Summers said he wasn’t making a judgment on whether the 5 percent payout by Harvard was appropriate in 1999. What he was questioning was whether it made sense to maintain the same level given the fall in interest rates.

“It may be that it should pay out more in 1999. It may be it should pay out less,” he told the NBER meeting of macro-economists. “But it’s hard to believe that the real rate should have moved by 4 percent and there should be no change in the types of spending rules that people operate.”

Summers argues that interest rates will remain low because the U.S. and much of the industrial world are stuck in a prolonged period of “secular stagnation” characterized by scant economic growth, low inflation, excess savings and depressed investment. He wants the U.S. to boost its budget deficit in response, with a particular focus on increased spending on infrastructure.

Summers resigned as president of Harvard in 2006 after a tumultuous five years in the job. He served as director of the White House National Economic Council under President Barack Obama from 2009 to 2010.
 

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