The nerve of these two....

“For the first time in 75 years, we are experiencing a protracted recession due to a lack of demand,” Summers said during a speech to the Center for Global Development in Washington. “It’s now been about five years since the recession began and it appears the stagnation will be with us for another long interval.”

“There is not enough demand,” Krugman said during an appearance at the Economic Policy Institute, where he gave a talk to promote his new book, End This Depression Now. “We focused a lot – too much – on the financial sector’s problems. Yet that is long since gone and we still don’t have a steady recovery. That tells us the crisis was far more about household debt.”

Both economists blamed government fiscal policy for the prolonged nature of the downturn, though they focused on different aspects of it. Krugman said premature budget austerity in the U.S. had forced the destruction of more than a million public sector jobs and lost contracting opportunities from reduced infrastructure investment. Unemployment would be close to 7 percent instead of the current 8.2 percent, he said, without the government spending cuts demanded by the Republican majority in the House of Representatives.

Summers, taking a slightly longer view, pointed to the rise in income inequality in the U.S., which on the eve of the Great Recession had reached levels not seen since the eve of the Great Depression. The top 1 percent of earners now takes home around 20 percent of the nation’s total income compared to 10 percent two decades ago, he said, a trend that accelerated through the downturn and is depressing demand among the poor and middle class who have jobs.

Summers said higher productivity from technological innovation that is eliminating manufacturing jobs all over the globe and the growing importance of high value-added business services were the driving forces behind inequality, and little could be done, including through education policy, to reverse those trends. Yet income inequality needed to be addressed if average households were going to resume spending at rates seen in previous economic expansions.