Democratic economist Larry Summers, who served as treasury secretary for Bill Clinton and a top adviser to Barack Obama, spoke out against the Biden administration on Monday for its narrative about the inflation crisis.
What is the background?
The Labor Department's Bureau of Labor Statistics reported Friday that the consumer price index "rose 6.8% for the 12 months ending October, the largest 12-month increase since the period ending June 1982."
November also marked the sixth consecutive month in which year-over-year inflation remained above 5%, meaning Americans are paying significantly more across the board for goods and services.
What did Summers say?
The economic expert knocked the Biden administration for downplaying the seriousness of inflation problems.
"I cannot understand why so many in Admin & out cling to the idea that inflation is caused by bottlenecks & will soon recede to normal levels. Of course there is uncertainty but the idea that inflation will revert soon to levels anywhere near Fed’s target looks like a long shot," Summers said.
Numerous top Biden administration officials have indeed argued that inflation is not a lasting problem.
For example, White House press secretary Jen Psaki claimed last month that "everyone from the Federal Reserve to Wall Street agree with our assessment that inflation [will] substantially decelerate next year." Meanwhile, Commerce Secretary Gina Raimondo said just last week the Biden administration is "quite confident" that high inflation is "short-term problem."
But Summers vehemently disagrees and predicted there will not be a "major deceleration in inflation" as the Biden administration claims.
"Inflation has trended up through 2021 and the economy is growing far more rapidly than potential output. Given housing prices and tightening labor markets, there is no compelling reason to expect major deceleration in inflation," Summers said.
"But, even if inflation subsided to .2 percent a month, the annualized inflation rate would be 6.5% in March 5.1% in June and 4.0% before the election," he explained. "My guess is barring a major recessionary or financial shock next fall, headline inflation will round to 5 percent."
"We are beyond where the Vietnam inflation took us but still have plenty of time to stop a late 1970s situation from developing, if we have the will," Summers added.
Summers has been sounding the alarm over inflation during the last several months, contradicting the Biden administration's peachy outlook and response to the growing problem.