Maria Bartiromo tried several times to get Summers to say whether he thought there might be a "double-dip" recession. The first time he gave an economist's answer. ("Nobody can forecast what's going to happen... But most observers don't see any reason for the freefall precipitous decline that we saw" late last year and early this year, etc.) On return visits to the question he finally said, "Look, you're going to try to get me into your categories. I am going to keep using my somewhat more rounded categories" -- and went on to say that economic "convalescence" is never smooth but it appeared that the worst was past. You can see some of the same tone in this exchange, on whether a "second stimulus" was needed:
When the interviewer responded by saying, "So, will there be a second stimulus?" Summers said: "I have been here a while, but not long enough to slip into catch Washington phrase like 'second stimulus.' What we need is continuing public investments, and that is what the President is putting forward."
After the jump, two other clips illustrating of his answers: one on why the Administration would let some of the Bush Administration's tax cuts expire, and the other on his big-picture perspective of what this time in economic history might mean. Before that, one exchange I thought was very interesting and that illustrated Summers's experience in realms other than immediate policy making.
In the context of a "second stimulus" question, Maria Bartiromo asked why the American medical system was so amazingly retarded in the application of information technology -- compared with the corner grocery store, the airlines, FedEx, or anything else. ("Retarded" is my term, but that was the point.) Summers gave this economic-theory-and-history answer.
"There are people who could give very nuanced answers in terms of the health care sector," he began. "I would give a different kind of answer."
"When there are things people can do that are strongly in their own interest to make the world better, the market system works very well. But when there are chicken and egg problems, where coordination and network issues are central, the pure market system is going to be much less good in doing it. What is the gain to my doctor in adopting electronic medical records, if no other doctor anywhere is going to be able to read that record? And who is going to go and invest heavily in a medical record system, if there is the feeling that a new system based on a different standard is going to be accepted broadly a year or two years from now?
"In an area like this, you need the public sector to take a strong role It's similar to another area, the national power grid. Perhaps a town or state would be pragmatic about allowing a new kind of transmission cable to come across, if that was going to allow lower costs for that town and that state. But if it's going to permit cheaper movement of kilowatts between that state and the one to east or west, the state has no very strong incentive to do it.
"These are major coordination issues, and that is what the kind of money invested in the recovery act is designed to overcome. If you go back to the transcontinental railroad [he said "transPacific"], the interstate highway system, network of landgrant colleges - you see the the idea that where there are important investments that involve coordination in a major way, the public sector can do it best. This is both because of the benefits on the input side, putting people to work, and the output improvements that will ultimately result."
Quotes may be approximate -- this is from typing in real time -- but that was the gist. At several other points, Summers emphasized that the economic collapse was both a crisis and an opportunity -- to make similar coordinate public investments in other transportation and energy needs.
More clips below. See the full webcast when it goes up. (Rush transcript here.)
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Watch the full video of this session:
Summers on the long-term perspective about today's global economy:
On why the Administration will let the Bush tax cuts expire:
