Tags: Summers | Washington | growth | deficit

Larry Summers: Washington Should Focus on Growth, Not Deficit

By Dan Weil   |   Wednesday, 13 Nov 2013 08:05 AM

Washington's current concern should be stimulating growth, not cutting the budget deficit, says Larry Summers, a Harvard professor and a former top economic adviser to President Obama.

"Growth should be a priority," he told Politico. "We are starving our potential."

Economic expansion itself will trim the deficit further by increasing tax revenue, said Summers, Treasury secretary under President Clinton.

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"We have demonstrated that we have a very limited capacity to do many things at once in Washington, and that makes it important that we focus on what is most important," Summers explained.

At a recent UBS investment conference, Summers said both public and private spending must increase, Financial Advisor reported. Infrastructure is one area where the government should increase its expenditures, he added.

"This is no time for austerity," he told the attendees. What's plaguing the economy is "a shortage of demand instead of an excess of supply."

And he thinks the country has given itself over to "deficit hysteria," despite the fact that the debt-to-GDP ratio is forecast to continue shrinking over the next 10 years.

Experts have mixed views about the budget deficit, which shrank to a five-year low of $680 billion in the year ended Sept. 30.

"We've made a lot of fiscal progress in the U.S. because of the sequester cuts, tax rates going back to historic norms and the economy improving," Bricklin Dwyer, an economist at BNP Paribas, told Bloomberg.

"Politicians have, thus far, avoided the most difficult choices — addressing unsustainable spending on entitlements such as Medicare and Medicaid."

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