Larry Summers, a long-time economic advisor to former President Obama, hasn’t been very quiet with his criticism of how the Biden administration has been handling the economy and inflation. Summers repeatedly warned in 2021 of runaway inflation, though his concerns were brushed away by the White House as some kind of fear-mongering.
As of today, with the highest inflation rate since 1982, Summers has been proven more correct than any Biden administration economic official wants to admit.
In a recent interview with the New York Times, Summers described the current situation as resembling the 1970s when inflation grew out of control during the Carter years thanks to government mismanagement:
EZRA KLEIN: … So where is your level of worry now? How is the Larry Summers’ forecasting function changed in the past month?
LARRY SUMMERS: I’m probably as apprehensive about the prospects for a soft landing of the U.S. economy as I have been any time in the last year. Probably actually a bit more apprehensive. In a way, the situation continues to resemble the 1970s, Ezra. In the late ’60s and in the early ’70s, we made mistakes of excessive demand expansion that created an inflationary environment.
And then we caught really terrible luck with bad supply shocks from OPEC, bad supply shocks from elsewhere. And it all added up to a macroeconomic mess. And in many ways, that’s the right analogy for now. Just as L.B.J.’s guns and butter created excessive and dangerous inflationary pressure, the macroeconomic overexpansion of 2021 created those problems, and then layered on with something entirely separate, in terms of the further supply shocks we’ve seen in oil and in food.
And so now I think we’ve got a real problem of high underlying inflation that I don’t think will come down to anything like acceptable levels of its own accord. And so very difficult dilemmas as to whether to accept economic restraint or to live with high and quite possibly accelerating inflation. So I don’t envy the tasks that the Fed has before it.
In other words, the Biden administration entirely mismanaged the economy in 2021 and misread the warning signs flashing in front of them. They didn’t learn from history, so we’re all doomed to repeat it.
Beyond the NY Times interview, Summers also published an op-ed in the Washington Post earlier this month warning of a “major recession” in the future resulting directly from the Biden administration’s economic policies:
Anything is possible, and wishful thinking can sometimes prove self-fulfilling. But I believe the Fed has not internalized the magnitude of its errors over the past year, is operating with an inappropriate and dangerous framework, and needs to take far stronger action to support price stability than appears likely. The Fed’s current policy trajectory is likely to lead to stagflation, with average unemployment and inflation both averaging over 5 percent over the next few years — and ultimately to a major recession.
Will the Biden economic team take the steps necessary to slow inflation or will they continue to let things ride as they are? Both paths have difficulty and downsides, one short-term and one long-term. From experience watching this clown car operate, they’ll do whatever causes the least amount of short-term pain since the midterm elections already look like a disaster for Democrats.
No wonder Biden’s poll numbers, which were already low, keep drifting lower based on the way people perceive their economic situation. As the cost of everything continues to rise and wages don’t keep up, we’re all paying a Biden tax that keeps growing month to month. Forget taxing the rich, Biden’s inflation is taxing everyone.
Most politicians talk about putting money back in your pocket by lowering taxes and lowering the cost of household goods. In Biden’s case, every move he has made since his inauguration has resulted in taking more money out of your pocket and driving prices up across the board.
The Biden economic team is either too proud or too incompetent to admit the truth.
