Don’t bet against America.
The world’s only superpower faces its share of tough economic and political challenges, but the past seven years should make people more — not less — encouraged about the future.
That’s the message from an unlikely source: Larry Summers, the prominent economist and former U.S. Treasury Secretary who for the past year has been arguing the U.S. is facing a prolonged period of slow economic growth.
Yet Summers made a compelling and passionate defense of America’s progress and its future despite the pessimism found in politics and the media.
“This is not a society that is stuck. It is a society that is uniquely able to be resilient through a constant process of savage self-criticism,” Summers, the former top economic adviser to President Obama, said on Friday at SkyBridge Capital’s SALT Conference.
The comments drew cheers from the hedge fund crowd at the conference.
‘Secular stagnation’ is not inevitable: The sunny forecast from Summers stands in sharp contrast with his argument that the U.S. is not just facing a moment of economic difficulty but a period of “secular stagnation” marked by slow growth.
Summers has even gotten into a public debate with Ben Bernanke, the ex-Federal Reserve chief who is more confident in the vitality of the current economic recovery.
While secular stagnation is a “terrible thing,” Summers explained it’s merely a “prediction as to what could happen if nothing is done” to fire up the economy. (Read: If Washington doesn’t fix it.)
“It is not an argument for fatalism. I for one am very optimistic about the future,” Summers said.
To back up his case, Summers pointed to the imperfect yet critical progress made on several fronts.
Energy revolution: Thanks to the shale oil boom, the U.S. is no longer as reliant on foreign oil pumped from unfriendly countries.
“Seven years ago it was inconceivable that the United States would ever achieve energy independence,” Summers said.
Now not only is that achievement in sight, but Congress is even debating exporting oil.
Health care spending: Not long ago health care inflation at a “rapid rate was an inextricable and unstoppable phenomenon,” Summers reminded the audience.
Now health care inflation has grown less rapidly than the U.S. economy for four consecutive years even as Obamacare has expanded coverage dramatically, he said.
Fixing the financial system: In 2008, the U.S. financial system nearly melted down completely. The picture looks completely different today.
“We passed — and you can debate in a million ways its merits — the most far-reaching reform of financial regulation in 60 years,” Summers said, adding it was a “far stronger” and faster response than any other major nation could muster.
Summers pointed to the ability to continue growing the adult population in the U.S., in part due to immigration. That gives America a powerful demographic advantage that aging countries like Japan can only dream of.
He even noted shifts in society that point to progress. “The attitude in our society towards gay marriage and the rights of gay people has been completely transformed,” Summers said.
Democratic dysfunction: Of course, none of this is to say that things are perfect. There are great challenges facing the world’s largest economy. And issues like the deficit, taxes and immigration are only worsened by the gridlock preventing Congress from tackling them.
In fact, Summers’s optimistic speech was triggered by critical comments from Julia Gillard, the former prime minister of Australia. Gillard, a SALT panelist on stage with Summers, complained about how “U.S. democratic dysfunction” is creating a void when dealing with global challenges like tensions in Asia.
But Summers said criticism of America, especially from within, is what keeps it on top.
“The moment I would worry about America’s future is the moment when…no one is complaining about dysfunction in Washington,” Summers said. “It is the unique American gift to engage constantly in self-denying prophesy of doom…that calls for action to change it.”
