President Barack Obama’s top economic adviser says targeted tax cuts, more exports and greater spending will help reverse a lack of consumer demand that threatens to constrain the economy “now and for the next several years.”
Lawrence Summers, in his swan song speech as head of President Barack Obama’s National Economic Council, said the tax cut plan negotiated with the president and Senate Republicans “averts what could have been a serious collapse in purchasing power.”
“And it adds far more fiscal support” – stimulus spending through tax credits, payroll tax cut and jobless benefits – than “most observers thought politically plausible,” he said.
Beyond that, however, Summers said the nation needs to increase exports significantly and pointed to Obama’s goal of doubling the sale of American goods abroad over the next five years and his push to open up foreign markets. He also called for government and the private sector to take advantage of low interest rates and depressed costs of materials to rebuild infrastructure and tackle long-deferred maintenance.
Summers, who is leaving the White House at the end of the year to return to Harvard University, said the risks of deflation and economic stagnation exceed the risk of high inflation, countering recent criticism of Federal Reserve policies. He cited Japan’s long recession in the 1990s as both “disturbing and instructive.”
He said Japan’s experience “carries lessons that it is a serious mistake to be complacent part way through an economic recovery when substantial slack remains.”
While White House officials had expected a new NEC director to be named this month, White House spokesman Robert Gibbs said Monday that the appointment might have to wait until January. He said the White House had been busy with legislative matters, including the tax cut plan, pending before the lame duck session of the current Congress.
Prodded to reflect on his time at the White House, Summers praised Obama’s stewardship of the economy, saying steps the administration took helped avoid a calamity.
“Would I like the results to be even better than they have been in a number of different dimensions? Of course,” he said. “But I think the president is right in taking pride in what has been averted.”
Summers said he is looking forward to gaining a new perspective, one that he said “is not possible when you’re working in the daily grind of the White House.”