US economy: Larry Summers Tells Us How to Fix the Economy He Helped Mess Up

Larry Summers, now the burden of Harvard University, is back on the op ed pages to explain what’s wrong with the economy and how to fix it.

It’s all in the technocratic language of macro economics — Brad DeLong approves and will likely retranslate later — but here, I think, is the gist: It seems the financial and housing collapse crushed demand, and it has to be rebuilt with jobs and economic growth over a very long period. And until you do that, you can’t expect deficits to come down, so it’s way premature to pivot to reducing the deficit. Instead we need more stimulus to increase demand, restore jobs and boost the economy.

And this is a great time to invest in infrastucture, education, and so on, because we have lots of people who can do that work who need jobs, we need the infrastructure, and interest rates on borrowing are near historic lows. Oh, and we need to restore confidence. Most of that could have been written by Paul Krugman, the guy the Administration ignored for three years, or by DeLong and many critics of the Adminstration’s far too tepid economic policies.


In fact, it has been written by them. So is this Larry’s mea culpa? Larry Summers is the guy who, when presented in early 2009 with a set of calculations and projections from Christine Romer that showed we needed a stimulus about twice the size the one Summers ultimately proposed to the President, said we should limit fiscal stimulus policy to a mere “insurance policy” against the possibilitiy of another Great Depression. That would be enough to produce a self-sustaining recovery, he told President Obama.


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