Robert Rubin and Lawrence Summers, both of whom served as Treasury secretary under President Clinton, advocate a major fiscal stimulus package to get the plunging economy back on its feet.
Democrats in Congress want to pass a stimulus bill during the current, lame-duck session, but Republican opposition makes it unlikely that a new package will be adopted before the new Congress convenes next year.
Rubin, speaking along with Summers at a Wall Street Journal conference, said the economy faces a long road to recovery. Both have been advisers to President-elect Barack Obama, and both are potential picks to be the new Treasury chief.
“A lot of damage has been done, and it will take some time to get through that, certainly well into next year,” Rubin says.
So what’s the antidote? “I think we need very substantial stimulus,” he says. But Rubin cautions that loose fiscal policy can’t last for too long.
“It’s imperative that we marry that stimulus with a real commitment to reestablish sound fiscal conditions once we get through this.”
In January, Summers advocated fiscal stimulus that would be “timely, targeted and temporary.”
But now, “the situation has deteriorated substantially,” he points out. “So I would go for speedy, substantial and sustained stimulus over a several-year interval.”
The stimulus won’t be all bad for the budget deficit, because the resulting economic activity will bring revenue back to the government, Summers says.
A group of major CEOs at The Journal conference called for a stimulus package of more than $300 billion.
“This really was far and away” the top priority, Roger Ferguson, CEO of TIAA-CREF, told the Associated Press.
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