Summers now says he’s more concerned than he was when he first issued his warnings.
There is a new fear circulating inside the West Wing of the White House: Maybe Larry Summers was right.
The former Treasury secretary has been warning since February that President Joe Biden’s big-spending agenda was creating the risk of an inflation spike this year, potentially cutting into the economic recovery from the Covid-19 pandemic.
For the moment at least, Summers is looking prescient.
The government said Tuesday the consumer price index rose 5.4 percent in June from the same month last year, the biggest jump since 2008, as costs for everything from used cars and trucks to restaurant meals and hotel stays continued to soar. It marked the second straight month of sharply higher prices. June prices also unexpectedly rose 0.9 percent from May, undercutting the argument that the price increases only look bad in comparison to last year, when the pandemic was raging.
Tuesday’s number beat Wall Street expectations and sparked fears that the Federal Reserve might have to act faster than anticipated to pump the brakes on the economy to prevent a runaway rise in prices.
Summers has vexed the White House and infuriated Democrats with his repeated alarms about Biden’s plans to spend trillions of dollars more in federal money, though he favors more infrastructure investment.
He has been among the loudest voices in Democratic circles in cautioning about the risk of a prolonged spike in prices. The White House has mostly dismissed his concerns, saying prices will ease later this year, a view shared by Fed Chair Jerome Powell, who will testify before Congress this week.
For his part, Summers now says he’s more concerned than he was when he first issued his warnings. “These figures and labor market tightness and the behavior of housing markets and asset prices are all rising in a more concerning way than I worried about a few months ago,” he said in an interview on Tuesday. “This raises my degree of concern about an economic overheating scenario. There are huge uncertainties in the outlook, but I do believe the focus of concern right now should be on overheating.”
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Former Treasury secretary Larry Summers has been warning since February that Biden’s big-spending agenda was creating the risk of an inflation spike this year.
Now, there's a new fear circulating inside the West Wing : Maybe Summers was right. https://t.co/W4ieMEnqLa
— POLITICO (@politico) July 13, 2021
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