President-elect Donald Trump’s proposals to implement major tax cuts and roll back oversight of the financial industry risk triggering another economic crisis and crippling the country for a generation, warns former Treasury Secretary Lawrence Summers.
“The idea that we would repeal Dodd-Frank” – the landmark financial reform legislation passed in the wake of the 2008 economic crisis – “I think that would be a catastrophic kind of error,” Summers told David Axelrod on “The Axe Files” podcast, produced by the University of Chicago Institute of Politics and CNN.
Allowing that some portions of the 2010 law could be altered and improved, Summers said gutting it, as Trump and his advisers have signaled they will do, is a “very, very scary” notion that, if carried out, “would be taking immense and systemic risks of another financial crisis.”
“Right now, the dangers are all on the side of the pendulum swinging too far back [towards deregulation] – and I think that’s very scary,” said Summers.
Turning to Trump’s tax proposals, which independent analysts say will skew toward the wealthy and cause massive budget deficits, Summers agreed there was no way to put the tax plan into effect without adding large levels of new debt. But, he said, the long term implications are what he finds most troubling.
“What I’m worried about is that we’re going to do tax cuts that are going to cripple government for a generation,” Summers stated. Pointing to the potential repeal of the estate tax as an example, he argued that its repeal would only compel the wealthiest Americans to protect those savings in family trusts.
Summers, who served not only as President Bill Clinton’s treasury secretary but also as President Barack Obama’s National Economic Council director, helping to navigate the country through the financial crisis, said that the country’s biggest challenge today is putting people back to work in this advanced, global economy.
Summers pointed out that 1-in-7 prime-age America men are currently out of work, a trend that threatens to grow to 1-in-3 men in the next 30 years.
“I think that finding work for everyone is going to be the central challenge of our politics over the next generation,” Summers said, before arguing for the implementation of a modernized education system and a boon of targeted infrastructure projects, which he says is different in crucial respects from Trump’s current infrastructure proposal.
“I think the government is going to have to take a much larger role in assuring that everybody’s prepared for work,” Summers continued.
Summers also contended that the Democratic party should worry as much about half the population that cannot attend college as it does for the people who can go but have trouble affording it.
“If we’re going to be progressive and if we’re going to commit ourselves to the people who traditionally have been the constituency of the Democratic party,” stated Summers, “I want to see what we’re going to do to support the transition to work and the transition to adulthood for the people who don’t have a chance to go to college or the people who don’t choose to go to college.
“I think that is a huge imperative for us going forward,” he concluded.
To hear the whole conversation with Summers, which also covered what it was like to grow up in a family of renowned economists, what actions he believes did and did not cause the 2008 financial crisis, how and why he began advising politicians on economic matters, and much more, click on http://podcast.cnn.com. To get “The Axe Files” podcast every week, subscribe at http://itunes.com/theaxefiles.