Video: Summers: Stimulus is ‘properly sized’

  1. Transcript of: Summers: Stimulus is ‘properly sized’

    But first, the president's point man on the economy , Dr. Larry Summers . Welcome back to MEET THE PRESS .

    DR. LAWRENCE SUMMERS: Good to be with you.

    MR. GREGORY: President Obama 's elected to get a daily economic briefing similar to the national security briefing. Can you tell us what you're telling him, succinctly, about the state of this economy ?

    DR. SUMMERS: I'm telling him he's inherited an extraordinarily difficult situation: the worst economy since the second World War , a financial system that's got very serious problems, government budget deficits he's inheriting of a trillion dollars, an entitlement situation that's three times the burden that it was in the year 2000 . He's inheriting an extraordinarily difficult situation in the domestic economy , in the global economy ; the kind of situation that requires the types of decisive action he's been working with Congress to produce.

    MR. GREGORY: So let's talk about that, and that is the stimulus or the recovery plan that the president has proposed. In December, this is what you wrote:"In this crisis, doing too little poses a greater threat than doing too much." That was an op-ed piece you did. In that same piece, you said at that time that the economy was headed to a position where it was underperforming, where it was falling short of capacity to the tune of a trillion dollars. Now, there are other economists that I've spoken to say actually that's optimistic, that it's actually falling short to the order of $2 trillion. So why a stimulus plan that's only 825 billion?

    DR. SUMMERS: David , this is the largest stimulus plan in the country's history. It's the largest investment in the backbone of our economy since the interstate -- since the interstate highway system. It's going to double renewable energy . And it is only one phase of the approach that the president is taking. The president has made clear that there will be strong action to address the terrible problems in our housing sector, that he will be using additional funds for a substantial financial recovery plan to get the flow of credit going. This is one component of our strategy to bring about expansion. And the president has also made clear that going forward we're going to be leaning forward and that he is prepared to do what is necessary.

    MR. GREGORY: It is big, even...

    DR. SUMMERS: And so we believe this -- we believe that this is a properly sized approach to move the economy forward. You know, economists from several private firms have now corroborated our incoming CEA chairman Christina Romer 's estimate that the plan will create...

    MR. GREGORY: The Economic Advisory Board.

    DR. SUMMERS: Yeah. The plan will create three to four million jobs more than the economy otherwise would've had, and that's before you get to the financial recovery approach. So we are very determined.

    But there is one other thing that we are also very mindful of, which is money has to be spent well. And that's why the president's put new emphasis on accountability in designing this proposal: no earmarks, oversight of all projects, transparency on a Web site that everybody can see on the status of each project. And we also have to do things in a way where the government can control them right.

    MR. GREGORY: I, I -- and I want to go through all that. But I just want to go back to your central point, which is that one of the biggest mistakes you can make is doing too little. Yes, this is the largest stimulus in our history, but the problem, as you said, is something we've never seen in our history. So if you have a hole in the economy that's at least a trillion, maybe 2 trillion, don't you need a stimulus package that fills that hole?

    DR. SUMMERS: Well, no, David . We have what economists call the multiplier. A fact -- when the government -- when the government spends...

    MR. GREGORY: Right, which is if you create a job, it creates another job.

    DR. SUMMERS: ...when the government spends a dollar creating a job, that person has higher income; because they have higher income, they're able to spend more, that creates other jobs down the road. That's why we surveyed a range of economists. We talk -- and this is something the president insists on -- to a lot of experts, both Democrat and Republican. And you know, frankly, some of them think the stimulus should be larger, some of them think the stimulus should be, should be smaller. President balanced the different views and I think came to the approach that we've taken, and came to an approach that's balanced in another way. It's balanced between very substantial new investments that are referred to between very important protections to prevent teachers and cops from being laid off, and also -- and this is a substantial part of the

    package -- tax cuts, because we recognize that we've got to help households to be able to spend, and businesses.

NBC News and news services
updated 1/26/2009 5:41:47 PM ET 2009-01-26T22:41:47

The Senate is expected to take the final vote on Timothy Geithner's nomination as Treasury secretary at 6 p.m. Eastern Time Monday, after delaying a vote because Geithner failed to pay some of his federal taxes earlier this decade. Geithner settled his delinquent taxes shortly before Obama nominated him, and senators from both parties have said they expect him to be confirmed. Geithner would oversee the financial industry bailout approved by Congress.

Senate committees are scheduled to take up the massive economic stimulus package Tuesday and the full House is expected to vote on its version of the $825 billion plan Wednesday. The packages dedicate about two-thirds to new government spending and the rest to tax cuts. The proposals would combine tax cuts for individuals and businesses, help for cash-strapped state governments, aid for the poor and unemployed, and direct spending by the federal government.

The goal is to infuse money directly into the economy in the hope of bringing the nation out of recession, while creating 3 million to 4 million jobs. It would be largest economic recovery package ever enacted.

"These problems weren't made in a day or a week or a month or even a year, and they're not going to get solved that fast," said Lawrence Summers, a top economic adviser to Obama.

Congress has given Obama permission to spend the second $350 billion of the Wall Street bailout package. House Speaker Nancy Pelosi, D-Calif., said she is open to additional government rescue money for banks and financial institutions. But she said taxpayers must get an ownership stake in return.

Vice President Joe Biden said Geithner will recommend whether more money is needed for the banks.

On Sunday, Democrats sought to lower expectations for a quick economic recovery, even with major government intervention to stimulate the economy and save financial institutions.

"We're off and running, but it's going to get worse before it gets better," Biden said of the economy.

Video: Boehner: Obama’s stimulus ‘won’t work’ Republicans want the recovery package tilted more toward tax cuts and have questioned whether government spending programs will revive the economy in the short-term.

"I just think there's a lot of slow-moving government spending in this program that won't work," House Republican leader John Boehner of Ohio said. "We can't borrow and spend our way back to prosperity."

The administration has pledged to spend three-quarters of the proposed money in the first 18 months after it is approved.

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Obama met with Republican and Democratic congressional leaders at the White House last week to listen to Republican concerns about the package. Obama plans to meet with more Republican lawmakers this week, though Boehner said there is little support among House Republicans for the package in its current form.

House Democrats, if united, have a large enough majority to pass it without GOP backing. But Obama is seeking bipartisan support on this critical early test of his presidency. Senate Republicans could block the package but they would have to be united to do so.

Biden appeared on CBS' "Face the Nation," Pelosi was on ABC's "This Week," and Summers and Boehner spoke on NBC's "Meet the Press."

NBC's Ken Strickland contributed to this report.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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