Europe’s capacity for common defense. Indeed, I am told that as finance minister he has never rejected a request for spending on refugees or common defense.
Wolfgang in eulogizing Chancellor Kohl remarked on how when in the harried fall of 1989 it fell to President Bush to respond quickly to a German reunification plan, the President did not wait for his machinery to ponder the details but said simply: “We trust the Chancellor.” I recall being told a similar story about de Gaulle’s response to an emissary sent with photographic evidence during the Cuban Missile Crisis.
History may be shaped by tectonic forces beyond the control of any political figure. But at key junctures, personality matters and trust between persons matters. I have known many who disagree with Wolfgang Schauble sometimes on fundamental matters. I have never known anyone who has found him anything other than utterly straight forward.
He possesses a remarkable combination of determined adherence to principle with openness to all perspectives. It’s no secret, as I’ll discuss in a few minutes, that Wolfgang and I do not see eye to eye on the importance of Keynes insights on demand management policy for current European dilemmas. But he has always been open to friendly discussion and indeed was first to invite a range of outside experts for protracted dialogue with the G7 group when he was its host.
If I find myself in full agreement with Wolfgang on matters of politics and matters of international relation and an enormous admirer of his character, I would be disingenuous if I did not take note of our differences on matters of economics. These differences are not as large as many suppose and are hardly personal but instead rooted in the differences between German and Anglo-American economic traditions.
Contrary to some caricatures of American economists, I am under no illusion that the dials of fiscal and monetary policy, no matter how brilliantly fiddled, can produce enduring full employment with prosperity. Competiveness and economic success for any nation depend ultimately on the skills of its workers, the ingenuity and efficiency of its companies, and the quality of its institutions. Here the world has much to learn from modern Germany, especially its success in helping all young people make the all-important transition from school to work. When Germans attribute their success to deep and difficult reform, I believe they are correct. When Shakespeare said that “fault lies not in our stars, but in ourselves” he could have been speaking of nations with struggling economies. Foreigners who suggest that Germany is in some sense exploiting the global system for its own benefit, to the detriment of others, are more wrong than right.
At the same time, there is a reason why in the long history of nations, common money across several nations in the manner of European Monetary Union is almost without precedent. Its management requires enormous statesmanship and skill. For in cushioning inevitable shocks neither the federal responses characteristic of the United States nor the option of currency adjustment is present. The challenge is that on the one hand convergence is a necessary condition for success: that when all can draw on a common pool of credibility, discipline is essential if that pool is not to be dissipated. On the other hand, it is essential to recognize that individual virtue, multiplied many times over, need not always translate into collective success. One who stands up at a football game sees better. If all stand, no one sees better. In the same way, selling requires buying. Not every nation can enjoy export led growth, and communal prosperity requires mutual adjustment.
Successfully striking this balance is the challenge of European financial diplomacy. So far things have worked out, with German leadership, a flexible and pragmatic ECB willing to do whatever it takes to preserve monetary union, and much negotiation. We can be grateful for the progress that has been made and for the recent encouraging economic statistics, even as we recognize that there is much left to do.
Some would see it as an irony of Wolfgang’s career that a man of such steadfast principle has been a politician of such extraordinary staying power. I suppose so. But virtue is sometimes rewarded. For his public service, Wolfgang has suffered more than almost anyone. And yet he persevered with purpose and determination, but without bitterness or anger. For him it’s always about the issue not the self. The real irony is that the most apolitical of politicians has been the most enduring.
Wolfgang has said that, “I’ve been a politician long enough to know that every year will find us living in a situation that one couldn’t have imagined a year previously. Sometimes it’s better than we imagined, sometimes it’s not as good.”
We could not have imagined a year ago where we are today. And we cannot know the future. Events are contingent, tactics and strategies are subject to amendment; yet values are enduring. I believe with Wolfgang that community is an enduring value in international affairs. I expect that with steps forward and backward that will be the enduring view on both sides of the Atlantic. Surely though, this is Europe’s hour.
If Wolfgang’s values, as manifest in a very long career, can guide all of us forward, there will be much to celebrate at the 80th Anniversary and the 100th Anniversary of the Marshall Plan.
I am honored to be here tonight at the American Academy in Berlin to congratulate Wolfgang Schauble on the Henry A. Kissinger Prize.
(Source: The American Academy in Berlin)
While I do not believe the Fed made a serious mistake Wednesday in raising rates, I believe that the “preemption of inflation based on the Phillips curve” paradigm within which it is operating is highly problematic. Much better would be a “shoot only when you see the whites of the eyes of inflation” paradigm of the kind I have advocated for the past several years.
Such a paradigm would be more credible, more likely to result in the Fed’s satisfying its dual mandate, reduce risks of recession, and increase the economy’s resilience when recession comes. Read more
We tend in modern economies to take progress for granted and debate only its pace. This is not true with respect to air travel times. A look at airline time tables reveals that today the 8:26 a.m. flight from Boston to Washington National took 103 minutes. The 8:15 a.m. flight in 1982 took 82 minutes. The difference is similar, if not greater, on other routes. For example, flights from Boston to Charlotte typically took 125 minutes in the early 1980s compared to 160+ today.
Summers points out the math error in Trump’s budget on The Late Show with Stephen Colbert.
May 25, 2017
Published by the New York Times
June 7, 2017
Some of the nation’s most influential leaders in higher education met last week at the Higher Ed Leaders Forum hosted by The New York Times. They discussed an array of issues facing colleges and universities today, including high costs, free speech, addressing the skills gap, using big data and leading in a time of crisis. The excerpts below have been edited. Videos of the full sessions can be found online at www.nythigheredleaders.com.
Gina Raimondo, governor of Rhode Island, on reducing college costs
“Ninety-nine percent of good jobs that are being created in this country since the recession require a degree past high school. And so how can you say in order to get a good job you need a degree past high school, but oh, by the way, it’s unaffordable.”
“Too many students are being denied an opportunity to get a good job because they can’t afford college. It’s a crisis in this country; it’s locking people out of economic opportunity, and we have to take action.”
Ryan Craig, co-founder and managing director of University Ventures, on the need to bridge the skills gap
“We have, over the last decade, record levels of underemployment for college graduates, and the well-documented failure to launch — which, coupled with record student loan debt, has had spillover effects in terms of areas like home buying, in terms of new business creation.”
“A decade ago if you’d surveyed matriculating students as to why they were pursuing a degree, you’d get lots of different answers. About half of them would say it was related to job or income or career. Today it’s 92 percent.”
“Virtually all job descriptions are now online. Each posted job generates 150 to 250 applications. That’s too many for any single hiring manager to review. So most employers now have resorted to using applicant tracking systems as filters, and those are based on keyword filters. If applicants literally do not have in their résumés or CVs the keywords that are in those job descriptions, they will be invisible to human hiring managers.”
Lawrence H. Summers, Charles W. Eliot university professor and emeritus president of Harvard University, on free speech on campuses
“I think President [Robert] Zimmer at the University of Chicago got it about right. There’s a safe space with respect to hearing ideas you don’t like. It’s your parents’ house. It is not any place on a college campus. It should not be. Demands that speakers be disinvited should be rejected. The obligation to maintain order and give every speaker a chance to be heard should be respected. And when those norms of civility are violated, there should be consequences for those who violate them.”
Sheila Bair, president of Washington College and former chairwoman of the Federal Deposit Insurance Corporation, on college costs
“It’s important to understand that when you hear about these high sticker prices of tuition, that generally is not the price that a student pays. Scholarships are typically provided by my college and others. But nonetheless, it’s still really expensive. And why is that? Part of it, it was just too easy to raise tuition for a while. The demographics, the high school populations, were increasing for a while, and then when the federal government went to direct lending, it really opened up the spigot.”
Jonathan Haidt, social psychologist at New York University’s Stern School of Business, on free speech on campus
“There are so many things going on. But one of the most dangerous is this new culture of safety-ism. The most important psychological truth I think we all need to know for raising kids or educating students is anti-fragility. Nassim Taleb’s book “Antifragile” says that human beings, like many systems in the world, only become strong by being repeatedly exposed to shocks, challenges, unpleasant events. We overcome them, we’re stronger.”
Published by Business Insider
June 5, 2017
Former US Treasury Secretary Lawrence Summers has some harsh words for JPMorgan CEO Jamie Dimon: Stop giving cover to Donald Trump’s outrageous policies on immigration, climate and the economy.
Summers called Dimon out for not leaving the president’s Council of CEOs, which the Harvard economist said lends credence to what he sees as the president’s deeply misguided agenda.
Dimon previously defended his supportive stance on Bloomberg TV: “I am a American patriot, and I want to help the president of the United States. When someone is piloting the airplane I want to root for the pilot so I want to help him as best I can.”
Donald Trump set off the ire of leaders around the world last week by officially announcing he was pulling out of the Paris Agreement on climate. Dimon was being asked about that issue specifically.
“It is very hard if you say I’m going to go off an advisory group or not do ‘a, b, c’ because you disagree on one issue. Honestly, no one is going to agree with every president or prime minister on every issue. So I don’t want to overreact to it,” Dimon said.
Summers did not mince words in his response, also delivered on Bloomberg TV. He framed what he saw as a necessary opposition to Trump in much broader terms, saying Dimon’s argument that this was a single issue gone awry simply did not pass muster given the administration’s harsh stance on issues like immigration and international isolation on trade and security.
“Three points,” began Summers:
“1. Jamie referred to this as one issue. There’s an immigration ban, there’s arithmetic that doesn’t add up, there’s climate change, there’s crony capitalism and selective deals — this is hardly the first and only minor issue. This is the central part or philosophy — does the United States believe in a community of nations.
“2. Jamie should be prepared, and I would be prepared, and I hope any business leader would be prepared to offer advice to the president. That is a very different thing to lending your prestige and that of your company to joining an advisory board of his creation. That is accepting a presidential appointment.
“3. Where does this principle stop? Jamie says it’s one issue. What would cause him to back off? Look, our president is very different and I think the rhetoric on the left that compares him to leaders in Europe in the 1930s is frankly overdone.’
Summers went on:
“That said, at what point as a patriot is your allegiance to your country rather to your president? I’ve always thought of my allegiance as a patriot as being to my country. That’s why if I had been asked to support the kind of policies that are being advocated by this administration while in government I surely would have resigned. And make no mistake, the decisions business leaders make send a very powerful signal both to the rest of the world and the president. If Jamie and his colleagues on this advisory board resigned, not over the details of the Paris Agreement but over the philosophy that the United States no longer believes in cooperation with other nations in a community of nations, that would send a very powerful signal to the rest of the world and it would send a very powerful signal to the president and to the people at home.”
In an interview on Bloomberg Daybreak: Americas, Harvard University Charles W. Eliot Professor Lawrence Summers talks about his support for big reforms in U.S. air traffic control and looks at the prospect of infrastructure spending. He speaks with Bloomberg’s David Westin on “Bloomberg Daybreak: Americas.” (Source: Bloomberg)
In an interview om Bloomberg Daybreak: Americas, Harvard University Charles W. Eliot Professor Lawrence Summers discusses his editorial on the United States’ global leadership under President Donald Trump. He speaks with Bloomberg’s David Westin on “Bloomberg Daybreak: Americas.” (Source: Bloomberg)
The Boston Globe
JUNE 05, 2017
THE TRUMP ADMINISTRATION has announced its first full budget, which calls for the elimination of federal funding for after-school and summer programs for low-income communities, known as 21st Century Community Learning Centers.
This cut would have drastic effects for working families. Federal funding for after-school programming supports 1.1 million students nationwide. An overwhelming body of evidence says that these programs help to close the opportunity gap in education, increase student academic and behavioral outcomes, and reduce school absences.
These programs are often a lifeline for working parents, especially working mothers. As Federal Reserve chair Janet Yellen recently observed, programs that enable women to balance work and family life help foster greater workforce participation, which has real economic consequences: Increases in women’s workforce participation from 1948-1990 expanded the potential growth rate of real GDP by a half percentage point per year.
Federal investments in after-school programs yield a significant return on investment. The total cost of the 21st Century Community Learning Centers program is only $1.2 billion, approximately 0.2 percent of total federal spending, and only one-20th the expected cost of Trump’s border wall. Unlike the wall, federal investments in after-school programs yield a 3-to-1 return, according to state and national reports, by increasing students’ earning potential and reducing crime and other social safety net expenses.
At Citizen Schools, a national after-school organization that serves 5,000 students in five states, we have seen firsthand the difference that these programs make in young people’s lives. Consider a student named Nelson, who attends Joseph A. Browne Middle School in Chelsea. Nelson has struggled during the traditional school day. His mother works two jobs. She couldn’t afford the academic and extracurricular supports that Citizen Schools makes possible, so she relies on federal funding to ensure that Nelson is in a safe, enriching space after school. That matters, because these supports help change a student’s academic trajectory: On average, students at Citizen Schools are 25 percent more likely to go to college and twice as likely to graduate with a four-year college degree, as compared with their peers. At Citizen Schools, Nelson has thrived.
Even for those of us not currently juggling the demands of our children’s education with the obligations of work, we need to ask ourselves, as a society: Do we have a responsibility to help educate our neighbor’s children? Among those members of Congress who ultimately will be responsible for accepting or rejecting the administration’s proposal, we hope that the answer is a resounding “yes.”
We need to recognize as a nation that education is about more than the school day and school year. It is about what happens before children are ready to enter school, what happens during half the days in the year they are not in school, what happens after school ends and before a parent comes home, and about how students transition from school to work. Yes, school reform is essential. But it is not enough to meet the challenge of opportunity for the next generation. We must work more broadly to assure adequate education for all our kids.
The reality is that a significant majority of Americans support federal funding for after-school programs because those programs measurably benefit students, working families, and the broader economy — and that’s good for all of us.
Lawrence H. Summers is president emeritus of Harvard University and former secretary of the US Treasury. He chairs the Board of Citizen Schools. Emily McCann is the CEO of Citizen Schools.
June 4, 2017
In economics as in life things often take longer to happen than you think they will and then happen faster than you thought they could. So it may turn out with the catastrophic international economic policies of President Donald Trump. It is possible that the past week will be remembered as a hinge in history – a moment when the US and world started moving on a path away from the peace, prosperity and stability that have defined the past 75 years.
For all that has gone wrong in the past 75 years, they have witnessed more human betterment than at any time in human history. The rate of fatalities in war has steadily declined even as growing integration has driven global growth and improvement in life expectancy and living standards. Progress is too slow and not well enough shared but Americans have never lived so well. This has been driven by remarkable developments in human thought especially in science and technology and a relatively stable global order that has been underwritten by the US.
Will these trends continue? Optimists have suggested that despite the revanchist and often anti-rationalist rhetoric of his campaign, Mr Trump has in the international sphere surrounded himself with rational establishment advisers and has either retreated or been stymied by Congress on proposals like launching trade wars or building walls.
Until last week, they had a reasonable argument. No longer. We may have our first post-rational president. Mr Trump has rejected the view of modern science on global climate change, has embraced economic forecasts and trade theories outside the range of reputable opinion, and relied on the idea of alternative facts rather than evidence-based truth.
Even for Conservative statesmen like Ronald Reagan, George W Bush and Henry Kissinger the idea of a community of nations has been a commonplace. Now HR McMaster, national security adviser, and Gary Cohn, director of the national economic council, who have been held out as the president’s most rational globally minded advisers have now taken to the Wall Street Journal to proclaim that “the world is not a global community.”
They advance a theory of international relations not unlike the one that animated the British and French at Versailles. On this view, the objective of international negotiation is not to establish a stable peaceful system or to seek co-operation or to advance universal values through compromise but to strike better deals in “an arena where nations, non-governmental organisations, and businesses compete for advantage.”
In service of this theory, the president last week renounced any claim to American moral leadership by failing to convincingly reaffirm traditional US security commitments to NATO and abandoning participation in the Paris global climate agreement. The latter is probably our most consequential error since the Iraq War and may well be felt over an even longer term.
There will be consequences to all of this as there were to the pursuit of short term advantage rather than systemic stability at Versailles. One does not need to subscribe to pessimistic versions of Graham Allison’s Thucydides Trap about the perils associated with a rising power to worry about Chinese efforts to fill the vacuum left by the US.
How, after the events of the last week, can America’s adversaries and allies alike not follow Angela Merkel, German chancellor, in concluding that the US is now far less predictable and reliable? How can the responses be other than destabilising?
It is essential that leaders in American society signal clearly their disapproval of the course the administration is taking. History will judge poorly business leaders who retain their positions on Trump administration advisory boards in the hope of being in a position to cut favourable deals. Elon Musk of Tesla and Robert Iger of Disney have taken the right and principled stand by resigning their presidential appointments. More should follow.
What is to be done? The US president is not America. The world will be watching to see whether President Trump’s words and deeds represent an irrevocable turn in America’s approach to the world or whether they represent a temporary aberration.
In an interview, Here & Now‘s Jeremy Hobson talks with Larry Summers, former U.S. treasury secretary and president emeritus of Harvard University, about what Trump’s decision means for the country and the economy.
When President Trump announced that the U.S. will withdraw from the Paris climate accord, he explained that it was because the agreement is bad for American workers and is harming the U.S. economy.
(Source: WBUR)
Published by Matthew J. Belvedere, CNBC
June 1, 2017
In an interview, Former Clinton Treasury Secretary Larry Summers told CNBC on Thursday the U.S. would benefit economically and on the world stage by staying in the Paris climate accord.
Summers said on “Squawk Box” he “never imagined” an administration that’s “way to the right of Exxon on a fossil fuel issue.”
The oil giant has reiterated its support of the Paris deal ahead of President Donald Trump‘s expected announcement Thursday afternoon to pull out of the climate agreement.
Secretary of State and former Exxon CEO Rex Tillerson has advocated staying in the agreement, which involves nearly 200 countries. Only Syria and Nicaragua are not part of the accord.
“How can it be the right thing for the United States to create a world where there are two clubs: Everybody else and the United States, Syria, and Nicaragua?” Summers asked.
During the 2016 presidential race, Trump had campaigned against the accord, which was fashioned under Barack Obama‘s administration. The former president committed the U.S. to reducing its greenhouse gas emissions by 26 to 28 percent below 2005 levels by 2025, and pledged $3 billion to a fund to help developing nations meet their Paris agreement goals.
Summers, a former Obama economic advisor, said the Paris deal is not perfect. “It’s not the agreement I would have written.” He said he favors “more emphasis on just raising the price of carbon and less emphasis on command and control regulation.”
He said he would support amending the deal, but abandoning it without anything in its place would put the U.S. in the position to just “take our chances with the climate lottery.”
“That seems to me to be profoundly irresponsible,” he said.
“The right way to understand the Paris agreement is that it’s not the once-and-for-all resolution forever,” Summers said. “This is the first stage in a process to global commitment to address what the vast majority of scientists think is one of the most pressing security problems facing mankind.”
In addition to political pressure, more than two dozen CEOs signed a letter that appeared in full-page ads Thursday in The New York Times and The Wall Street Journal.
On CNBC’s “Squawk on the Street” on Thursday, Hewlett Packard Enterprise CEO Meg Whitman, a signatory on the letter, said leaving the Paris agreement would put the United States behind in jobs in the future. The tech billionaire, who ran an unsuccessful 2010 GOP gubernatorial bid in California, ended up supporting Democrat Hillary Clinton for president in the 2016 election.
Another signatory, Salesforce co-founder and Clinton supporter Marc Benioff tweeted out the letter on Wednesday evening.
Tesla co-founder Elon Musk didn’t sign the letter but threatened on Wednesday to stop advising Trump if he were to announce a withdrawal. Musk, founder of SpaceX, is on Trump’s manufacturing jobs council, strategic and policy forum and infrastructure council.
The White House was not immediately available to respond to CNBC’s request for comment.
(Source: Matthew J. Belvedere, CNBC)
In an interview with CNN Money, Larry Summers says he never imagined Exxon would be more progressive than the White House on climate change. Mr. Summers served as President Clinton’s Treasury Secretary, President Obama’s top economic adviser, and Chief Economist at the World Bank.
(Source: CNN Money)
Larry Summers is doubling down on his secular-stagnation hypothesis.
The Harvard economist and former Treasury secretary first offered the bleak diagnosis in November 2013 at an International Monetary Fund conference. The U.S. and much of the rest of the world was suffering from a chronic shortage of demand and profitable investment opportunities, he argued. There wasn’t any interest rate that would produce healthy growth (given that rates can’t go much below zero).
At a recent academic conference at the Federal Reserve Bank of San Francisco, I asked Mr. Summers how his secular stagnation hypothesis looks today, three and half years after he inserted a Depression-era phrase into today’s debate about the economic outlook. Many economists have had their doubts about his gloomy hypothesis, and not all has gone wrong with the U.S. economy. Unemployment, for example, has fallen to 4.4% from 7.2% in 2013, leading to a rise in wages.
At the risk of beating a dead horse, here are some thoughts on the Trump administration’s 3 percent growth forecast. Zero interest rates seemed inconceivable 15 years ago, and yet they happened. Almost no one forecast the productivity boom that took place in the United States between 1995 and 2005 or the magnitude of the 2008 financial crisis. So any statement that a given forecast is inconceivable is unwarranted.
It is, though, reasonable to use history to try to gauge the likelihood of possible outcomes. I do not see how any examination of U.S. history could possibly support the Trump forecast as a reasonable expectation.
May 26, 2017
An interview with Maria Bartiromo on Fox Business, Larry Summers discusses why he dislikes President Trump’s budget.
(Source: Fox Business)
The events of the last week have crowded out reflection on economic policy. But things have been happening. Commerce Secretary Wilbur Ross described the trade deal reached with China earlier this month as “pretty much a herculean accomplishment….This is more than has been done in the history of U.S.-China relations on trade.”
Past a certain point, exaggeration and hype become dishonesty and deception. In economic policy, as in almost everything else, the Trump Administration is way past that point.
The trade deal is a “nothing burger” that a serious Administration committed to helping American workers would likely not have accepted, and surely would not have hyped.
