Summers: 'This is The Biggest Cutback in the US Social Safety Net in History'

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00:00This is a story about borrowing from Peter to pay Paul.

00:03President Trump's one big, beautiful bill found a way to pay a lot of Paul's through reduced taxes,

00:09but taking funds away from Peters who have been dependent on things like Medicaid.

00:14Our special contributor, Larry Summers of Harvard,

00:17has been outspoken about what he says it will cost us over the long run.

00:23David, this is the biggest cutback in the U.S. social safety net in history,

00:28measured relative to GDP.

00:31It's substantially larger than anything that happened in Ronald Reagan's revolutionary 1981 tax cut legislation.

00:39It's substantially larger relative to the economy than the welfare reform that took place during Bill Clinton's time.

00:49So this is a big deal.

00:51It's going to mean that some number, it's hard to evaluate exactly,

00:55might be 10 million, might be 12 million people, are going to lose their Medicaid benefits.

01:01It's going to mean that ancillary services that are hugely important for people,

01:06getting a ride to the hospital so they can get their dialysis,

01:12being able to go to a rehab facility when they can't take care of themselves,

01:16but they no longer need to be in a hospital.

01:18That kind of thing is going to be cut back.

01:22It's going to mean no economic lifeline for desperately important rural hospitals,

01:28some of which are going to close.

01:32But here's a crucial point that I don't think has gotten enough attention in the debate.

01:38People focus on the moral aspect, and that's important,

01:41what's going to happen to some of the most vulnerable among us.

01:45But this has consequences for everybody.

01:49When people come to the hospital later and sicker with more that needs to be done,

01:56and there's no government support for their care,

01:59the bills of all the rest of us are going to go up.

02:04When hospitals are filled with people who don't need to be in a hospital,

02:09but are there only because there's no other place for them to go,

02:13there's less access to care for others when they have an emergency.

02:21When rural hospitals close, that means less access,

02:27not just for the poorest people.

02:31When these costs mount and ultimately have to be borne,

02:37that's ultimately going to translate into higher taxes and greater premiums

02:45when the people eventually get sick enough that they qualify for the supported medical care.

02:54So this is both immoral and wrong,

02:59and it is imprudent and is going to burden the American middle class.

03:07It's part of a larger pattern, I think many people have detected in the bill overall,

03:13which is a shift in wealth from some of the poorest among us to some of the wealthiest among us.

03:20We can talk about whether that's a moral thing to do or an immoral thing to do,

03:24but what does it mean in macroeconomic terms, in terms of growth over the long term?

03:29David, my values point me towards wanting us to be a more equal society.

03:37I don't think that those making estate wills to their children of $30 million

03:46should be the beneficiary of new largesse at a time when we've got a massive budget deficit.

03:56But I'm going to be honest with you.

03:59I don't think honest economists should make all arguments in favor of the policies they prefer.

04:08And the reason to oppose this bill is that it's unfair, that it's inefficient,

04:15that the deficits are going to do a great deal of damage.

04:20But I'm not going to tell you that because of the inequality,

04:25we're going to get major reductions in economic growth.

04:29Yes, we're going to get major reductions in economic growth

04:33because we're on a trajectory to cutting back R&D in very dangerous ways.

04:40Yes, we're going to get reductions in economic growth

04:43because we're going to cut back support for other kinds of public investment in education.

04:49and in infrastructure.

04:52But the main reason to be against inequality is because it's wrong

05:00and because some of the investments you make to reduce inequality have very high payoffs.

05:08But while it would support the policies I generally favor,

05:13I am not as an economist going to say that we have convincing evidence

05:18that as a systematic matter, reducing inequality raises economic growth.

05:25Even as Trump's big bill will shrink the country's social safety net overall,

05:29one increase in federal spending will go toward supporting families,

05:34including through a single payment of $1,000 for a savings account for newborns.

05:39But Summers says he's worried it isn't enough.

05:41My suspicion is that it is so subscale that most of the costs will go into administering the thing

05:51relative to benefits that will change people's lives.

05:55So I don't think we know yet, and maybe this will be an acorn that plants a very valuable tree

06:03that will grow over time, but I haven't yet seen the blueprint that convinces me of feasibility

06:12at the current scale.

06:15We put in some of the lowest percentage of our GDP into early care and education

06:19in the United States of any developed country,

06:22and it's because we haven't yet made that leap from the idea that actually the care and learning

06:27of young children is very much a public concern.

06:30Elliot Haspel at the think tank Capita says market forces alone aren't enough

06:35to solve the child care crisis in the United States, and the government needs to be doing more.

06:41Child care is not a market good.

06:44Former Treasury Secretary Janet Yellen has called it a textbook example of a failed market.

06:49It doesn't work, so you're going to need some sort of government intervention.

06:52We can also look across the world and see other countries, including just above us in Canada,

06:57that have made major reforms in the past few decades, all of which are underpinned by significant

07:03permanent increases in public support of a public-private system to make sure that families

07:10have access to good child care options, that educators are paid well, programs are high quality,

07:16and again, that there are guardrails in place to make sure that public money is serving the public good.

07:22Haspel's view that government should play a bigger role in helping new parents

07:26is shared by Congresswoman Becca Ballant, who was a former teacher herself.

07:32The struggles that working families have right now, they are not the same struggles

07:36as people had 20 years ago. You know, you've got young people carrying a lot more debt.

07:42They have costs that did not keep pace with inflation. They exceeded them,

07:47whether they were housing costs or health care costs. I always say to people,

07:50I'm in my 50s. I always say to voters who are grousing about younger families, I say what they're

07:57doing actually is something very different than I did and what folks in, you know, my parents' generation

08:05did, that the economic strain on them is more acute. And so there is this understanding that we need to

08:14gain, that you've got families who are absolutely stretched. And it is within our best interest

08:22as legislators, as people looking for solutions, to see this as part of the ecosystem of the economy

08:31and not an add-on. This is how you make economies thrive. And certainly other countries have figured

08:36this out before we did. Even as state and federal lawmakers take steps to invest more in American

08:43families and child care, Summers says we shouldn't be looking to Trump's big bill to save our kids.

08:49The costs might well outweigh the benefits, especially for future generations.

08:55I think the borrowing that we're engaging in and the risks that that poses to the economy

09:02may well do more harm to my children and my one-year-old granddaughter than the putative new programs

09:14that are contained.

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