printable versionHarvard president says deficit puts U.S. in precarious position
BY KENDALL MADDEN
Summers spoke at length about the dangers of large national deficits but made no mention of the scandal that enveloped him earlier this year when he made controversial remarks about women’s capabilities in science and math.
Facing large national trade and federal budget deficits, the United States finds itself in a very precarious position, Harvard President Lawrence Summers said during a May 20 talk on campus.
"Without some significant structural changes this figure will continue to rise," Summers said. "Substantial adjustment problems lie ahead. … This is not a problem which will be solved overnight."
Summers, who succeeded Robert Rubin as treasury secretary in the Clinton administration, spoke to associates of the Stanford Institute for Economic Policy Research meeting in Encina Hall. Although he has been widely criticized for remarks he made earlier this year about women's capabilities in math and science, Summers did not bring up the matter in front of the audience, which was more than a third female.
Summers pointed to several indicators of "when you should worry" about the deficit. "The first question is, is it big?" he said. By historical standards, the current U.S. deficit is big. The federal budget deficit is 3.6 percent of the gross national product; the national trade deficit is 6 percent of GNP, he said.
Without ever explicitly criticizing the Bush administration, Summers made it clear that a passive attitude toward the deficit would not be sufficient to deal with the problem. "All countries want to say that they are different," he said, referring to how nations respond to the indicators of dangerous deficits. But all economic and historical precedents show that there are no exceptions, he said.
"As long as the U.S. savings rate is only 1 percent, we are not on a healthy path," Summers said. To reduce the deficit will require more national savings and reduced consumption, he added.
Summers offered several steps the United States could take to reduce the deficit, but he acknowledged that "there is no silver bullet" to solve the problem.
During his talk, Summers also lauded the work of Stanford economists, including Nobel Prize winners Kenneth Arrow and Milton Friedman, who were in the audience. "The power of research done at places like Stanford is anything but inconsequential. It is, in fact, extremely influential in the policy-development process," he said.
Returning to academia after work in Washington, Summers said, has given him a new appreciation for the role of the university in politics and public life.
Kendall Madden is a science-writing intern.