Larry Summers on Push for Economic Stimulus Package

This is a rush transcript from "Your World With Neil Cavuto," February 9, 2009. This copy may not be in its final form and may be updated.

STUART VARNEY, GUEST HOST: To Washington, less than three-and-a-half hours away from President Obama's first prime-time news conference since taking office.

Ahead of it, the president making a big push for stimulus, saying, without it, we may not be able to get reverse this crisis.

With us now, the president's chief economic adviser and former Treasury Secretary Larry Summers.

Mr. Secretary, welcome to the program.

• Video: Watch Stuart Varney's interview

LAWRENCE SUMMERS, CHIEF WHITE HOUSE ECONOMIC ADVISER: Glad to be with you, Stuart.

VARNEY: The president has used the expression "deepening disaster" and he's warned of "economic catastrophe." Those are his words, very strong words for a new president to use.

Do you think that this stimulus package will save us from economic catastrophe?

SUMMERS: I do.

Without this stimulus package, without an effort to backstop the economy, we are going to be caught in a vortex of declining employment, falling incomes, reduced spending, increased financial distress, less lending, reduced employment, reduced spending, and so forth.

This package...

VARNEY: Does it save us from a Great Depression?

SUMMERS: This package — this package, combined with a — the — a robust financial recovery program, of the kind that Tim Geithner — Secretary Geithner — is going to announce tomorrow, in my judgment, offer the best possible prospect of arresting the decline.

To be sure, there are enormous uncertainties. We are going to have to keep monitoring this economy. Problems that were not made in a month or a year are going to take a long time to fix. But what we know is that there are now millions of people who need work — 600,000 more in January alone — and that there is tremendously important work to do in our country: Creating a green economy, repairing schools, so that our kids have a decent chance to learn to compete in the 21st century, making our health care system work, and that it has to be the right thing to do to bring those without work together with work that badly needs to be done.

And that is what the president's program is all about.

VARNEY: Pass this stimulus — $900 billion, or whatever the final number is — and we have got a $2 trillion deficit this year.

Are you confident that we can ask — people will lend us that kind of money this year and next year and, on down the road, trillions of dollars? Are you confident that they will lend us that money, and that the damage done by that deficit will not outweigh any benefits of the stimulus package?

SUMMERS: It is a fair question.

But I am confident, Stuart. I look at the economy. I look at what has happened to long-term interest rates. Frankly, when you and I first got to know each other 15 years ago, we would have thought the idea that there would be a 3 percent 30-year bond rate would have been something that was unthinkable. There is a huge rush to quality that is leading people to buy U.S. government bonds.

But you're absolutely right that we cannot assume that this situation will prevail forever. And that is why the president has put emphasis in this package on measures that are temporary, that will lift this economy out of a rut, that are countercyclical in their impacts.

And that is why he has made it clear that, when he presents his budget, he is going to bring in the tough choices with respect to health care, with respect to Social Security...

VARNEY: You know...

SUMMERS: ... with respect to the growth of government spending that are necessary to put the nation's fisc on a sustainable basis.

(CROSSTALK)

VARNEY: Mr. Secretary, you know...

SUMMERS: But I will tell you this — yes.

VARNEY: But, you know, Mr. Secretary, Speaker Pelosi wants to put some spending into the Senate version, into the final bill. She wants to put it back in.

This — this is a political document. You are an economist. Are you really comfortable pushing such a highly politicized document, such a highly political piece of legislation through?

SUMMERS: Stuart, legislation is always political.

But if you ask me, if I am comfortable with cutting taxes for middle- class families, yes. Am I comfortable with investing in our country's infrastructure? Yes. Am I comfortable with protecting state and local governments from the need to lay off teachers and lay off cops? Yes — yes, I am.

Am I comfortable with preparing to create a situation where every American has a computerized medical record? Yes, I am. Am I comfortable with more scholarships, so that kids are not disenfranchised for life from a chance to participate in this economy by not being able to afford to go to college? Yes, I am.

Of course there's politics in a bill like this. Stuart, we both know that. But let's not let the fact that there is a political process in Washington blind us to what is happening across America...

VARNEY: OK, sir.

SUMMERS: Where those people are out of work, and there is work that needs to be done.

VARNEY: And, as the president said, it is an impending catastrophe.

OK, Mr. Summers, Mr. Secretary, thank you for joining us, sir. We appreciate it.

Thank you.

SUMMERS: Thank you.

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