Former Treasury Secretary Lawrence Summers warns that a Donald Trump presidency is the great threat to a nation dangerously close to another recession.
“The possible election of ‘Demagogue Donald’ dwarfs congressional dysfunction as a threat to American prosperity,”
Summers wrote in his blog.
“Beyond lunatic and incoherent budget and trade policies, Donald Trump would for the first time make political risk of the kind usually discussed in the context of Argentina, China or Russia relevant to the United States. How else to interpret threats to renegotiate debt, prosecute insubordinate publications and rip up treaties? Creeping fascism as an issue dwarfs macroeconomic policy!” claims Summers, who also was an economic adviser to President Barack Obama and served as Treasury secretary under Bill Clinton.
Meanwhile, he says the nation has to pull itself out of its economic funk and looming recession.
“The single most important issue for containing government debt burdens, increasing national security, encouraging more generosity toward the poor and raising middle-class standards of living is accelerating U.S. economic growth,” said Summers, now a Harvard professor.
“Fiscal policy is now important as a stabilization policy tool in a way that has not been the case since the Depression. Historical evidence suggests a better than even chance of an officially declared recession in the next three years,” he said.
“There is an additional case for fiscal policy. The economy as it now stands requires remarkably low interest rates to grow adequately. These rates are an invitation to leverage, to reaching for yield, to financial engineering and to bubbles. Raising rates significantly, as many suggest, without doing anything else risks recession. So the right strategy is to raise demand so as to make financially sustainable growth. This comes back to fiscal policy along with measures such as tax, regulatory and immigration reform to spur private demand,” he said.
Other respected investment voices aren't as adamant on their presidential preferences and believe the economy will be fine regardless of who occupies the White House.
For one, Warren Buffett, chairman and chief executive officer of Berkshire Hathaway Inc, has said a Trump presidency wouldn’t be the blow to U.S. business that some fear,
Bloomberg reported.
“If either Donald Trump or Hillary Clinton becomes president, and one of them is very likely to be, I think Berkshire will continue to do fine,” Buffett, 85, said at the company’s annual shareholders meeting in Omaha, Nebraska.
The outcome of November’s presidential election is unlikely to change the fact that the U.S. is a “remarkably attractive place in which to conduct a business,” said Buffett, who endorsed Democrat Clinton at an Omaha rally in December. U.S. companies have enjoyed “terrific” returns on equity despite a sustained period of ultra-low interest rates, he added.
Buffett, who has criticized Trump in the past and scorned politicians’ pessimism about the country, looked past the current voter angst for a longer view of U.S. economic prospects.
‘Far More’
“Twenty years from now, there’ll be far more output per capita in the United States in real terms than there is now. In 50 years, it’ll be far more,” Buffett said. “No presidential candidate or president is going to end that. They can shape it in ways that are good or bad, but they can’t end it.”
Asked how a Trump presidency might affect Berkshire’s business, Buffett replied, “That won’t be the main problem.” He didn’t elaborate.
(Newsmax wire services contributed to this report).
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