Washington: President Barack Obama's former economic advisor on Sunday warned of a new recession plaguing the American economy, even as he attacked the S&P's track record, which has downgraded country's credit rating from AAA to AA+.
"S&P's track record has been terrible, and as we have seen this weekend, its a arithmetic is worse. So, there's nothing good to say about what they've done," Larry Summers, the former economic advisor to US President Barack Obama, told the CNN in an interview.
"But that's not the large issue here. The large issue here is that the House majority played chicken with America's credit worthiness, and America's families are going to be the losers, losers in terms of higher interest rates on their mortgages, losers in terms of what this is going to mean for employment, that we've got critical economic problems," he said.
Standard & Poor's on saturday for the first-time downgraded the US credit rating from AAA to AA+.
"The critical economic problem of slow growth and lack of jobs, the critical economic problem of a long-run budget situation that needs to be adjusted and needs to be adjusted in a rational way, and we have to find balanced approached going forward.
Balanced approaches to focus on the jobs deficit," Summers said.
The United States is going to pay its debts, he said. "Look S&P said to sell, Warren Buffett said to buy. That should tell you something about the quality of
US bonds," he added.
"At the same time, this happened because S&P was seeing what most Americans are feeling, which is unhappiness with the solutions that are coming out of congress for critical economic problems.
"To say that S&P is suspect is fought in any way to say that all is well, and the productive thing here is not to bash on S&P, even if they deserve some of that, the productive thing is to focus on what we can do going forward," Summers said.
Observing that forecasts have enormous uncertainties, Summers said nobody in or outside the Obama administration foresaw the kind of European financial crisis that they have had in the last couple of years, no one foresaw how high energy prices would rise.
These have been adverse shocks to the economy, he noted.
"But the President saw this coming at the end of 2009, the president proposed and the then-Democratic House of Representatives passed legislation that would have extended unemployment insurance faster, done more for state and local governments, made necessary public investments in our infrastructure.
Unfortunately the Congress was not willing to go along with that legislation," he said.
"So you can't judge simply by saying that the economy is not where we would like it to be.
It would be much better if all of the president's suggestions had been followed and it would be much worse if his early measures had been blocked," Summers said.
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