LARRY SUMMERS HITS BIDEN’S ‘LEAST RESPONSIBLE’ ECONOMIC POLICY

Former Treasury Secretary Lawrence Summers warned that the US is suffering from the “least responsible” macroeconomic policy in four decades, pointing the finger at both Democrats and Republicans for creating “enormous” risks, Andrew Davis reported for Bloomberg News.

In his latest attack on the recent rush of stimulus, Summers told David Westin on Bloomberg Television’s “Wall Street Week” that “what was kindling, is now igniting” given the recovery from COVID will stoke demand pressure at the same time as fiscal policy has been aggressively eased and the Federal Reserve has “stuck to its guns” in committing to loose monetary policy.

“These are the least responsible fiscal macroeconomic policy we’ve have had for the last 40 years,” Summers said. “It’s fundamentally driven by intransigence on the Democratic left and intransigence and the completely irresponsible behavior in the whole of the Republican Party.” He disagrees with Paul Krugman's thoughts on how long it takes inflation expectations to become unanchored.

Summers, a top official in the past two Democratic administrations, has emerged as one of the leading critics among Democrat-leaning economists of President Joe Biden’s $1.9 trillion pandemic plan.

Summers warned in the interview the US was facing a “pretty dramatic fiscal-monetary collision.” He said there is a one-in-three chance that inflation will accelerate in the coming years and the US could face stagflation.

He also saw the same chance of no inflation because the Fed would hit the brakes hard and push the economy toward recession. The final possibility is that the Fed and Treasury will get rapid growth without inflation.

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