'This Week' Transcript: NEC Director Larry Summers

Remember, as of now, inventory change is zero, the level of inventories is at the absolutely low level, and all of the people who are in the business to see what the tightness of markets are, are saying effectively that there's a shortage of inventories out there and we're on the edge of a significant build-up.

TAPPER: As the -- you mentioned real estate. And I've heard a lot of economists talk about their fear of the -- the commercial real estate bubble popping. How concerned are you by that?

GREENSPAN: Well, I think it's already popped, in a sense. I mean, real estate prices generally are down almost 50 percent. And they've come back a little bit...

TAPPER: I mean the kind of crisis that we saw with the -- with the subprime housing and personal housing.

GREENSPAN: Yes. Yes, with prices already down and adjusted, if we were going to get severe secondary reactions, they would have likely -- would have occurred, and they would have occurred if it weren't for the fact that the rest of the economy is showing some degree of buoyancy.

TAPPER: Now, Dr. Summers didn't really answer the question, but -- but I was wondering your thoughts on whether or not we can expect, if there is accelerated job growth, whether or not you think there will be any dips in that, including into negative job growth, or if you think it's just going to be a straight line.

GREENSPAN: You mean month-by-month increases?

TAPPER: Yes, month-by-month.

GREENSPAN: I suspect it's month by month. I mean, it's -- I can -- you know, a statistical aberration possibly, but the momentum is very clearly there, and I doubt very much that we're going to run out of that momentum until very late in the year.

TAPPER: So no double-dip recession?

GREENSPAN: I think the odds of that have fallen very significantly in the last two months.

TAPPER: The president signed massive health care reform legislation into law a few weeks ago. You have expressed concern about the legislation, as it was making its way through the process, about whether or not it did enough to contain costs. What did you think about the final legislation? Does it contain costs enough?

GREENSPAN: Well, the CBO, incidentally, Congressional Budget Office, which is really a first-rate operation, says that it does. The problem is not their estimates, but the range of potential error in those estimates.

And when you're dealing with an economy in which debt is becoming -- federal debt is becoming ever increasingly a problem, it strikes me that when you're dealing with public policy and you're in a position where you have to ask yourself, "What happens if we are wrong?"

In other words, in the case now, where our buffer between our capacity to borrow and our actual debt is narrowing, for the first time, I think, in the American history, there's a question, supposing we are wrong on the cost estimates, and, indeed, they are actually much higher than the best estimates can generate, the consequences are very severe, whereas if they are too high, it's very easy to adjust.

So I think it's -- it's -- there's an issue over and above the question of what's the best cost estimate. There's a policy strategy here which I think requires us to lean in an ever more conservative area with respect to judging...


TAPPER: So it might have been too rosy, the projections, you're saying?

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