President Joe Biden, left, speaks at the Washington Hilton Hotel in Washington, D.C., on Wednesday. Lawrence Summers, director of former President Barack Obama’s National Economic Council, attends a luncheon at the J.W. Marriott on April 9, 2009, in Washington, D.C. (Mandel Ngan – AFP / Getty Images; Chip Somodevilla / Getty Images)
By Warner Todd Huston April 7, 2022 at 1:19pm
All signs point to some very troubling times ahead thanks to President Joe Biden’s spiraling economy, and even former Obama adviser Larry Summers is blasting Biden and the Democrats for their continuing failure to address the coming crisis.
Summers, a Harvard-trained economist who was President Bill Clinton’s secretary of the Treasury and President Barack Obama’s director of the National Economic Council, recently said that he thinks it is possible to get inflation under control, but that the Biden administration doesn’t seem to have any interest in taking the proper steps.
In a March 29 interview with The New York Times’ Ezra Klein, Summers was asked if there is a way to address the current economic problems without causing a recession.
Summers said he thinks there is. But he also warned that it is too late to prevent a “mild recession.”
“I think the likelihood is that we will not return to 2 percent inflation without having at least a mild recession,” Summers said.
“I think that the magnitude of the imbalances and excess demand in the labor market are sufficiently great that the odds are probably three and four that we will not get inflation down without running a recession.”
According to Summers, history shows that the chances of a recession are very high.
“If you look at the last 75 years of American business cycle history and you just ask the question — suppose that the unemployment rate is below 4 and the inflation rate is above 4, what are the odds that the economy will go into a recession in the next year and what are the odds that the economy will go into recession in the next two years?” he asked.
“Depending on just how you calculate the answer, it’s about 50 percent that it will go in the next year and about 75 percent that it will go in the next two years.”
Do you think a recession is around the corner?
Klein went on to ask Summers if Biden’s “plan” to increase supply will work. Summers said Biden is doing the exact opposite of what he needs to do to address the nation’s economic woes.
Summers ruefully noted that Biden has moved away from the limited tools government can use to address the economy. “The tools that there are, are tools that the Biden administration has so far been very reluctant to adopt,” he said.
“If we reduce tariffs, that would make more goods available at lower prices and perhaps reduce the consumer price index by 1 percent or more. But their rhetoric has gone the other way on tariffs,” he continued.
Summers added that Biden could have “decided to do public procurement as inexpensively as possible” to “reduce prices of a whole set of things the government buys and increase competitive pressure.”
Instead, the economist explained, he has “indicated a desire to shift from buying cheap to buying America and buying in ways that protect certain key constituencies.”
So, instead of trying to boost the economy for all Americans, Biden is racing to protect his political allies.
After offering a few ideas on how to spur growth, Summers said, “I don’t think it’s remotely realistic to think that programs of public investment are going to increase supply in a relevant horizon for the current inflation.”
Summers has spoken against large-scale government involvement in the economy before. In 2019, for instance, he blasted Sen. Elizabeth Warren’s “Medicare for All” plan, saying it would put the country in “dangerous territory.”
Now, Summers is again panning a Democrat for suggesting that big government spending can fix everything. And it doesn’t appear that Biden is listening.
It looks like the nation is going to suffer as a result.