From an interview with Larry Summers by Walter Isaacson at Fortune’s Brainstorm Tech conference:
The biggest problem the country has right now is not the budget deficit. The biggest problem the country has right now is the jobs deficit. Yes, there’s a risk that we will misplay things and make the mistakes of the 1970s, and have inflation and have excessive borrowing.
But far and away the larger risk is that we will make the mistakes of 1937, and that we will not have a recovery that is sustained, that we will make the mistakes that Japan made, and that we will have a decade or two of stagnation. The right question to be focused on is how to stimulate demand.
Look out there, guys. The Treasury bond rate, Treasury note rate for 10 years is 2.85 percent. Nobody is failing to invest because 2.85 percent is too much. They are failing to invest because there are no customers in their store. They are failing to invest because their factories are sitting empty. They are failing to innovate because they’re not sure how large the market for the product will be. That is the problem that we need to address.
… We’ve been flying out of the recession, but we’ve been flying out of it dangerously close to stall speed, and doing something about that should be our top priority.
… We have schools across this country where we tell our kids that education is the most important thing in the world, but we ask them to study in classrooms where the paint is chipping off the walls.
We can borrow money to invest in fixing that, at 2.8 percent. Twenty percent of the people in the country who are doing construction are unemployed, and we’re not trying to do something about that, when we have a major demand problem? It just doesn’t make any sense.
We have infrastructure in this country — I mean you can argue whether we need a new high speed rail system or whether we don’t need a new high speed rail system, but I don’t know what the argument is for letting bridges collapse. I don’t know what the argument is.
You can fly to Europe, you can fly to Asia, any of those places, and you compare Kennedy Airport with the airport where you land, and you ask yourself which is the airport of the greatest country, richest, most powerful country in the world? … You can say airports aren’t that important or whatever, but it is symbolic of an approach to infrastructure that probably never made any sense, and certainly doesn’t make any sense when you can borrow money at 2.8 percent and you’ve got 20 percent of the construction workers unemployed.
So I’d rather see us focus on the jobs deficit. I’d rather see us focus on the public investment deficit. I’d rather see us focus on the human capital deficit. …
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