Former U.S. Treasury Secretary Lawrence Summers called for a $2.5 trillion infrastructure investment program over 10 years to energize the American economy and help it exit from “secular stagnation.”
Speaking to a Sydney conference via live video on Tuesday, Summers cited one of his favorite examples in reiterating his call for new U.S. infrastructure. He got a large show of hands after asking how many in the Australian audience had been to New York’s Kennedy airport. He then asked how many thought the U.S. should be “really proud” of that airport as a gateway to America’s greatest city. The response: no hands, and a lot of laughter.
“It is a no-brainer,” Summers said. “Because of what it means for job creation and demand in the short run; because of what it means for economic capacity in the medium run; because of what the growth means for the financial health of the government.” He highlighted historically low funding costs, "very low" materials costs and the employment needs of non-college-educated males in his call.
Asked what it would take to get out of secular stagnation, where trend economic growth rates have been reduced, Summers nominated 1 percent of gross domestic product a year for a decade as "a reasonable target to do something substantial with infrastructure investment” that would have a meaningful impact. He said he didn’t think it would be a problem for the country’s fiscal health, representing “about $2.5 trillion over 10 years.”
“Infrastructure investment as a share of GDP is lower than it’s been any time since 1947, and if you look at federal infrastructure investment, net of depreciation, net investment, it is rounded to the nearest integer: equal to zero,” he said.
In a question-and-answer session with a moderator at the Citigroup Inc. investment conference, Summers’s comments included:
- While government debt is high, it’s serviceability is “extraordinarily low,” thanks to current interest-rate levels;
- Substantial parts of Europe -- particularly Germany -- should join the U.S. in investing in buildings, roads, bridges and the like;
- The Trans Pacific Partnership trade deal could still be passed;
- The Federal Reserve should avoid raising interest rates.
On the U.S. presidential election, Summers said it now looked highly unlikely that Donald Trump would win, and criticized the Republican’s platform.
“I had never supposed that populism personified by Juan Peron in Argentina or many other Latin American leaders would be successfully exported from Latin America to the United States,” said Summers, who served with Trump’s opponent, Democratic candidate Hillary Clinton, in the Obama administration. “And I think it’s very dangerous.”
On the TPP, Summers said President Barack Obama “is very determined, and it is a mistake I think to count him out given he’s been successful at accomplishing things like universal health care that many people thought were impossible.”