Former U.S. Treasury Secretary Lawrence Summers said Tuesday that the government’s focus on short-term fiscal tightening, through tax increases and spending cuts, was hurting growth, constraining employment, and holding back the economic recovery.
Instead, he said, policy makers should be trying to lock in medium and long-term changes that reduce the deficit and ease some of the policies that have led the deficit to contract sharply in the near term….
He called for more investments in things like public infrastructure, like improvements to airports, roads and bridges to boost job growth. He said policy makers should take advantage of low-interest rates and the shortage of work in the construction sector. He acknowledged, though, that a lot of these investments can be difficult to sell politically.
But the great man will wait to weigh in on what Ben Bernanke's doing until Janet Yellen and Tim Geithner get passed over in favor of certain former Harvard presidents and—in case you had forgotten—Treasury secretaries.
“Old Treasury Secretary habits die hard and so I’m going to respect the independence of the Federal Reserve system and not make a statement about the …monetary policy right now,” Mr. Summers said.
Summers: U.S. Near-Term Austerity Hurting Growth [WSJ Washington Wire blog]