“A contrarian and pessimistic take on what could be in store for the U.S. economy, and Canada” – Lawrence H. Summers.
- Problem: Slow economic growth rate.
- Cause: Slow population and labour force growth and downward trend in participation. At the same time, productivity growth has been slow.
- Result: A middle class that benefits less and less from opportunity. Rising inequality and more embittered minority citizens.
- Solution: “I think that most of the steps that I would favour infrastructure investment, tax reform, immigration reform and free trade are in the interest of the vast majority of Americans. It cannot be right that, in a country with record construction and non-employment, one that can borrow money for the very long term at rates close to 2 per cent in a currency that it prints itself, Kennedy Airport looks as it does. That’s a symbol for a great deal of infrastructure investment. It is shocking and not acceptable that federal investment in infrastructure is now zero as a share of GDP on a net basis – that is adjusting for depreciation. That it’s the lowest it’s been in more than 50 years. That can’t possibly make any sense.”
- Infrastructure investment’s burdens on an already debt-laden future generations? ”There are many ways of burdening the future. One is to borrow money – though, given how low interest rates are, those burdens aren’t that great. Another is to defer maintenance. Those costs accumulate at a much greater rate, and that’s why I think infrastructure investment is so very important. Another way to burden future generations is to scrimp on education. Another way is to fail to invest in basic scientific research. Another way is to saddle them with huge pension liabilities for those who are working, serving the public today. We are doing all those things. And so, a more rational set of policies that raise the growth rate and leave them 20-per-cent richer than they would otherwise be is by far the most important thing we can do for future generations.”
From Lawrence H. Summers: ‘There are many ways of burdening our future’ The Globe and Mail Friday, Mar. 20 2015