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Partial transcript of the CNN Sunday program, Fareed Zakaria GPS:
Well, I’ve gathered three of the top economists in the world to talk about all of this.
Lawrence Summers served as the United States’ secretary of Treasury, then as president of Harvard University. Paul Krugman is the must-read op-ed columnist for the “New York Times.” And Columbia University professor, Jeffrey Sachs, has spent years giving emergency assistance to economies around the world in the form of advice.
The first question to you, how scared should we be? In other words, are we in the phase of a crisis where the pain has been felt, and there’s going to be a long, slow working out of this pain? Or are there more unpleasant surprises to come?
You know, what innings are we in?
JEFFREY SACHS, DIRECTOR, THE EARTH INSTITUTE, COLUMBIA UNIVERSITY, ECONOMIC ADVISER TO GOVERNMENTS: I don’t know if Paul and Larry agree exactly, but one thing that could be added to this is the question of whether there’s a way to counteract the downturn itself, not whether one should pump up the economy, and so forth. But is a recession at this point unavoidable? This is going from, you know, gloom to gloomier.
But I would say yes, and that the attempt early on in the next presidency to have a big stimulus and keep pushing, and do everything we can to avoid the downturn, would actually prove to be fruitless at this point, because there are so many imbalances that have been built into the U.S. economy in the last decade, and especially in the last few years, and now added to the — now added on by the global markets — that consumers really are going to have to adjust.
They’ve not been saving for years. The housing market is not going to be the way the economy is going to recover. There’s going to have to be a lot of structural change in the U.S. economy. There’s going to have to be export-led growth to an important extent, because we’ve been borrowing on an amount that we will not continue in the future…
ZAKARIA: So, (UNINTELLIGIBLE), a recession will actually have an effect of cleansing the system. It will take out some of these unsustainable imbalances.
SACHS: No, what I’m saying is that, the idea that there really are enough gears right now to just keep that headline measure of the total size of the economy growing at some positive, close-to-normal rate, is just not the case. We don’t have tools like that, that can do that.
And there are so many problems that need adjustment right now, and such a legacy of imbalance, that I think that heroics to stop a downturn wouldn’t work.
Full transcript here.