Screengrab of Charlie Rose Show
Lawrence Summers on Charlie Rose Show
Lawrence Summers on Charlie Rose Show Screengrab of Charlie Rose Show
The key elements of President Obama's scheduled jobs plan to be outlined in a Thursday evening speech before a joint session of Congress have been discussed for days.
The package, with an estimated cost of $300 billion, will feature proposed spending on infrastructure projects, an extension of the payroll tax holiday and tax cuts for employers who hire new workers, among other ideas.
All of which sounds a lot like what Lawrence Summers, the economist who until December headed the White House's National Economic Council, recommended during a July appearance on the PBS's Charlie Rose Show.
Before laying out the several steps he thinks must be taken to get employment growing, Summers explained that for the first time in his career as one of the nation's leading economists, he feared the U.S. could be close to repeating historic mistakes that delayed its economic recovery from the Great Depression.
Or Japan's mistake of the 1990s of imposing austerities before its economy had fully recovered, an error that resulted in what is known as "the lost decade."
It's important to understand this because, even though Summers hasn't been part of the White House's official economic policy team for many months, there's very little daylight between his view of what it will take to give the economy some traction and Obama's.
Summers' relevant exchange with Rose:
ROSE: How do you create demand? ... What are the policies to get people to demand more products so that companies can make more products and hire more people and use capital to build more factories?
SUMMERS: You invest in infrastructure or other things that the public sector buys.
ROSE: That's a kind of stimulus program.
SUMMERS: That's a kind of, stimulus and the creation of demand are different sides of the same coin. You give employees or employers tax relief. That puts more money in their pocket so that they spend more.
You provide support to parts of the economy that would otherwise be laying people off on a huge scale, who they don't want to lay off because they have important work to do. That's why bailing out the automobile companies was so important, that's why support for state and local governments is so important.
You provide unemployment insurance and support for workers who've lost their jobs who would otherwise set off a spiral by cutting their spending.
And you do everything that you can to promote the sale of American products to foreign consumers at a time when foreign economies, particularly in emerging markets, are growing more rapidly than ours. If you do those five things to increase demand, the prospects for more jobs are much greater.
And, ironically, the prospects for deficit reduction are much greater because an economy that grows more rapidly is an economy that collects more in taxes. It has to spend less on welfare payments. Indeed, the best estimates are that every dollar of extra GDP reduces the deficit between 25 and 30 cents in the first year.