White House economic adviser Larry Summers said on Tuesday the foundations for a return to growth had been laid and there were many signs economic life was getting back to normal.
Speaking to a conference on social security at the national Press Club, Summers cited large and small signs the financial crisis was easing, even if it will take some time to be able to firmly declare it over.
In more obvious indicators like the stock market, less obvious indicators like credit spreads, the spread between LIBOR and federal funds, forward markets and what they suggest about housing prices...what one sees is a substantial return to normality, Summers said.
Summers' address echoed remarks he made last month at the Peterson Institute when he defended the effectiveness of the Obama administration's $787-billion economic stimulus program.
As he did then, Summers said the economy was back from the brink of what some feared was potential depression when the Obama administration took office in January. It is reasonable
to say that we are in a very different place, he said.
But he said the severity of the crisis that struck the financial system, and hurt the entire economy, was so great that recovery was likely to be slow.
We have a long way to go, Summers said. The problems were not created in a week or a month or a year and they will not be resolved in a week or a month or a year.
He said that now that economic freefall has been contained, it was time to think about the type of recovery that will most benefit the country. Recent expansions were fueled largely by asset bubbles that drove consumption in the high-tech industry in the late 1990s and in housing in the early 2000s.
Summers suggested past bubble-driven expansions coincided with important lags in crucial systems within the economy like improving healthcare and boosting funding for education and energy development. Such lags produced inequality that made downturns more damaging, he said.
As Summers spoke, President Barack Obama was in New Hampshire urging support for his healthcare reform plan, which seeks to provide coverage to nearly 46 million uninsured Americans, rein in rising medical costs and regulate insurers.
Critics say it would result in higher government budget deficits and hurt the economy. Summers said restoring growth should be twinned with efforts like reforming health care and considering future Social Security needs in order to bring more stability to the economy.
(Reporting by Emily Kaiser and Glenn Somerville; Editing by Andrew Hay)