Summers Embraces Infrastructure Investment

During the design of the fiscal stimulus plan in early 2008, the mantra was that it must be "timely, targeted, and temporary." Larry Summers, in his recent piece in the Financial Times, acknowledged that these principles may have been flawed and that a longer term stimulus plan that includes infrastructure investment will be necessary.

At the time, people feared that the economy would recover quickly and any stimulus that went beyond the summer would add to inflationary pressure. Many now fear that the economy will be stagnant for much longer and that the stimulus checks will only provide a temporary boost to consumption, after which, the economy will enter a longer period of stagnation or even recession.

During the formulation of the stimulus plan, the New America Foundation Economic Growth Program and Bernard Schwartz advocated investing in infrastructure to give Americans jobs with high incomes and make businesses more competitive. Now, Summers agrees that infrastructure investment should be a component of further fiscal stimulus.

Larry Summers - What we can do in this dangerous moment (June 30, 2008)

Larry Summers - Why America must have a fiscal stimulus (January 6, 2008)