Here & Now's Jeremy Hobson talks with Larry Summers (@LHSummers), former secretary of the Treasury and president emeritus of Harvard University, about the revised trade agreement between the U.S., Mexico and Canada, the trade war with China and his outlook on the U.S. economy.
“The vast majority of NAFTA is continuing as it was,” Summers says about the new deal. “This has been a major diversion from the important domestic challenges facing the United States, and the important international challenges.”
On the USMCA trade deal, and his opinion it negatively affected U.S. relations with Canada and Mexico
“[I’ve] never seen so much ado about so little. I thought the old trade regime between Canada, Mexico and the United States was a good one, and this one's not very different. How it could possibly be worth major alienation of major allies? I can't imagine.
“But I'm happy with the new agreement, principally because I was happy with the old agreement, and I can't imagine why someone who was profoundly troubled by the old agreement should be happy with the new agreement. So, this is more in the nature of a publicity stunt than an international diplomatic act.
"This has been the most shortsighted of strategies for the most negligible gain."Larry Summers
“The ill will we have created with respect to the Canadians and the Mexicans will have costs that will exceed any benefits. The ability of North America to remain unified when we face very serious challenges from Asia has been constrained. This has been the most shortsighted of strategies for the most negligible gain.”
On the Trump administration’s trade tactics in regard to China
“I think there are major issues in the U.S.-China trading relationship. It seems to me the strategies we have used to go after them have been quite problematic. They embolden the strongest and most hostile to the United States elements within the Chinese government. They encourage the Chinese on a road to self-sufficiency and independence from the United States, which ultimately will reduce our leverage and influence. They fail to mobilize the moral and political force of the entire international community, which is surely the most effective way to influence Chinese behavior.
“I think that any conscientious American administration would be addressing issues about Chinese trade practices, and in particular, the ones relating to intellectual property, but I don't think the strategy or the tactics has been well calculated to maximize long-run American interests.”
On the argument that tariffs on Chinese goods have allowed the U.S. to collect more money from the country
“There are all kinds of ways of raising taxes if you want. Tariffs are taxes. They are taxes that fall principally on the goods that people buy and the inputs that companies need in order to compete. That's why there are taxes that are particularly regressive and particularly inefficient.
“There's something very odd about an administration that prides itself on its tax cutting, focusing on cutting the taxes for corporations and raising the taxes on the ordinary goods, the toys that parents buy for their kids at Christmas.”
"I've stopped being surprised at Republican cravenness in front of President Trump."Larry Summers
On Republicans who say they are against tax increases, but supportive of Trump’s tariffs
“I've stopped being surprised at Republican cravenness in front of President Trump. It is clear — and you know, I'm an economist, not a politician or a political scientist — but it's quite clear that Republican congressmen and senators are in great fear of a primary challenge sponsored and supported by President Trump.
“Trump may not have a majority within America with him — indeed his approval rating suggests that it's well under 50 percent — but he does have a big majority within the Republican Party, and he's prepared to ruthlessly use that to impose party discipline.
“John [F.] Kennedy wrote a great book called 'Profiles in Courage' about senators who guarded their core beliefs as being more important to them than their re-election. I just wish we were seeing more profiles in courage in the Senate these days on trade issues, and frankly, on some other issues as well.”
On how the Fed recently increased interest rates, and whether interest rates are too low
“I think the Fed is right to recognize that any error in letting inflation rise a little bit too much is likely to be a reversible error, and any error in terms of tipping the economy into recession is likely to take a very long time to reverse. I'm one who believes that we have a very different economy than we used to. Therefore, I think the approach that's being pursued is OK, and I would not be one to criticize it, certainly not one to criticize it on the grounds that we should have even more rapid increases in interest rates than we do.”
On the theory the U.S. will be hit by an economic recession soon
“I'd be surprised if sometime in the next three years we didn't have a recession. Evidence is that it's very hard to predict recessions, and so the fact that we don't see one coming doesn't assure us that one is not coming. I think you have risks in the geopolitical environment. You have risks that the Fed will tighten too fast. I think you have risks that elevated asset prices will just, at a certain point, run out of steam, and when people no longer buy them because they're confident they go up, they can actually fall quite sharply. So I think you have a situation that has a number of real risks associated with it.”
On whether the midterm elections will affect the economy
“I'd be surprised if they had a huge effect, because I would be surprised if you see substantial policy change in Washington regardless of what happens in the midterm election. I think the greater chance is of erratic actions in the international arena that have consequences, but those are less affected by the result of the election.”
This segment aired on October 2, 2018.