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
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
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
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
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
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.”