The Corner

Summers in 2001: Stimulus a Bad Idea

Dan Friedman of CongressDaily:

National Economic Council Director Lawrence Summers is championing the $787 billion stimulus bill President Obama signed in February to spur economic activity. But eight years ago, he had a different view. “The idea that a huge spending program is the way to stimulate the economy, or the idea that the way to get better at high tech is for the government to take over the technology industries, these kinds of ideas basically have become passe because they’ve been disproven,” Summers said in an April 2001 interview with PBS. “They don’t represent a reading of experience.” Citing his “enormous respect” for conservative economist Milton Friedman, Summers said, “There is something about this epoch in history that really puts a premium on incentives, on decentralization, on allowing small economic energy to bubble up rather than a more top-down, more directed approach, that may have been a more fruitful approach in earlier years.”

But epochs change. “We are not in ordinary economic times and the change of economic conditions requires a different approach,” White House spokeswoman Jennifer Psaki said when asked about Summers’ 2001 statement. “Larry Summers has been a top adviser to the president on the economy and a strong supporter of the stimulus from the beginning. He has made clear that the economic downturn and the events of the last few years have made stimulus spending a necessary part of economic recovery,” she said.

Republicans are gleeful about the unearthed words. “It certainly doesn’t inspire a lot of confidence from taxpayers when the administration’s chief stimulus cheerleader was making arguments like this just a few years back,” said a senior Senate GOP aide. “That sounds very much like the arguments that Republicans made during the debate over the Democrats’ trillion-dollar spending bill,” a spokesman for House Minority Leader Boehner added.

The PBS interview can be found here.

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