tv Wall Street Week FOX November 8, 2015 9:00am-9:30am EST
ve talked about anything that affected people and their money. from times square, a new york ." anthony: we are pleased to welcome larry summers, president emeritus at harvard university treasury. it is a great honor for gary and i to have you on the show. tell us a little bit about your childhood. sec. summers: i grew up in suburban philadelphia, and went to public school. two younger brothers, came from a family where both my parents were economists. someone said since one of my brothers was a lawyer, and the other was a psychiatrist, that they had a lawyer, doctor, and business. gary: your uncle is a very
famous economist, is he not? sec. summers: i have two famous uncles, paul samuelson and ken arrow are both my uncles. gary: i don' t know anybody who grew up in philadelphia who is not absolutely passionate about philadelphia sports. with? sec. summers: i grew up eagles, and 76ers. 45 years in boston has moved that a bit, i' m a little bit bigger on the red sox, and the patriots. i still check out the phillies, and eagles, however. anthony: what kind of kid were you, did you get in trouble? sec. summers: i would not say that i was the wildest kid. i did not do my homework enough either to be valedictorian. yeah, i was in the chess club, and the math club.
anthony: you were on the debate team at m.i.t., how did that prepare you for government? sec. summers: a few ways. it taught me there were two perspectives on everything, and you had to be prepared to argue both sides if you wanted to really understand the question. it taught me to be able to express myself relatively forcefully, and clearly. in debate, you are always supposed to number your argument. that stuck with me, and ever since people make fun of me for saying the three points on that, four points on the other thing, it is a habit that i have. life role models? sec. summers: i came from a family of their illiberal parents -- there he liberal pa rents. i went to england for a year because my father was on
sabbatical. it was england, they insisted on interviewing not just the kid, but the parents as well. my mother, and father, where there. the guy asked me, the headmaster, asked me who my said franklin roosevelt. roosevelt?" and i said yes, he got us out of world war ii. that he was shocked. my father almost lost his temper, he said he was elected by the american people four times. the guy had served with very conservative people who hated roosevelt during the war and the only supposed roosevelt was
hated by the american people. far from it, but i suppose i don' t think i would use the term role model, but he was a kind of hero for me. i grew up interested in policy, i did end up going to that school because my mother successfully restrained my father. anthony: do you think you have lived the american dream, sir? sec. summers: i think i have been incredibly lucky, and i lived in america, and that sense i suppose i kind of lived the american dream. i grew up very fortunate. i grew up in a wonderful, wonderful household. i hadad a wonderful family, and so i would hardly call myself a rags to riches story. in that sense, i' m not sure i' m
i feel incredibly lucky to have had the set of opportunities that i have had. it makes me want to give something back to the country, that is why i wanted to be in public service and to work in government. anthony: we will be back with more from larry summers. sec. summers: it is not the first thing that donald trump has said that was nonsense. anthony: the idea that janet yellen was part of some political conspiracy was not -- sec. summers: you couldn' t possibly believe. >> sign-up for the "wall street week" newsletter, where we dive deeper into the most recent episodes with featured articles. go to wall street week.com and
gary: we' re back with larry summers. anthony: let' s talk about harvard for a second, is it easier to deal with professors in harvard, or politicians in washington? sec. summers: i was more successful with politicians in washington. they are brilliant professors at harvard, but the way you be, a harvard professor is that there is some conventional wisdom in your field and you overturn it.
you take a group of people whose defining professional success was an active iconoclasm. it tends to be hard to get them to work together and move forward. gary: what kind of teacher were you? sec. summers: the easiest one. i like people to say after the tape one of my classes they differently. preconceptions. my wife has always said that the large podium, small chair method is the worst way of imparting information. it works much better if the students are active. that is what i tried to do. anthony: what have you learned from the adversities you have had in your life? sec. summers: what i always say to people when either bad or good things happen to them,
anthony: you a written a lot about this concept of secular stagnation, but you are also positive about the united states. can you explain to our viewers where you are now in terms of macroeconomics? sec. summers: we have advantages. we have a hugely flexible economy, incredible universities , terrific energy resources, silicon valley, those go beyond what any other culture has. i would rather be playing the hand the united states has been any other hand anyone else is playing in the global economy. that said, i think we have real challenges. i think the world has real challenges. but now, the problem is actually
now we have tremendous potential to produce things, but the question is whether there is enough demand for all of that. that is why we see a bit of a tendency towards deflation, that is why we see such remarkably low interest rates. i think we' re in a very different era and we have been traditionally. anthony: i want to run a clip we dug up, something that you said. >> i think the world economy as a whole looks sluggish, and that is one of the reasons for concern about the american situation because slow growth as a whole means reduced demand for american exports. anthony: 23 years ago you were worried about slow growth, then you became a distinguished policy advisor and the secretary of the treasury. what steps were taken, and are
sec. summers: well, i sure looked a lot younger. i' m a little thinner now, so that is a good thing. no, look, some things become cliche because they are true. one of them is that the united states can' t be in prosperity in a world that is systematically troubled. that was true in the early 90' s, when bill clinton was coming into office, that was true at the end of the 1990' s when the u.s. was booming, but we were worried about what was happening in europe, and japan. it is certainly true right now when we have a lot of trouble in europe, when japan is not getting near its 2% inflation target, and when emerging markets are moving more towards submerging and less towards emerging.
anthony: we have talked with a lot of people that worked with you, and the things they say about you it is not about left or right for someone like professor summers, it is more about right and wrong and i think about policy. here we are, right now, talk about fiscal policy for a second. what would you put in place now? sec. summers: i would embark upon a 10 year, trillion dollar program of infrastructure investment, which would initially be financed by borrowing. when, and if, there was evidence the economy was overheating, would be financed by an increasing in the gasoline tax and increases in the carbon tax. i just looked at a set of data that said -- these kinds of data are always inaccurate -- that
automobile repairs because of excessive potholes on our road works out to about a $.40 per gallon gasoline tax. be making these investments to do adequate public investment. anthony: one problem is the difference between good debt and bad debt. the debt you are calling for would add to the deficit, but you would say that is a good deficit? sec. summers: think about just this -- deferred maintenance is debt. the third maintenance is placing the burden on our children. deferred maintenance is avoiding our responsibility today, and shifting to the future. if we borrow money, it compounds at a rate of zero, or long-term
at a rate of 2%. when we defer maintenance on laguardia airport, or we defer maintenance on the roads in massachusetts, or by letting school buildings collapse, that is compounding a lot faster than 0% or 2%. actually, borrowing money in order to do things today when they are cheap, rather than a they are cheap, rather than a generation from now when they are expensive, is reducing the burden on future generations. it is not increasing the burden. gary: i think you can probably articulate this comedy counterargument that some would say, what would that be? anthony: it is hard for me to make a counter argument because i' m in support of it, but it would be that we have $19 trillion of debt and climbing and we can'
anthony: 1 wall st week -- next time on "wall street week" we sit down with ben bernanke. >> i haven' t had a chance to hear your perspective as a result of quantitative easing. the income disparity, the fact that the asset prices have really benefited such a small percentage of the population, how do you square that circle in the sense that it was necessary, been? >> my view is we need more fiscal policy forward. at a time of zero interest rates, and a time when the
fraction of men who were working is near a record low, at a time when material costs are low because of the commodity bust, the idea that we are spending less on infrastructure relative to our income in our country and the federal government than any time since the second world war is crazy. look at kennedy airport, and look at any place you fly to from kennedy airport. look at 30,000 schools for the paint is chipping off the walls. we have a huge opportunity to push the economy forward using fiscal policy. if we do that, there would be less need for monetary and financial excess to try to drive the economy forward. i think we do need to push the economy forward, but i think there' s a better way to do with it than with extraordinarily easy monetary solutions. gary: it was necessary because
the policy was not in place, if the monetary policy created certain excess, whether it is high-end real estate or vacation properties, you would say that is unfortunately one of the negative byproducts. sec. summers: yeah, i think there are medicines that are necessary for your health that have adverse side effects. gary: the long-term solution has to come on the fiscal side. sec. summers: disaster, the fiscal side and the structural side. if we had the right immigration policy, it would spur residential investment meeting we had a more rapidly growing labor force. that would mean more private investment. it is not all about the public sector at all. it is about having more investment from the policies. gary: the stock market was lobbying janet yellen very hard to raise interest rates. you were very vocal that you thought the fed should not raise
the fed listened to you, so are you happy with what the result was? not in the sense that you wish they would have to be dealing with this, but did the fed did the right thing? sec. summers: i don' t know whether the fed listened to my advice or not, i certainly thought that it would be a mistake to raise interest rates in september. the fed did not raise interest rate in september, and i think the global health economy as a whole is healthier because the fed did not raise interest rates. i think you tap the break, or his brakes, when one of a couple of things is happening. when there are signs that inflation is really rising and getting out of control, i cannot see any of that in the data. when there is a sense of financial euphoria breaking out, perhaps you could make that argument last spring, but you can'
a sense that the economy is overheating, and businesses can fall -- fill all their order books. that is not the sense we have about the economy right now. so, absent any evidence that you want to the brakes, i don' t know why -- what the strong case would be for raising rates. i will tell you this, and this is something i don' t think is getting the degree of concern that it should. on average, about every seven years, we have had to cut interest rates by about 300 basis points to keep the economy stable. it has been seven years, that is sense this recovery began, we are entering the seventh year of recovery, so sooner or later that need will co me, and i' m
gary: a candidate suggested that the fed was somehow working with the government to make certain that it was not going to be a recession until after the next president was in office. in fact, they were not doing anything in terms of interest rates and it was some sort of collusion. your thoughts on that are what? sec. summers: that is nonsense. it is not the first thing donald trump has said that was nonsense, it is not the last thing i suspect he will say fed is nonsense. the idea that janet yellen is part of some elaborate political conspiracy is not something that anyone has ever mentioned or could possibly believe. anthony: it preys on people that have low information. speaking of chairwoman yellen, has done a good job -- has a she
sec. summers: i think she has. the court judgment to keep interest rates low has been the right decision. so yes, i think she has done a good job. anthony: you mention the stimulus of blowing by 300 basis points every seven years, that would mean the u.s. would need quantitative easing again, could you see that in our future? sec. summers: we have to hope that we avoid the provocation and avoid the need by not falling into recession. that is why i think policy needs to have a bias towards being in favor of expansion rather than contraction. gary: do you see any signs of another recession? if you look at housing, and auto sales, some of the traditional metrics, it is not there. yet the market is worried. sec. summers: it is certainly not there in housing investment.
on the other hand, most people think growth in the third quarter is going to come in at the 1.5% range, so the plane is at stall speed . then planes that are flying around for growth is not that far above, and the growth of the rest of the world is not as good as it is in the united states. always remember this -- if you look, since the second world war, not a single recession was predicted by the fed, by the imf, or by the consensus of professional economists. so one should not take the fact that people are not so anxious about recession as evidence that necessarily it will all be ok. anthony: we will be back with more.
>> "wall street week" is mounted in part by morgan stanley. gary: you are on twitter, you were on facebook, what do you think of the whole social media world, and what does it say about the economy in the sense that many people say it is changing the dynamics between people that actually work, and people that do other things. sec. summers: look , i think things that bring people together are presumptively good. i think things are positive socially, i think they are positive economically, they let people target advertising, to let people target products in a better way. gary: so you would disagree with
lower the overall output of what an economy would do. they are saving people money, but are disrupting existing technologies, but in doing it of work. sec. summers: i don' t think they are shrinking the economy. i think facebook is the centerpiece of an ecology of hundreds of thousands of people. i think it is a broad social and economic process. anthony: what is the future for larry summers? sec. summers: i love the life i have now is a professor, getting to think, write, and advise on a set of economic issues. anthony: we finish these shows with some word association. we want to first reaction to something. what is the first thing you do in the morning? sec. summers: read the economic and financial news. anthony: if you have dinner with any three alive people, who would it be?
interesting come off the world war ii era. they were placed to travel? sec. summers: london. anthony: favorite part of the day? sec. summers: dinnertime. anthony: fisting buddy harvard campus? sec. summers: harvard yard. anthony: fisting with 2016 election? sec. summers: democrats. anthony: president barack obama? sec. summers: strong leader history will remember well. he fought hard to make actions better. anthony: we want to thank professor larry summers, the former secretary for spending time today with "wall street week." that is it for today, you can check-in. [captioning performed by the national captioning institute, which is responsible for its
. (applause) well, god bless you. it's always a joy to come into your homes. if you are ever in our area please stop by and be a part of one of our services. i promise you we'll make you feel right at home. thanks so much for tuning in and thank you again for coming out. i like to start with something funny. i heard about this wife. she was taking a nap on valentine's day during the afternoon. when she woke up she called her husband and said, "honey i just had a dream that you bought me a beautiful diamond ring for valentine's day! what do you think this dream