Summers: US faces balancing act on economy, budget

* Maintaining U.S. fiscal confidence key for recovery

* Also emphasizes need to keep near-term stimulus

* Lists uncertainty over Europe as a risk to global growth

By Caren Bohan

WASHINGTON, May 24 (BestGrowthStock) – The United States faces a
balancing act between assuring global investors it will rein in
its budget deficits and spurring economic growth in the near
term, White House economic adviser Lawrence Summers said on

Summers said that putting the economy on a sound fiscal
track was crucial to its long-term health but added that it
would it would “penny-wise and pound-foolish” for the
government to back away from its efforts to stimulate the

Summers, director of the White House National Economic
Council, pushed proposals supported by President Barack Obama
to extend jobless and health benefits to the unemployed and
help financially struggling U.S. states.

“It is not possible to imagine sound budgets in the absence
of economic growth and solid economic performance,” Summers
said in a speech to the Johns Hopkins University School of
Advanced International Studies.

“Equally, assurances that deficits will come down once an
economy recovers are integral to the maintenance of confidence
that is essential for economic recovery,” he said.

The worst economic crisis since World War Two has sent U.S.
deficits soaring. The deficit hit $1.4 trillion in 2009, or
nearly 10 percent of gross domestic product. The White House
has projected it will climb even higher this year, to almost
$1.6 trillion.

Aiming to show he is serious about stemming the deficits,
Obama has named a panel of outside experts charged with
recommending ways to improve the nation’s fiscal position.

The deficit woes of countries like Greece, Portugal and
Spain are seen by some analysts as a warning signal to the
United States to fix its fiscal problems.

Summers is the latest White House official to stress the
Obama administration’s commitment to dealing with the problem.

White House budget director Peter Orszag earlier this month
said in a Reuters interview that the United States must “never
wind up facing the sorts of choices that Greece now faces.”


In his speech, Summers said southern Europe’s problems
highlighted the need for pursuing sustainable fiscal policies.

“In settings such as those that arise in emerging markets
or have arisen recently in southern Europe where there is doubt
about the ability of government to subsequently raise taxes or
cut expenditures to repay newly incurred debts, increased
budget deficits raise the prospect of inflation or default with
dire consequences for financial markets,” he said.

In the United States, Summers said neither reducing the
deficit nor boosting growth can be pursued in isolation.

Discussing the near-term economic outlook, Summers said
there were “growing signs of recovery.”

As one indication of economic improvement, he noted that
forecasters had gone from debating the risk of a double-dip
recession to debating the pace of the recovery.

Still, Summers said an “economic emergency grinds on” for
millions of Americans who have lost their jobs. The U.S.
unemployment rate now stands at 9.9 percent.

He listed some risks to the economic recovery, including
the persistence of unemployment and the potential impact from
the European debt crisis in U.S. growth. He said that “recent
events in Europe have introduced uncertainty into the prospects
of global growth.”

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(Additional reporting by Alister Bull; Editing by Cynthia

Summers: US faces balancing act on economy, budget