Former Treasury Secretary Larry Summers , a Democrat, says that the country’s too-high inflation could lead to Donald Trump being reelected to the presidency.
Summers, who served as treasury secretary under President Bill Clinton and director of the National Economic Council under President Barack Obama, has been a stalwart critic of the Federal Reserve’s and the Biden administration’s handling of inflation and argued in a Monday Washington Post op-ed that the government must reevaluate the threat that higher prices play.
“After years of advocating more expansionary fiscal and monetary policy, I altered my view this past winter, and I believe the Biden administration and the Federal Reserve need to further adjust their thinking on inflation today,” he said.
“Excessive inflation and a sense that it was not being controlled helped elect Richard Nixon and Ronald Reagan, and risks bringing Donald Trump back to power,” he cautioned Democrats.
Summers used a speech by Fed Chairman Jerome Powell from August to illustrate his point. He rebutted five points that Powell made to argue that inflation is merely transitory and will settle back down.
The former treasury secretary rebutted the notion that inflation was only confined to a few sectors of the economy and Powell’s August assertion that there was “little evidence of wage increases that might threaten excessive inflation.”
Summers highlighted that about 4.4 million workers quit their jobs in September, about 100,000 more than the month before — a number that is the highest since the United States began keeping records about two decades ago.
He added that the central bank’s own inflation expectations have notably increased since Powell’s annual speech in Jackson Hole, Wyoming.
Summers said that reducing tariffs “is the most important supply-side policy the administration could undertake to combat inflation” and that the Fed should accelerate the tapering of its asset purchases. The central bank said after its most recent meeting that it will begin winding down its massive monthly purchases of government bonds later this month.
Summers also encouraged President Joe Biden to appoint Fed officials who recognize the threat that inflation poses to the economy and will take rising prices seriously.
Summers has been sounding the alarm on inflation for months, even early in the year, when fewer economists were cautioning about the threat that it posed. He has knocked Treasury Secretary Janet Yellen for her views on inflation and has not shied away from criticizing the Fed over its slow-walking on a return to normal monetary policies.
Inflation just hit its highest rate in 30 years, clocking in at a whopping 6.2% for the year ending in October.