Outgoing Summers optimistic about U.S. economy, but only if right steps taken

He also called for increased investment in the national infrastructure as a way for the government to boost the economy while the private sector continues to lag.

“A substantial sustained effort to rebuild America should be at the top of Washington’s priority list next year,” he said.

In the longer term, improving the nation’s education system will be critical to the country’s success, he said.

“Our biggest failing as a nation over the last 50 years has been with respect to education,” he said. “In this less elitist age, the battle for America’s future will be won or lost in its public schools.”

Summers said encouraging innovation is also critical for America’s long-term prognosis, and the government has a key role to play in it.

Making it easier to entrepreneurs to patent ideas, raise capital, and come to America from abroad will help protect America’s status as “the only country in the world where you can raise your first $100 million before you buy your first tie if you have a sufficiently good idea,” Summers said.

And finally, the long-term budget deficit needs to be reined in if America is to recover and succeed.

“Deficits are a means of postponing and magnifying ultimately necessary tax increases or spending reductions,” he said. “They are a tax on our future unless used to financed productive investments.”

If the government proves unwilling or unable to control the deficit, public confidence in its fiscal health will deteriorate.

That in turn could lead to a “vicious cycle in which an inadequately resourced government performs badly, leading to further demands it be cut back,” Summers warned.

On the implementation of the Dodd-Frank financial reform bill, Summers warned that the lobbying battle against it did not end when it was signed into law.

“That effort…has not gone away, it has been turned to the whole rule writing process,” he said. “It is hugely important that that effort not succeed.” 

And although some Republicans have made noise about blocking upcoming increases to the federal government’s debt ceiling, Summers expressed serious doubts that lawmakers would allow America’s ability to pay back its debt to be called into question.

“It is inconceivable that the United States could allow any serious question to arise with respect to our debt,” he said.