Larry Summers Shares His Thoughts On Fiscal Policy And Good Debt Vs. Bad Debt

• The people at Wall Street Week were kind enough to share a preview of this Sunday’s show with Benzinga.
• This week, the broadcast will feature prominent economist, former Secretary of the Treasury, and President Emeritus and Charles W. Eliot University Professor of Harvard University, Lawrence “Larry” Summers.
• The famed economist shared his thoughts on “why this country is in stock, and why you should never bet against America.” Below are some takeaways.

After going into his childhood, formation and views on the U.S. macro-economic situation in a troubled world, Mr. Summers shared his thoughts on fiscal policy.

“I would embark upon a ten-year, trillion dollar program of infrastructure investment, which would initially be financed by borrowing and, when –and if- there was evidence that the economy was overheating, would be financed by an increase in the gasoline tax and increases in the carbon tax,” he explained.

“I just looked at a set of data, and said, ‘these kinds of data re always inaccurate,’ that the extra money people pay on automobile repairs, because of excessive potholes, on our roads, works out to about a 40 cents a gallon gasoline tax,” the economist continued. “So it’s crazy not to be making these investments…” he assured.

Good Debt vs. Bad Debt

Investors might be thinking, what makes the aforementioned debt a good kind of debt?

So, Summers expounded, “deferred maintenance is dead, deferred maintenance is placing a burden on our children (…) If we borrow money, it compounds at a rate of zero, or if we borrow long-term, it compounds at a rate of 2 percent. When we defer maintenance at the LaGuardia Airport, when we defer maintenance on the roads in Massachusetts, when we defer maintenance by letting school buildings collapse, that’s compounding a lot faster than zero to two percent. So, actually, borrowing money in order to do things today when they’re cheap, rather than a generation from now, when they’re expensive, is reducing the burden on future generations; it is not increasing the burden,” he argued.