May 19, 2024

Talk: Larry Summers, Un-king of Kumbaya

What do you see happening to those one in six?

There’s consequences for poverty. It has consequences for the government’s disability budget, crime, the ways in which children are raised.

You directed the National Economic Council until the end of last year. My understanding is that the head of the N.E.C. is supposed to dispassionately bring various economists’ opinions to the president. And yet Joseph Stiglitz, the Nobel Prize-winning economist, says that you ignore arguments you don’t like. Did you bend over backward to bring the president different views?

I said to the president when he asked me to do the job that I was a person who had strong views, and that I would make every effort to make sure that he was exposed to all perspectives and that each of those perspectives would be presented in as effective a way as possible. But if he wanted to maximize the feeling of kumbaya in the group, I wasn’t the right person. He responded that in this crisis he wanted me in this position, and that was good enough for me.

I have read that Christina Romer’s projection that we needed $1.2 trillion in stimulus wasn’t in the memo presented to Obama on the topic.

The president was told that there was no danger of doing too much fiscal stimulus, and that we should do as much as we could from an economic point of view. It was entirely clear in the meeting where this was discussed that a larger fiscal program would have larger multiplier effects. The constraints were political, and indeed the seriousness of those constraints is demonstrated by the fact that the ultimate bill that passed was between 70 and 80 percent as large as what the president sought.

What would the economy look like now if $1.2 trillion had been spent?

I think it’s an artificial question because there would have been all kinds of problems in actually moving $1.2 trillion dollars through the system — finding enough bridge projects that were ready to go and the like. But the recovery probably would have proceeded more rapidly if the fiscal program had been larger. That’s why we advocated a larger fiscal program than the one that passed.

You have been cast as the heavy in documentaries like “Inside Job” and on “Frontline” for sowing the seeds of the economic crisis during the Clinton administration. You were against regulating derivatives and in support of repealing the Glass-Steagall Act, which significantly relaxed how banks do business. Did they miss the mark by casting you in this light?

Oh, these are much more complicated issues than those kinds of movies can suggest. Canada, for example, is generally pointed to as a major regulatory success. But it’s got universal banking that goes considerably beyond the Glass-Steagall reforms that happened in the United States. The major accidents in the United States — Bear Stearns, Lehman, Fannie and Freddie — had nothing to do with Glass-Steagall. Did we 10 years ago foresee everything that happened with respect to derivatives? Absolutely not. Would I have acted differently with the benefit of everything that I’ve seen over the last 10 years? Of course. Is it plausible that the Bush administration, which was failing to act on all the rules that did exist, would have used any authorities with respect to derivatives in any of the legislation we dealt with? Exceedingly unlikely in my view.

On a recent birthday in the White House, you started singing a rousing chorus of “For he’s an unpleasant fellow.” You’re aware of — and were making light of — the fact that you occasionally rub people the wrong way.

I was probably making light of some newspaper stories that had appeared at the time. You know, in meetings, I’m more focused on trying to figure out what the right answer is than making everybody feel validated. In Washington and at Harvard, that sometimes rubs people the wrong way.


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