While generally upbeat about global economic prospects, former Treasury Secretary Jack Lew warned policymakers against “blowing a hole in the deficit” by cutting taxes and pursuing aggressive fiscal policy measures.
Lew delivered the opening keynote address at the Pershing INSITE conference on June 14 in San Diego. He was secretary of the Treasury from 2013 to 2017 under President Obama. He previously served as White House chief of staff in the Obama administration.
He spoke on the day Representative Steve Scalise and four others were shot in Washington and commended the bipartisan sympathies that had been expressed in Congress.
“The economy is ‘steady as you go’ in the U.S. and throughout the world,” Lew said, adding that growth is stronger in Europe than many people realize and the anxiety about China’s economic path has subsided.
Yet, he said, it is hard to reconcile the deep anxiety and anger expressed by many Americans with the positive economic conditions. It has to do with technology and globalization and the connection between the two, according to Lew.
Factories throughout the world are highly automated, he said, not because of lower labor costs but because of technology. “Technology is making the structure of manufacturing different,” Lew said.
Technology makes things more affordable but is threatening workers’ careers and those of their children, according to Lew.
Some things can help, like investment in infrastructure, which would “resurrect” blue-collar jobs, and the “retraining” of workers. But Lew worries that the merger of technology and globalization makes it too easy to blame America’s problems on “others.”
He said the U.S. should invest “fairly heavily” in infrastructure and “turn the corner” of education.
But, he said, we don’t need a tax cut.
“We don’t need to add fiscal stress in a world where the Fed is raising rates,” he said, which it had done before he spoke.
China knows what it needs to do, Lew said. It must open its economy to market forces and become more entrepreneurial, and its politicians need to embrace that transition – “before it is too late.” It still has time, given its $3 trillion in currency reserves, Lew said. China will take those measures for itself, not for the U.S., because it needs the growth, according to Lew.
He was less optimistic about Europe, which he said lacks access to capital, which has driven higher unemployment. “We are seeing daylight now with looser credit, but banking reform is still needed, such as an FDIC-like backstop,” Lew explained. He added that Europe needs better fiscal policies and more aggressive use of them. He pointed out that the common currency (the euro) helps the countries that don’t use fiscal policy.
Politically, some European countries are “willing to look away” from facts and analysis, Lew said. He referenced Britain, which “should not have to go through what it is experiencing.” Britain is not benefitting from a weaker currency following the Brexit vote and its elections. He warned of “a long period without clarity.”
By Robert Huebscher, read the full article here.