MR. ISAACSON: Do you think that President Obama waited too long to get deeply engaged?
DR. SUMMERS: No. I mean I think you can make that argument. Look, I think 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 1970’s, 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 ten 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.
And yet our idiotic Congress insists that cutting spending will somehow instill confidence in the nation’s manufacturers, retailers, and developers.
No. What would instill confidence is people having or getting jobs which give them income which they could then spend on material goods.