Summers: Rising Deficit Calls Ability to Remain ‘Greatest and Most Secure Power’ and National Resilience into Question

During an interview aired on Friday’s edition of Bloomberg’s “Wall Street Week,” Harvard Professor, economist, Director of the National Economic Council under President Barack Obama, and Treasury Secretary under President Bill Clinton Larry Summers said that nothing “in the discussions currently underway is about changing the American habit or lifestyle with respect to spending and taxes” and we will likely have to spend more on defense than is currently projected.

He also said that “there’s a very profound question of how long the world’s greatest debtor will remain the world’s greatest and most secure power” and “part of resilience for a company, part of resilience for a household is containing your leverage and containing your borrowing. And I think that’s something we need to think about as a nation.”

Summers stated, “If somebody’s got a basic problem of being overweight, it’s good if they skip dessert, it’s good if they check into a spa for a weekend. But what really matters is whether they change their habits and they change their lifestyle. And nothing in this agreement or anything in the discussions currently underway is about changing the American habit or lifestyle with respect to spending and taxes. I look at the world right now, and it is the most ominous world geopolitically that I have seen, certainly since the Berlin Wall fell in 1989. I look at projections for the federal budget that call for defense spending as a share of GDP to fall substantially. I don’t think that should happen and I don’t think that will happen, almost regardless of how domestic politics play out. And so, I think as I look at the budget picture, we’ve got to recognize that we’ve got a big national defense liability ahead of us that we’re not really budgeting for in the current projections.”

He continued, “And much more generally, David, there’s a very profound question of how long the world’s greatest debtor will remain the world’s greatest and most secure power. And so, I think that everybody talks about our resilience as a country, well, part of resilience for a company, part of resilience for a household is containing your leverage and containing your borrowing. And I think that’s something we need to think about as a nation.”

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