Get real Larry Summers

Yesterday Larry Summers, Director of the White House National Economic Council, said that China would be the “central American challenge going forward” with regard to the future of the U.S. economy.  Get real!

First of all, the central challenge of any economy at any time is to create real economic growth.  That is, economies succeed or fail based on their ability to create efficiencies or to innovate.  This will always be the case and with no variation.  The number two challenge, whatever it is, will always be a distant number two compared to the creation of real economic growth.

Second, let’s consider the source of this statement.  Yes, Larry Summers has economic props.  However, he is a spokesperson for the White House.  The last time I checked the Obama Administration just lost control of Congress.  That means that it also lost control of the domestic agenda.  That means that if it wants to improve its chances for re-election in 2012 that it needs to activate and motivate the average U.S. citizen with a non-domestic agenda.  Hmmm.  Would that mean foreign policy?  Probably.  What is the easiest foreign policy battle to win in the next 15 months, which is the time of the Iowa caucuses?  Hit China!

It’s not that the Chinese are playing fair economically.  Their currency is held massively artificially low so that Chinese goods are artficially CHEAP.  So their economy is artficially strong.  But this is not news to anyone.  This has been the state of affairs for two decades.  So Larry Summers’ comments, even though they are politically sexy, are just not accurate.  More likely he has been sent out to start kicking the Chinese.  If this sort of kicking from members of the Obama Administration plays well with the U.S. public expect this to become the huge and central issue in the upcoming electioneering season.

Jason