04/13/2009 05:12 am ET | Updated May 25, 2011

Summers: Consumer Spending Stabilized But Economy Gripped By Fear

Barack Obama's chief financial adviser said on Friday that the president's economic policies had already had effects, however marginal, on the nation's economy, including stabilizing consumer spending.

"It is surely too early to gauge the broader economic impact of the President's program," said Larry Summers, director of the National Economic Council. "But it is modestly encouraging that since it began to take shape, consumer spending in the US, which was collapsing during the holiday season, appears, according to a number of indicators, to have stabilized."

Speaking at the Brookings Institution, the rest of Summers remarks were only moderately optimistic. Discussing the broader landscape, including a Dow Industrial Average that "was at the same level as it was in 1966," he warned that the U.S. economy is gripped by fear, drawing parallels to the Great Depression.

"In the past few years, we've seen too much greed and too little fear, too much spending and not enough saving, too much borrowing and not enough worrying," he said. "Today, however, our problem is exactly the opposite. It is this transition from an excess of greed to an excess of fear that President Roosevelt had in mind when he famously observed that the only thing we had to fear was fear itself. It is this transition that has happened in the United States today."

In his first major policy speech since President Obama took office, Summers said that the administration's goal is to find a medium between the "abundance of greed and an absence of fear" that personified the past decade, and the reverse, where "[g]reed gives way to fear and this fear begets more fear." Repeating a new mantra from the White House, he declared that the country needed to wean itself off of "bubble driven economic growth," calling it "problematic" for its "disruption and dislocation."

In place of "asset price inflation-induced consumption," he said, the foundations of the economy and the engines of growth had to be more stable. The bullet points he hit on included: "stronger exports," moving "away from foreign debt-financed growth," containing health care costs, investing in "energy vulnerability," and improving America's education system. The metric of success, in turn, would be jobs.

"Rising employment will lead to rising spending, which leads t further increases in income and employment," he said. "Of fundamental importance is ensuring that we do not exchange a painful recession for another unsustainable expansion. That would not only be irresponsible, it would be counterproductive."