Summers: US economy will return to 3% growth this year

Former US Treasury secretary praises Obama's stimulus push that helped prevent a depression.

June 20, 2013 03:04
2 minute read.
US Treasury secretary Larry Summers

US Treasury secretary Larry Summers. (photo credit: REUTERS/Hyungwon Kang)

The United States economy will reach a 3 percent growth rate by the end of 2013, Larry Summers, former US Treasury secretary, predicted Wednesday night.

Speaking on a panel of distinguished economists and thinkers at the Presidential Conference in Jerusalem, Summers praised US President Barack Obama for policies that are beginning to bear fruit in the economy.

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Obama’s stimulus push helped prevent a depression, and allowed many of the economic problems to work through more quickly. Among them, the US housing market’s recovery is cause for hope. While at the height of the crisis the excess capacity in housing dug deep, the US was already approaching a point in which higher demand meant there would be a shortage.

“Young people may like living with their parents for a little while, and parents may like having them home for a little while, but after a few years, that changes,” he said.

The fiscal adjustments in falling public sector spending and increasing revenues, which he called “a significant headwind,” was set to end. “That process is now essentially over. The headwind will not be blowing again next year the way it has the last three years,” he said.

In part because of Obama’s healthcare legislation, healthcare costs, “a traditional bugaboo,” are expected to total a trillion dollars less over the next decade, while other inflation pressures would remain “quiescent” at worst. Despite all the hubbub, he said, increasing growth would mean that the US debt to GDP will be lower in 2015, and even lower in 2020.

All in all, he said, the United States had several economic advantages that would help it in the near future. The first was demography, which would provide a strong labor force over the next generation, a problem facing many other industrialized countries with aging populations.

The second was immigration, which would only be aided by reform. “We stand out in our capacity to accept, assimilate and benefit from immigration,” he said.

The third “a capacity for technology and entrepreneurial innovation, that I believe with the possible exception of Israel, [the US] is unmatched in the world,” he said.

Both are countries, he joked, in which you can raise your first $100 million before you buy your first suit.

Fourth are positive developments in the energy market, which are leading the country toward energy independence.

And in perhaps one final nod to Obama, Summers declared that, “The United States will benefit from its capacity for audacity.”

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