Economist Larry Summers says White House misread inflation

Larry Summers, a former top economic adviser to President Obama, said Wednesday that President Biden’s White House has been “behind the curve” in their predictions about rising prices during the coronavirus pandemic.

“I think that the policymakers in Washington unfortunately have almost every month been behind the curve,” Summers said on CNN. “They said it was transitory; it doesn’t look so transitory. They said it was due to a few specific factors; doesn’t look to be a few specific factors. They said when September came and people went back to school, that the labor force would grow, and it didn’t happen.”

Data released Wednesday showed that the consumer price index, which tracks inflation across goods and services, rose 0.9 percent during the month of October and 6.2 percent over the past year. 

Summers, who has for months warned about inflation tied to the $1.9 trillion coronavirus relief bill passed by Congress this spring, said he hoped the Biden administration’s predictions about the inflation being transitory would pan out but urged officials to prepare for a more dire scenario.

“My experience is that you should hope for the best and plan for something much less than the best. I think that means stronger actions by the Fed, it means the administration has to be thinking about inflation,” Summers said.

Summers commended the administration for taking steps to ease bottlenecks at U.S. ports, including a plan rolled out earlier this week, but also urged officials to consider removing some of the tariffs on foreign goods and take actions to encourage energy production in order to reduce gasoline prices.

But Summers also said that the bills Biden is ushering through Congress would not contribute to inflation. 

“The 10 years of the two spending bills together, A, are less than the one year of what they did last spring and, B, unlike what they did last spring, are paid for by tax increases,” Summers said.

“I don’t think that’s an inflation problem. I think a lot of it is vitally needed investments in the future of our country.”

Republicans have attacked Biden’s broader agenda, claiming it would worsen inflation.

Biden’s domestic agenda has been split into two pieces of legislation that will together repair infrastructure, address climate change and expand social programs. The infrastructure bill passed the House last week and is awaiting Biden’s signature, while the social spending bill is still moving through Congress.

The White House has addressed the rising prices in part by arguing that Biden’s domestic policy agenda will ease inflation once the bills are signed into law. During a speech at the Port of Baltimore on Wednesday afternoon, Biden also spotlighted the administration’s efforts to address supply chain disruptions.