Summers: Economy Has Moved Back From Catastrophe

WASHINGTON — President Barack Obama's top economic adviser has new cause for optimism. Back in January, Lawrence Summers said, Google searches for "economic depression" had increased by a factor of four. Today, the searches are back to pre-crisis levels.

For Summers, that is an economic indicator worth noting.

"If we were at the brink of catastrophe at the beginning of the year, we have walked some substantial distance back from the abyss," Summers said Friday.

Summer's upbeat tone, delivered in a speech to a Washington think tank, comes as the administration approaches its sixth month in office and as the public and members of Congress are becoming restless with Obama's economic policies. The administration is calling for patience to let its initiatives take hold.

Summers had other causes for optimism: The pace of economic contraction is slowing. Wall Street institutions that received government assistance are showing unexpectedly better earnings. On the other hand, unemployment climbing higher – at 9.5 percent now and expected to rise above 10 percent.

Summers, the director of the National Economic Council, said economic collapse looked all too real six months ago. "Fear was widespread and confidence was scarce," he said.

Now, he said, consumer sentiment has begun to improve. He conceded that unemployment is "substantially higher" and that job losses are greater than predicted last winter. Echoing Obama, he said he expected unemployment to rise in the coming months.

But he defended the administration's $787 billion economic stimulus, saying it was proceeding on schedule and that the peak of its impact on jobs is not expected until the end of 2010.

He said the improved health displayed by some large Wall Street firms would not have been possible without government infusions, guarantees and other programs provided by the government.

"There is no financial institution that would be reporting the kind of positive results that we have seen in the last quarter but for the extraordinary public support provided by the government," Summers said.

Speaking at The Peterson Institute for International Economics, Summer said that the ability of certain large banks to pay the Treasury back for large infusions of taxpayer money is a "positive and favorable sign."

"It's crucial to recognize that the increased health of financial firms is a positive indicator for the economy," he said.

Comments

[GreedyOldPsychopaths]

So the number of entries of the phrase "economic depression" on an internet search engine is used as an "economic indicator worth noting" by the administration's top economic advisers to judge the state of the economy? We're so screwed.

[springbaby]

I say BS!

[gr8abz]

And I think what Summers is saying is accurate. It's easy to be pissed off because things are not really rolling yet after a big six months of the new administration. Also unemployment is always the last thing to change during economic transformations. Then there is the media. Most network news stations thrive on predicting doom and gloom. Meanwhile, myself and most people I know report that things are definitely picking up in their business.

[Lilith33]

Moved back......­..........­..........­..........­..........­.....think about that.

[breakingpoint]

Liar!

[joebhed]

The economy may have moved back from catastrophe, but, as Larry Summers said, the worst is yet to come.
So, come on gang.
He's right.
We ain't there yet.

[My-Two-Cents]

I guess the collapse of the housing market, $700B for TARP, $800B for a recovery package, followed by a prolonged steep recession is better than a catastrophe. Wow, I feel much better.

I wonder what his definition of a depression is.

[macohmz]

They never ask the right question. Why are health costs so high? What's at the root of these high costs? The expense of health care is so far above the expense of everything else that there should be obvious reasons why. They (Democrats and Republicans) won't go that route. They keep it all so "surface". There's human beings behind the high cost of health care. This isn't something that just happens.
Maybe its time to force health care costs down. Instead of constantly accommodating the greedy wants of the medical establishment.

[ObamAtomic]

Not disrespect,are you awake?

[MadAppraiser]

The economic assault upon mainstream America is a well-orchestrated, coordinated effort of American banking, and Corporate American interests. Political lobbyists from these groups promoted private and public policy programs that actively stripped mainstream American wealth.

Mainstream America's big mistake is to view these economic dilemmas we face as separate economic events. Over the years we have seen attacks upon unions, salary locking mechanisms, corporate employment downsizing­/outsourci­ng techniques, hybrid collateral­ized/non-c­ollaterali­zed lending instruments, and creative banking service fees that result in decreased saving's yield rates.

We better OPEN OUR EYES, before it is TOO LATE!!!

[howeverfaraway]

NOW HEAR THIS FOLKS! From the comments section of the NY Times on Paul Krugman's column today, someone writes this
"Am I really first? Anyways, this is a little off the subject but not really. I was talking to a coworker about closing costs on his first home purchase today. He told me he shopped around and still ended up with 7,000 in closing costs. I bought a house five years ago and maybe had 2,500. $7,000 seams very close to the $8,000 first time home buyers credit. Did we really give the banks a trillion dollars and they are still going to back door billions more from hard working americans who need that money to get a little boost? That is a outrage, does anyone else feel the same way?"

Anyone out there trying to take advantage of the First Time Home Buyers credit finding the same thing?

[jwws007]

of course it's better, his buddies at goldman sachs just made huge profits

[mtracy9]

Reagan chose as his economic advisors a group that espoused a radical economic theory called "supply-side." The supply-siders told Reagan that if he gave tax cuts to the top brackets (the wealthiest individuals) the positive effects would "trickle down" to everyone else. Tax cuts, they argued, would produce so much growth in the economy that America could simply outgrow its deficits. Reagan bought into supply-side theory, which is why in 1981 he predicted that there would be a "drastic reduction in the deficit."

However, Reagan soon discovered that his supply-side advisors were wrong. Tax cuts, instead of reducing the deficit, caused the deficit to balloon. After 1981, Reagan made no more rosy predictions regarding the deficit.

At this point, Reagan would change strategy. He would blame the U.S. Congress for the record deficits that accrued during his years in office. Reagan would say that Congress was responsible, because Congress did not slash spending enough--meaning domestic spending, since Reagan always championed increased military spending.

Reagan chose to ignore the fact that his own Republican Party was in control of the Senate until 1987, and that Congress actually spent less than what he originally had asked for.

Federal deficits would continue unabated until the presidency of Bill Clinton when fiscal responsibility would finally be restored. President Clinton would achieve a balanced budget (and even record surpluses) in large measure by restoring higher taxes on the wealthy.

[My-Two-Cents]

I remember this “trickle down” theory, and for seem reason what was trickling down didn’t seem like money.

[macohmz]

Bull dookey! He knows about as much as a Magic 8 Ball.

[Austrian School]

Okay. Can we cancel the unspent Stimulus now? If we're not in a disaster, do we really need it?

[diak0n0s]

With this article and Joe Biden telling us to "look around" and see how much better things are, I'm really starting to feel good.

I just with the stupids new media would quite printing lies about how bad the economy is.

The NYT, CBS, NBC and CNN must be hacks for those low life Republicans.

[jwws007]

of course it's the media, just ignore those 7 million people who have lost their jobs since august

[igorz]

Indeed it is. Take a look at the market. It.leads the economy by 6 -9 months and its been up for 4 ... and going higher.

When the economy starts to grow again in the late summer early fall, watch the Right try to take credit for it; still screaming about how great the free market is.

[jwws007]

you're right, when the market hit 14k 6 months before the crash, it was right on the money . the market is nothing but a huge ponzi scheme

[diak0n0s]

I for one feel much better that Wall Street and Goldman Sachs are doing so good.

These wonderful Americans deserve every dollar they can steal.

Thank you Mr. President for your wisdom.