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A White House valet brings National Economic Council Director Larry Summers a birthday cake in the Oval Office, November 30, 2009. In 1983, when economist Larry Summers was 28, he became one of the youngest tenured professors in the history of Harvard University.
The Obama administration is seeking a mini-stimulus of $200bn to help the economy "out of a very deep valley," while asking Congress for powers to cut unnecessary spending.
The US government must find a balance between supporting the economic recovery and reducing long-term budget deficits, White House economic adviser Lawrence Summers said Monday. While the economy has resumed its growth and the possibility of a depression now seems remote, the government should continue its efforts to spur job growth and boost economic output, said Summers, who is director of the White House National Economic Council. The challenges posed by the nation's growing budget deficit "cannot be ignored," he added.
The former Treasury secretary in the Clinton administration said in a speech at Johns Hopkins University, that there is an old joke about economics exams. The questions never change, but the answers always do.
Summers said economists at some points seem to be saying that budget deficits need to be reduced in order to grow the economy, prevent financial Armageddon, or to keep the country solvent - - and, at other times, to be asserting that budget deficits need to be expanded to prevent depression, permit public investment, and promote growth.
"And then there are, of course, there are Harry Truman’s legendary two-handed economists who offer one list on the one hand and another list on the other hand." he said.
Summers who became a professor of economics at Harvard University at the age of 28, said these questions about fiscal policy are especially pressing right now. Fiscal issues are at the centre of the economic concerns in Europe, and while almost everything about fiscal policy is debatable and debated, "I suspect that a wide array of observers across the political spectrum would agree that the fiscal policy choices that the United States makes over the next several years will be as consequential as any we have made in a very long time.
I say this in part of because of the cyclical position of the American economy and in part because of the magnitude of projected deficits and the nature of fiscal trends."
Insight on whether the reducing unnecessary spending act will stand a chance of getting passed by Congress, with Alison Fraser, Heritage Foundation and Jim Nussle, former OMB director:
Summers said it was "essential" for the government to run deficits over the last few years as the economy fell into one of the deepest recessions on record.
He said the government's stimulus measures helped revive economic growth, though he acknowledged that many households are still struggling as unemployment hovers near 10%. As a result, he said it is crucial for the government to continue its efforts to support the economy in the near future.
"It would be an act of fiscal shortsightedness to break from the longstanding practice of extending these provisions at a moment when sustained economic recovery is so crucial to our medium-term fiscal prospects," he said.
“The observation that the economy is again ascending does not mean that we are out of a very deep valley,” added Summers.
President Obama proposed on Monday that the White House should be able to present lawmakers with a package of “rescissions” - - or cuts - - - from any spending bill. Congress would then have to vote on changes within a set time frame.
Discussing whether the economic situation in the United States is beginning to resemble Greece or Japan, with Mike Mussa, Peterson Institute and Peter Schiff, Euro Pacific Capital;