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Larry Summers: Job growth by Springby Mark Silva
Larry Summers, the president's chief economic adviser, says the shedding of jobs in an economy emerging from recession should end by Spring.
"It will take time,'' Summers said in an appearance on CNN's State of the Union with John King today. "A year ago, the question was would we have a depression?
"Today everyone agrees that the recession is over,'' Summers said. "And the questions are around how fast we'll recover. Experience is that it that these things -- that it takes significant time.
"First, GDP increases. We have seen that start to happen. Then firms ask the workers who are already with them to work more hours. That's starting to happen. Then, net job creation starts to happen,'' Summers said. "We were losing 700,000 jobs a month when President Obama took office. Last month, we lost 11,000. So we are getting there. And most professional forecasters expect job growth by Spring, and I think that's a reasonable judgment in an uncertain world. ''
Summers said the same thing in an appearance on ABC News' This Week with George Stephanopoulos.
"By Spring, employment growth will start turning positive,'' Summers told Stephanopoulos. "Everybody agrees that the recession is over.''
Here, courtesy of CNN, is a transcript of the interview with Summers:
KING: We begin this Sunday with a few numbers and with the issue that dominates our national conversation, the economy. We are 328 days into the Obama presidency, 299 days since the administration's big economic stimulus plan was signed into law. It is often said that consumer spending drives the American economy, and 13 days from Christmas, there are some signs many of you are willing to dig a little deeper this holiday season, but there are plenty of not-so- encouraging numbers as well. Record federal deficits, a national unemployment rate of 10 percent. And while mortgage rates are below 5 percent, many Americans say the banks, even banks that received their taxpayer dollars in bailout funds, are being more than a little Grinch-like when it comes to handing out credit.
The president meets with some of those bankers Monday at the White House, and also wants to dip into some of those Wall Street bailout funds to help create more jobs on Main Street. A perfect moment to touch base with one of the president's top economic advisers on these critical pocketbook issues, the director of the National Economic Council, Lawrence Summers, joins us from Boston. Good morning, Mr. Summers.
SUMMERS: John, good to be with you.
KING: It's good to see you in the greatest city in America, Boston, Massachusetts. Let's begin with the questions so many people are asking. Sunday morning, they get up, they have breakfast with the kids, they have a cup of coffee, maybe pick up the Sunday paper, and they ask themselves for months now, when are the jobs coming back? We are at 10 percent unemployment. When will we see 8 percent, 7 percent, 6 percent?
SUMMERS: Look, John, it will take time. A year ago, the question was would we have a depression? Today everyone agrees that the recession is over. And the questions are around how fast we'll recover.
Experience is that it that these things -- that it takes significant time. First, GDP increases. We have seen that start to happen. Then firms ask the workers who are already with them to work more hours. That's starting to happen. Then, net job creation starts to happen.
We were losing 700,000 jobs a month when President Obama took office. Last month, we lost 11,000. So we are getting there. And most professional forecasters expect job growth by spring, and I think that's a reasonable judgment in an uncertain world.
And then after employment growth, given that when you start to create jobs, more and more people start looking for work because they are encouraged, it takes further time until you reduce unemployment.
But on the key measure, is the economy creating jobs or are jobs still on net being destroyed, most people now think that we are looking to see that by spring. And some forecasters think it will happen a little sooner, some forecasters think it will happen later. But we are a lot closer than where we were a year ago, and the signs that are the first signs that things are turning, the output starting to grow, hours worked starting to increase, we are now seeing progress.
That's not nearly enough, not nearly enough. We have got to do a lot more. There is no more important issue facing the country than job growth, because if we don't create jobs, we have got no prospect at the kind of budget deficits we want. If unemployment stays high, we are not going to have the strength in the world that we want, if unemployment stays high.
That's why jobs are the president's critical economic priority going forward. That's why he is working so hard to implement the recovery act. And actually, because it takes time to bring projects online, there are going to be twice as many projects going in the next six months as there were in the last six months. That's why we are working to support the private sector by encouraging credit to small business, by doing as much as we possibly can to promote U.S. exports at a time when we should be very competitive in the global economy. And that's why the president announced this week a set of principles to guide us going forward, emphasizing the importance of small business, the importance of infrastructure, and the real need for us to start making investments on a much greater scale, and incentives for investment on a much greater scale in energy investment.
There are opportunities for millions of your viewers out there to make investments in their home where they will get a very high rate of return. They will spend $1,000 today and they will save hundreds of dollars each months going forward. And we have got to get the right kinds of partnerships going between the public and the private sector to encourage those kinds of energy efficiency investments. Just like the cash-for-clunkers program spurred a lot of spending and helped the environment over the summer, we are going to have to do similar kinds of things to support people as they make improvements to their homes to promote energy efficiency.
KING: Let me jump in here, let me jump in here, because you mentioned partnership. One of the reasons we are in this ditch is because of abuses on Wall Street and big mistakes made by financial institutions. The president will meet with a number of big bankers tomorrow at the White House and he says in a "60 Minutes" interview to air tonight that he is worried many of them still don't get it. What don't they get and what must they do?
SUMMERS: Here is what I think they don't get. It was irresponsible risk taking that brought the economy to the brink of collapse. It was their irresponsible risk taking in many cases that brought the economy to collapse. And frankly, after the Asian financial crisis, after the S&L debacle, after the 1987 stock market crash, after other things that happened, it wasn't the first time.
And they don't get in some cases that they wouldn't be where they are today, and they certainly would not be paying the bonuses they are paying today, if their government hadn't taken extraordinary actions. Extraordinary actions not, frankly, with the motivation of helping them, but with the motivation of helping the economy, but of which they were nonetheless the beneficiary. And for them to be complaining about serious regulation directed at making sure this never happens again is wrong. For $300 million to be spent on lobbyists trying to gut serious efforts at financial reform is not how this country should be operating. For firms that have benefited from taxpayer support to be complaining about the government burdening them is, frankly, a bit rich.
The country took necessary steps. It helped, because there was no other way, the financial community. Now the financial community has got to think about its obligations to the country. That goes to issues about the flow of credit, that goes to making sure that we don't see a recurrence of what took place again, which goes to stronger financial regulation. It goes to making sure that we are doing everything we can, everything we can to prevent foreclosures and to enable families to stay in their homes. And it goes, when some institutions are saying they can't lend to small businesses because they don't have enough capital, they would have more capital if they were not paying it out to their workers in the form of very great bonuses.
So the president is going to focus on what the bankers can do for their country, what they -- what obligations they should feel at what, even with the improvement, is still a critical juncture for our economy.
KING: Let me talk to you about a challenge, a critical juncture here in Washington. I want to play out something for our viewers to see. Congress is about to pass an increase in the federal debt celling, the amount that government is allowed to borrow and run up into debt.
Here's where you served in the Clinton administration, back in 1993, and you look at it; it goes from $4.37 trillion up to $12.1 trillion, the government now authorized to borrow. And Congress is going to raise that up a bit even more; $1.4 trillion, record budget deficit last year.
And yet, Larry Summers, even as families around the country have to cut their budgets or make concessions, Congress is going to vote today on a spending bill that will give some Cabinet agencies, a dozen Cabinet agencies, sometimes nine, sometimes 10, and some departments, as much as a 12 percent spending increase.
This administration says next year will be the focus and discipline on debt reduction. Why not draw a line now and say now we need to start, and that's too much spending?
SUMMERS: A couple points, John. First, if people study your graph slowly, carefully, they'll see that the debt was actually going down in the late years of the Clinton administration.
Frankly, when a new administration took place in 2001, all the innovations came off; we spent; we did, for example, a whole new prescription drug program, paying for none of it, and at the same time we launched massive tax cuts.
And that's why the 10-year deficit projection that President Obama inherited was $8 trillion. That's what happened. And President Obama recognizes that we've got an obligation to fix it.
Frankly, for the next year or two, priority number one -- certainly this year, priority number one has to be job creation. That's why we're putting people directly to work.
But then the priority has to be getting the country's finances under control. That's going to be very clear in the rigorous budget that the president proposes. That's clear in how the president, with the very strong support of Secretary Geithner, has administered the -- the TARP program.
Just this week we were able to announce that more than $200 billion improvement in the projection on that program. We're starting to collect the funds back with interest and dividends on a substantial scale.
The Bank of America, for example, paid back some $45 billion that's now available for taxpayers.
We're very focused. The president has said that, on health care, we are not going to put into place -- he is not going to sign any legislation that increases the deficit at all. And in fact, the legislation provides a framework that will enable significant budget cuts.
So, yes, it's a -- it's a challenging agenda. But what we've got to do is make sure the economy starts growing again and growing strongly, because, if we don't do that, it's going to be enormously difficult to make progress on the deficit, and then, once the economy recovers, make sure in every way we can that our situation becomes more sustainable.
And the president's made clear his willingness to be part of any system that will bring the congressional leadership of both parties together around that crucial objective.
KING: When we come back, we'll talk more about that, the tough choices the president and the Congress will face if you do try to get the deficit down, and also, a bit of a score card on the stimulus plan so far. Much more to talk about with the president's top economic adviser, Lawrence Summers. Stay with us.
(COMMERCIAL BREAK)
KING: We're back with Lawrence Summers, the director of the National Economic Council.
And, Mr. Summers, you were mentioning before the break, the president's willing to sit down with the members of Congress or anyone else to try to work on getting the deficit down.
As you know, one of the leading proposals in Congress is a commission. Kent Conrad, the chairman of the Budget Committee, a Democrat; Judd Gregg, a Republican, the ranking Republican, from the state of New Hampshire -- they say, let's form a commission; the president gets a couple of appointments; most of them come from the Congress; they come up with a plan, and Congress has to vote up or down, yes or no. Tough choices, probably, spending cuts in there; might be tax increases in there, but you have to vote up or down, make the tough choices.
We'll talk about some of the potential choices, but just on the basic premise, would the president say, "Yes, I'll support that plan?"
SUMMERS: President Obama -- the president wants to see the problem solved. He's open to a wide range of approaches. But, of course, it depends on where all the congressional leadership are. And anything that will bring together the House of Representatives and the Senate Democrats...
KING: Let me -- let me jump in. Because a lot of the...
(CROSSTALK)
SUMMERS: ... the president will be very open to.
KING: A lot of people that control the money don't want that commission. They think it takes away their power to appropriate, their power to raise or decrease taxes.
And other people in this town -- and again, you were here; you rightly so said you were paying down the debt when you left the Clinton administration; we had a balanced budget. There are other people who say, if we're going to make those tough choices, that's the way to do it, to take, as much as you can, the politics out of it.
Why won't the White House say yes, or say no, and make them find something else?
SUMMERS: The president will be happy -- the president wants to see the problem solved. He's prepared to accommodate others on the way -- on the way that will work to do it. What's important is that the problem be solved.
Adopting an approach that some people favor and that other people will block, that won't -- that won't work, if they have the capacity -- if they have the capacity to block it.
So the president is consulting widely with the congressional leadership in both parties, in both -- on both houses of the Congress, looking to craft an approach that -- that works. This is an issue that's crucial for the future of our country.
You know, people need to understand that we need to do both and focus both on jobs in the short run, because, if the economy doesn't grow, the deficit situation becomes impossible, and on the deficit situation for the medium run, because, if we don't have confidence that comes from sustainable deficits, it's going to be very hard to grow jobs.
SUMMERS: So we need, really, to be moving very aggressively on both fronts. And the president is very pragmatic. He knows that we need to move on both these fronts. He's determined to do it. He's proposed concrete steps in both areas. And he's prepared to work with others, because this is a democracy, in whatever way will be most effective to bring about these objectives.
KING: He's the president, though, and he's the most powerful member of his party. Our senior White House correspondent, Ed Henry, obtained a document this week that indicates there's a divide among the president's economic team, which you help lead, on this very question, on the question of, if you had such a commission, how broad of a scope would it have? Would it just be Social Security and Medicare or could it across the federal budget?
Should the president -- one of the proposals in that memo was, the president would, sort of, preempt the Congress and announce a commission of his own.
Where does Larry Summers stand on that question? Do we need a commission and how broad should its scope be?
SUMMERS: I stand where I -- where I just said I stood, and where the -- and where the president stands. We need to solve this problem.
KING: But we don't know exactly where he stands.
SUMMERS: We're prepared -- we're prepared to work with others, but we live in a country with an executive branch and with a legislative branch, with two parts of the legislative branch, the House and the Senate, and any approach to be viable has to be an approach that works for both of them, statutory commission, executive commission, direct action through the appropriations process.
That's not really what's fundamentally important. What's fundamentally important is that we find a solution that works. And the president will be open -- is open to any approach that offers the prospect of controlling the budget deficit.
And all of his advisers -- let me just say, all of his advisers are agreed on the importance of deficit reduction in the medium term, justice -- they're all agreed on the importance of spurring job growth over the next year.
KING: Let's quickly take a year-end report card, if you will, on the stimulus plan. Because, as you know, it was very important to the president and has become controversial politically.
He signed it into law 299 days ago. And let's begin by letting the president himself lay out what he called the test for this program.
(BEGIN VIDEO CLIP)
OBAMA: My administration has begun implementing the American Recovery and Reinvestment Act, which will create or save 3.5 million jobs, and 90 percent of those will be in the private sector.
(END VIDEO CLIP)
KING: And now, Mr. Summers, let's look, using your own numbers. Now, some people dispute these numbers, but these are the administrations numbers, total jobs created or saved.
The prediction was 3,675,000. So far, Recovery.gov says 640,000; 329,000 jobs created.
As you noted earlier, a lot of the spending is still to come into the pipeline next year. Will you make that 3.6 million? Will you create or save 3 million jobs next year or does the administration need to revise that figure?
SUMMERS: You know well that you're comparing apples and oranges. The 3.5 million jobs figure was a two-year figure for the total impact of the program. The 600-and-some-thousand jobs took no account of the tax cuts and the extra spending that resulted from them, took no account of the fact that, when you put people -- put someone to work, they then spend money and there's a multiplier effect that puts other people to work.
The Congressional Budget Office, which isn't our administration, and certainly has been a thorn in the sign of administrations for a very long time, estimated last week that the program had already created up to 1.6 million jobs.
The number of projects under the program, according to the projections, and it's on schedule, is going to be about twice as great over the next six months as it was over the last six months.
So I don't think there's any question that the Recovery Act is serving its intended function. Look, look at the economic debate today. People are talking about how much job creation there will be; they'll be talking about the pace of the recovery from recession.
We're not where we'd like to be as a country, but, gosh, it's different from where it was when the Recovery Act was passed, when the question was whether we'd have another great depression; when the question was whether the financial system would collapse.
We've got a long way to go, but we're starting to see the basic mechanism of recovery. People spend; that creates income for other people; they spend, that creates more income; they spend.
That basic mechanism, that cyclical process of recovery, is starting to engage. And that's really an accomplishment of the Recovery Act.
So we're very satisfied with what the impact of those measures have been, even as we recognize that the rate at which people were laid off in the spring was something that went way beyond what any forecaster last winter was expecting. And so we've got a great deal to do.
KING: Larry Summers is the director of the National Economic at the White House. We thank you for your time this morning.
SUMMERS: Thank you.
KING: Take care.
Senate Passes Omnibus Spending MeasureThe package includes increased budgets for health, education, law enforcement and veterans' programs.
