Larry Summers Says Job Growth Around The Corner; Unemployment Above 9 Percent For 20 Months
Two years into the Obama administration the architect of the president's economic policy remains resolute that, if the nation simply waits, job growth is right around the corner.
"The prospects for starting to see significant employment growth and reductions in unemployment right now are better than they've been in the United States in a number of years," said Larry Summers, who recently left the White House as director of the National Economic Council.
Summers, who arguably more than anyone in the Obama White House shaped the administration's response to the worst economic downturn since the Great Depression, said accelerated economic growth is "starting to happen."
"And historically, the behavior of output precedes the behavior of employment," he said during a Sunday interview on CNN's "Fareed Zakaria GPS." "It's a process that, unfortunately, takes time."
WATCH:
Nearly one in ten American workers is jobless. It's been above 9 percent for 20 consecutive months, the longest such streak since records began in 1948, according to the Labor Department. When Barack Obama took office, the nation's unemployment rate stood at 7.8 percent.
To combat that, the Obama administration should temporarily disregard the growing federal deficit and invest more in repairing the nation's decrepit infrastructure to boost the sagging economy, Summers said.
But his argument runs counter to the administration's approach. Largely focusing on cutting taxes and increasing entitlement spending as a means to end the Great Recession, the Obama White House has struggled to add jobs. Two-thirds of Obama's $800 billion stimulus plan, enacted shortly after he took office in 2009, was devoted to tax breaks and direct payments like increased unemployment benefits. Job growth has been anemic.
Summers said the time has come for the government to invest in repairing the nation's roads, bridges and buildings. Short-term deficit worries should be dismissed, he said, echoing similar arguments by Federal Reserve Chairman Ben Bernanke, who began making the case to Congress in June.
"If at a time when we have unemployment approaching 20 percent in construction, and a 10-year bond rate in the neighborhood of 3 percent, if that's not a time to invest in repairing our infrastructure, I can't imagine when there would be a better time," Summers said.
"The main thing we have to do to accelerate the process of job creation is to accelerate economic growth," Summers said. "The most important thing we can do is to raise the demand, the level of demand in our economy, so as to create more output. That's what's most important in the short run."
Once spending increases, jobs will follow, Summers said.
He added that failing to invest in the nation's infrastructure acts like a deficit in that the cost of making needed repairs is passed on to future generations of taxpayers. "Frankly, that's something we've been doing in this country for a long time," Summers said.
The average age of government assets -- like buildings, schools, and roads -- rose to 23.1 years old in 2009, a record, according to Commerce Department data going back to 1925. Highways and streets owned by federal, state and local governments are now on average 24.6 years old. State and local health care facilites average more than 27 years old, data show. Military facilities average 43 years old.
The construction industry has shed 2.1 million jobs since January 2007, Labor Department figures show. The Federal Reserve estimates that the unemployment rate will be around 9 percent at the end of this year. By the next presidential election in 2012, unemployment will be around 8 percent, according to the nation's central bank.
The yield on the 10-year Treasury note closed at 3.3 percent Friday. Treasuries are government debt that allow the government to borrow now and repay its funders later. The federal government was paying double its current rate on 10-year debt as recently as 2000, Federal Reserve data show.
The government paid about 3.9 percent interest on all its debt during the last full month of former President George W. Bush's administration, according to the Treasury Department. Last month, the federal government paid just under 3 percent.
Shahien Nasiripour is a business reporter for The Huffington Post. You can send him an e-mail; bookmark his page; subscribe to his RSS feed; follow him on Twitter; friend him on Facebook; become a fan; and/or get e-mail alerts when he reports the latest news. He can be reached at 646-274-2455.
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First Posted: 01/16/11 06:56 PM ET Updated: 05/25/11 07:25 PM ET