Larry Summers, former director of the White House National Economic Council, told students Monday night that the American economy requires more stimulus funding.
In front of a overflowing crowd at Sheffield-Sterling-Strathcona Hall, Summers argued in a Yale Political Union debate that the United States should rely more heavily on Keynesian economic policies, which call for government interventions to counter fluctuations in the economy. Even though many people worry about the increasing national debt, he said government spending and expansive monetary policy could effectively stimulate demand necessary for growth.
“Relative to what the American economy was achieving just five years ago, we are now 12 million jobs short,” he said.
Summers said that because of job losses, every family of four is now $18,000 poorer. If employment were at its normal level, Summers said, the budget deficit would be between $300 and 400 billion less.
Summers said low consumer demand has created a poor job market that is limiting the number jobs available to recent college graduates.
“Some of you, when you graduate, will not get the jobs you want,” he said. “That is because the firms you want to work at are not going to hire as many as you want them to hire. There is no reason for firms to hire workers for customers they do not have.”
He dismissed the fear of rampant inflation triggered by fiscal expansion, arguing that low demand was a much more serious and pressing problem. Some students in the audience challenged Summers’ advice. When one student claimed that the Obama Administration’s stimulus efforts and other government interventions were futile because of Congress’ corruption, Summers laughed and summarily denied the student’s portrayal of Congress.
“I would challenge this gentleman here to demonstrate that Yale University is able to construct projects with as little corruption and as much efficacy as was demonstrated in the stimulus project,” Summers said. “To suggest that the money went somewhere that did not create jobs is a suggestion that is supported by neither logic nor evidence.”
Summers similarly dismissed other questions, at one point saying he found it difficult to take seriously a student who questioned the merits of capitalism.
Three students interviewed who attended the debate said the talk reaffirmed their support of Keynesian economics, often complimenting Summers’ ability to succinctly present his positions.
“Summers’ speech made the policies he supported under the Obama Administration make a lot more sense than when they were depicted in the media,” said Julian Debenedetti ’15, who also described Summers as “testy” because of his sharp responses to students’ questions.
Summers received the John Bates Clark Medal in 1993 for his work in economics, and he served as president of Harvard University from 2001 to 2006. He currently teaches at Harvard’s Kennedy School of Government.
Correction Jan. 10, 2012
An earlier version of this article misstated the amount by which former White House economic adviser Larry Summers said the federal budget deficit would be reduced if the nation were at full employment levels. It was $300 to 400 billion, not $3 to 4 billion.