The Huffington Post reports:
Safely removed from the Obama White House, where he was a prime architect of economic policy, Larry Summers now tells us what most regular people have known for too long: The economy is ailing and in grave need of help.
In a sobering and clarifying opinion piece in Sunday’s Financial Times, Summers laments that “the US is now halfway to a lost economic decade,” describing a contemporary scene in which “new college graduates are moving back in with their parents.”
Most strikingly, Summers takes direct aim at the assumption that amounts to the default stance inside the White House: If we demonstrate our resolve at attacking long-term budget deficits by cutting spending, the market will gain “confidence” — a mystical term among practicing economists. Eventually, everything will get better.
Nonsense, Summers effectively scoffs. “A sick economy constrained by demand works very differently from a normal one,” he writes, before calling for a fresh stimulus while pointedly rejecting deficit-cutting as the fix. “The fiscal debate must accept that the greatest threat to our creditworthiness is a sustained period of slow growth.”
Translation: For those offering up scary warnings that a failure to slash spending courts the prospect of Uncle Sam running out of money and defaulting on his debts, the quickest way there is to slash spending and ensure that commerce grinds to a halt.