Obama Administration says it’s time for America to build a stronger economic foundationWritten by Jennifer Womack
“No president since Franklin Delano Roosevelt has inherited so difficult an economic situation — 3.6 million jobs lost last year, the economy in its most rapid decline since the second World War, a budget deficit of a trillion dollars, forces of distrust and anxiety so great that at some points in recent months the interest rate has actually been negative as people pay the government to store their money,” said Summers. It goes without saying that the economic forecasts agricultural economists offered at the same event hinge upon the national economy’s health.
Summers said America’s infrastructure is decaying in too many places and that fundamental investments are needed in education and healthcare. He said the average grocery store uses more technology today than the average American hospital. “It is a daunting set of challenges,” said Summers, noting his optimism that solutions are within reach.
“These are not problems of our potential,” he said. “We have the most productive workers in the world. We have the best natural resources of any major nation. We have the capacity to innovate and apply the science that is the wellspring of prosperity in a modern economy, more than any other nation. We have the resilience of a market system that is unmatched by the much more planned systems of Europe or Asia. And, we have a strength that comes from the tradition of America and the diversity of America and its ability to connect to any other part of the world that is not matched by that of any other country.”
“Our problem is not that we cannot do it,” said Summers. “Our problem is that our economy is falling far short of its potential. It is that shortfall from potential that is both our biggest challenge and ironically the biggest source of optimism.” Summers said we must restore our capacity to produce at the potential of this economy and our potential to earn. “When we do that we can reap large dividends.”
“What’s going on in the American economy?” asked Summers, noting that his colleagues at universities will study this time period for many years to come. “Usually economies are self stabilizing,” he noted. He summed it up as vicious cycles in which the Obama Administration plans to intervene and make repairs with a transformation to “virtuous cycles.” Occasionally, two or three times a century, he said a market’s equalizing mechanisms fail.
“We lost 600,000 jobs last month,” said Summers of January. “We lost 500,000 jobs the month before. If we keep losing jobs at that rate, it’s going to be hard to fix anything else because of the losses of income that will result.” He said that’s why Obama’s economic stimulus plan focused on job creation. “He knew we had millions of people who needed work and enormous amounts of work that needs done and that they needed to be brought together,” said Summers of the $800 billion stimulus package that’s passed Congress.
He said the package is estimated to create between three and four million jobs. “Shovel-ready” projects that had been canceled, said Summers, will be revived. He also noted that 75 percent of federal buildings will be weatherized within two years, roads and sewer systems will receive attention, schools will be modernized and more. “It’s the largest investment in the spine of our economy since the interstate highway system was built in the 1950s.”
In a second vicious cycle that need transformed to a “virtuous cycle,” Summers said the Obama Administration will become further involved with banking to ensure the availability of credit in America. Summers said, “It’s tempting to say to hell with them, but as the President said Tuesday night, we cannot responsibly govern out of anger.”
Summers said, “If credit shrivels up and breaks down, if banks are in no position to get funds and to lend, then no matter what the government does, we’re not going to have the kind of vibrant economy we want. Just as we did in the 1930s and in the aftermath of S&L Crisis, we have no choice, with proper accountability, but to support the flow of credit in our economy.”
Summers said the Obama Administration wants to make sure families are able to refinance their homes despite a reduction in market values. “We’re going to keep people in their houses and accelerate the day when the housing market starts to return and create a stronger financial system.”
In closing Summers said, “Our problems were not made in a week, a month or a year and they will not be solved in a week, or a month or a year. But they will be solved. Our economy will return to being an economy that can find a job for everyone who is willing to work. Our economy can provide the finest public systems of airports and highways, schools and facilities of any in the world. Our capacity for innovation can be driven once again by ever-expanding markets. We will look on this period as a period that was painful and a period that was difficult, but also a period when we made profoundly important investments in our country, when we learned profoundly important lessons about responsibility and when we built a foundation for an even greater prosperity in the future. That is what I see as the economic outlook for the United States in 2009.”