Summers Responds: Don't break out the champagne yet.

I am glad to see that the commentators share my sense of concern about the capacity of policy and the will of policymakers to respond to the next downturn. I am more anxious than most for several reasons.

First, I take a less favorable view of the last few years than many. While the crash of 2008 was contained more quickly than could reasonably have been expected, policy--between fiscal and monetary--was cumulatively understimulative between 2010 and 2015. This is not widely accepted, which makes me less than confident that policy will do better next time.

Second, as several commentators note, next time more of the stabilization burden will fall on fiscal policy because of limits on how much rates can be brought down. The risks that appropriate actions will not be taken because of some combination of misguided concern about excessive government debt and Washington dysfunctionality seem high. Recall that even with a major financial crisis under way, a new president with a strong mandate, and that president in possession of Congressional majorities, the passage of the too-small and too-temporary Recovery Act was a close run thing.

Third, if the next downturn involves major strains in the financial system, I worry about the capacity of the federal government to respond. Dodd-Frank curtails in important ways the U.S. Federal Reserve's capacity to support troubled institutions even at moments of systemic risk. Getting the Troubled Asset Relief Program of the next crisis through Congress could well be impossible given breakdowns in trust and increased polarization. Moreover, the current Treasury is the most policy-inexperienced in decades, and President Trump cannot be relied on to support necessary responses in a financial crisis as his predecessors did.

Fourth are the global issues. Concerted international action is often central to addressing downturns as it was in 2009, where the 2009 London G20 summit looks in retrospect to have been an important turning point, and the extension of dollar credits globally by the Fed was essential. Such efforts require American leadership and a willingness of others to join in a global effort. The president's recent moves to destabilize a dangerous Turkish financial situation are only the latest of many signals that the Trump administration is not interested in supporting global cooperation.

The economy today looks strong. But as in the late 1920s, storm clouds may be gathering even as output and employment grow and markets perform well. Our current prosperity is far more brittle than many suppose. Excessive complacency followed by a combination of protectionism, probusiness ideology, and ugly nationalism led to catastrophe in 1929 and thereafter. It could happen again.