Summers is planning nothing short of a complete overhaul of the U.S. economy
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A New Compact
Summers' immediate task is to convince skeptical Senators that shelling out nearly $1 trillion over two years isn't another exercise in traditional pork-barrel spending but a vital step needed to save jobs and invest in the future. Some Republicans call the current plan wasteful; free-spending Democrats long for more investments over years, not months. Summers argues that the stimulus bill splits the difference: not only will most of the money go to reviving the economy in the next 18 months, but much of it will also go to projects that could save money over the long term, such as weatherizing 75% of federal buildings and computerizing medical records. "The bill does a good job of marrying the twin imperatives of putting people back to work and doing the work that needs to be done," he says. "No $825 billion bill is going to not have some projects that any individual disagrees with."
Assuming the stimulus measure is passed — in private, even top GOP aides believe it will happen by mid-February — Summers says Obama will push next to stabilize the banks and the housing market. The Administration is weighing approaches that range from buying up banks' bad assets or guaranteeing the solvency of banks that hold them to taking an even larger ownership stake in the institutions and then pouring more cash directly into them. None of the options, Obama Administration officials admit, are ideal.
And then, perhaps as early as March, they'll launch their biggest lift with the beginnings of a plan to reform Social Security and Medicare, the two entitlement programs that, even before the economy collapsed, were threatening the Treasury with bankruptcy. By any standard, it is a massive three-month agenda fraught with political risk. The key to getting it all done, Summers says, is entering into a "compact" with the country "that this isn't just government as usual throwing money at things." When Obama unveils his annual budget in late February or March, Summers promises that the President "is going to describe the kinds of approaches he wants to take to the entitlement problems that have been ignored for a long time." Some options might include delaying retirement, stretching benefits and lifting the cap on taxable earnings. Could one of these prevail? "Remains to be seen," Summers says.
Sitting in a briefing room at the Old Executive Office Building — his office is still unfit for official visitors — Summers tells TIME that the strategic goal of all these moves is to render a massive fix for the economy but then muscle the federal budget back toward balance. "It is absolutely essential," he says, "and the President never lets us lose sight of this for an hour, that even as you do those things, you have to also be addressing the longer-range concerns. We inherited trillion-dollar deficits, and his budgets are going to show a path back toward fiscal health."
On that front, Republicans could come to Obama's rescue. Senate minority leader Mitch McConnell has told Obama in person that his party favors entitlement reform and would work for passage if both parties shared the risk. Republicans have always been keener than Democrats about curbing the automatic-spending programs, but the depth of the GOP's appetite for reform is uncertain because Congress has not taken a real vote on entitlement cuts since the early 1980s.