‘Excess of fear’ must be broken, says White House economic advisor
March 13, 2009
WASHINGTON ” President Barack Obama’s top economic adviser said Friday the nation’s economic crisis has led to an “excess of fear” among Americans that must be broken to reverse the downturn.
“Fear begets fear,” and that “is the paradox at the heart of the financial crisis,” Lawrence Summers, the president’s director of the National Economic Council, told a forum.
“It is this transition from an excess of greed to an excess of fear that President Roosevelt had in mind when he famously observed that the only thing we had to fear was fear itself,” Summer said. “It is this transition that has happened in the United States today.”
Summers spoke amid new signs of a deepening recession. The U.S. trade deficit plunged in January to the lowest level in six years as the economic downturn cut America’s demand for imported goods, the Commerce Department reported Friday.
The economic adviser said it’s still too early to gauge the broad impact of the president’s recovery program.
“But it is modestly encouraging that since it began to take shape, consumer spending in the U.S., which was collapsing during the holiday season, appears, according to a number of indicators, to have stabilized,” Summers told the Brookings Institution, a think tank.
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Summers was asked by a member of the audience what the nation’s business community could do to help speed the recovery.
“What we need today is more optimism and more confidence,” Summers said.
“Those who have sound long-term stragegy, who have investments that they want to make, who see productive opportunities, are going to find this a very good moment to make those investments,” he said. “There are a very large number of things that are on sale today. Think about the cost of doing construction today, versus the cost of doing construction two years ago.
“My advice to business leaders is not to foreshorten the horizon at a moment like this.”
On Wall Streets, stocks were seesawing after three straight days of gains.
The government said the U.S. trade imbalance dropped to $36 billion in January, the lowest level since October 2002.
However, while America’s deficit with many of its trading partners declined sharply, the politically sensitive shortfall with China bucked the trend, rising by 3.5 percent to $20.6 billion.
U.S. manufacturing companies, battered by what they view as unfair competition from China, said that the continued high deficit with that nation pointed to a need for the Obama administration to take a tougher line on trade rules with the Chinese.