A leading economist who worked in former President Barack Obama’s administration is coming clean about the Biden administration’s misguided approach to fending off inflation.
In an interview with Bloomberg‘s David Westin this week, Larry Summers said policymakers in Washington appear to be misdiagnosing the problem. Inflation isn’t being caused by corporate greed, Summers said — and the longer politicians like President Joe Biden wait to accept the truth, the worse it will get.
“Every time a Washington policymaker suggests that this is caused by corporate greed or some such, they are delaying the date at which we will achieve the credibility necessary to bring down inflation with stable employment,” said Summers, who was director of Obama’s National Economic Council and previously served as Treasury secretary under Bill Clinton.
“Misdiagnosis of the problem around greed or around particular sectors raises the risk that ultimate recession will be necessary,” Summers added in his talk with Bloomberg. “We need to recognize that we’ve got an overheated economy that we are going to need to cool off.”
“A very challenging year”
Summers suggested to Bloomberg that a recession isn’t inevitable at this point, but contended that “we are basically moving towards higher entrenched inflation.”
“People try to excuse it by picking this figure and that figure from month to month, but we’ve got an overheated economy, and the Fed’s gonna have a very real challenge of cooling that economy off and doing it in a controlled way,” he told Bloomberg, according to The Daily Wire.
“That has not been done very successfully in the past,” he said. “So it’s going to be a very challenging year for macroeconomic policy.”
Summers’ comments come the same week Biden nominated a trio of officials to fill out the Federal Reserve’s seven-member Board of Governors, including Lisa Cook, who, if confirmed, would be the first Black woman in the role, according to the New York Post.
In a Friday statement, the president said Cook and other nominees “will bring much needed expertise, judgment, and leadership to the Federal Reserve while at the same time bringing a diversity of thought and perspective never seen before on the Board of Governors.”
They certainly have their work cut out for them.
According to a report from The Washington Post, “prices rose at the fastest pace in four decades in December , increasing 7[%] over the same period a year ago.” Other numbers released last week bucked assertions from the White House that inflation would soon dissipate, suggesting Americans could be grappling with increased prices well past November, when voters hit the polls for the midterm elections.
“This [inflation] is going to have huge consequences in the fall,” GOP pollster Frank Luntz told The Washington Post. “Of all the economic issues, this is number one,” he added. “And it’s number one because whether you are upper middle class or lower middle class, you’re still affected.”