Secular stagnation has gripped the U.S. economy and breaking free of it will require more government spending, said Harvard economist Larry Summers on a visit to Denver on Tuesday.

“As the economy is configured, we have difficulty generating demand,” said Summers, who spoke to banking clients of BBVA Compass. “Clearly the economy needs more support, not less.”

Technological innovations are reducing the demand for labor, such as airline ticket kiosks that replace counter workers. Global competition has pushed wages down and displaced jobs here as well.

The lack of demand for labor, in turn, crimps consumer demand for goods and services, putting further downward pressure on wages and limiting job creation.

The U.S. economy last year generated 42 percent more output than it did in 1998, but it did so with the same number of labor hours — 194 billion, according to a report last week from the U.S. Bureau of Labor Statistics.

But in those 15 years, the country has added 40 million people. In short, there aren’t enough jobs to go around, and a growing number of people are dropping out of the labor force.

The longer they remain out, the less likely they are to find employment, which further reduces demand and acts as a drag on growth, Summers said.

U.S. economic growth has averaged 1.8 percent a year since 2001 and has run below 2 percent two of the past three years.

Hopes that 2014 would represent a break-out year were dashed when first quarter GDP revisions showed a 1 percent contraction, which many observers blamed on bad weather.

One area of the U.S. economy that could benefit from greater productivity is nonprofits, in particular higher education, said Summers, who was president of Harvard University from 2001 to 2006 and before that the U.S. Treasury secretary.

Tuition increases have far outstripped inflation, and Americans are now holding more than $1 trillion of student loan debt.

Summers said he considers fiscal stimulus more effective at generating growth than monetary stimulus and less prone to creating asset bubbles harmful to the economy.

He was an economic adviser to the Obama administration during the recession and helped design the Recovery Act and co-chaired the task force that restructured the U.S. auto industry.

He said if the U.S. economy could grow one-half a percentage point faster, it would take care of the fiscal deficits. Faster growth would also ease the country’s growing income gap and allow the U.S. to better compete with other countries and maintain a position of strength.

Aldo Svaldi: 303-954-1410, or

More in Business