We’re not big fans of economist Larry Summers, but in this case, he should be in line for a Nobel Prize for predicting exactly what is happening with inflation today … and who is to blame for it.
On Wednesday, the Bureau of Labor Statistics reported that inflation climbed at an annual rate of 6.2%, the biggest such jump in three decades.
And that’s despite repeated predictions from other “experts” that the spike in prices earlier this year was “transitory.” Even now, they are flummoxed. As the Washington Post put it Wednesday, inflation is “lasting longer than policymakers at the Fed and White House anticipated.”
But no one, we repeat, no one, should be surprised by the latest turn of events.
Go back and listen to what Summers was saying at the start of the year, and it’s eerily prescient.
Summers publicly and repeatedly warned that President Joe Biden’s $1.9 trillion “rescue” plan —which was Biden’s first big “achievement” that passed without a single Republican vote — would spark an inflationary spiral.
In an op-ed published in the Post back in February, Summers warned of the risk that “macroeconomic stimulus on a scale closer to World War II levels than normal recession levels will set off inflationary pressures of a kind we have not seen in a generation, with consequences for the value of the dollar and financial stability.”
In March, after Biden had signed his $1.9 trillion monstrosity into law, Summers called it “the least responsible macroeconomic policy we’ve had in the last 40 years.”
In May, he said that “Whatever was the case a few months ago, it should now be clear that overheating — not excess slack — is the dominant economic risk facing the U.S. over the next year or two.”
It’s important to point out that Summers’ predictions came before the (unexpected) return of COVID and before the supply chain bottlenecks and shortages gripped the nation — both of which are now getting blamed for the inflation surge.
It’s also important to point out that, despite what Biden kept saying, the economy didn’t need rescuing. The nation’s GDP had almost completely recovered from the COVID lockdowns by March, and unemployment was tumbling. What’s more, vast amounts of money for the previous two COVID stimulus bills under President Donald Trump still hadn’t been spent.
Nevertheless, the response from the White House to Summers’ alarm was swift. Biden’s top economic adviser, Jared Bernstein, called Summers “flat-out wrong.” Treasury Secretary Janet Yellen said the same.
Biden himself repeatedly dismissed inflation fears, telling the public that the spike in prices would be short-lived and was simply a sign of the economic rebound. “As our economy comes roaring back, we’ve seen some price increases,” Biden said in July.
Others on the left piled on Summers.
Seth Ackerman, executive editor of the leftist publication Jacobin, wrote in September how “Larry Summers put his credibility on the line with wild predictions of runaway inflation in the wake of Joe Biden’s stimulus package last January. It’s looking like his predictions were wrong.”
It’s true that Summers wasn’t the only one ringing the inflation alarm. The New York Times surveyed economists at various top-ranked universities in June and found that many shared his concerns and that “about half of respondents who work in macroeconomics agreed that the latest stimulus package was ‘significantly’ too large.” There was no shortage of free-market economists issuing the same alerts.
But Summers had the most to lose by so publicly sticking his neck out. He’s a die-hard liberal who’d served in the Obama administration. He knew that raising a stink threatened the new president’s big-spending agenda. And, unintentionally or not, he called the lie on Biden’s claim that “leading economists” all agreed on the need for another massive COVID stimulus.
Now that Summers’ prediction is coming true, will any of his detractors apologize? Will any admit that Biden’s $1.9 trillion spending spree — which is now being followed by a $1.2 trillion infrastructure bill and, quite possibly, a multi-trillion dollar welfare expansion — was a colossal mistake? Will they acknowledge that Biden is principally to blame for the inflationary spiral the economy appears to have entered?
Don’t count on it. Biden is running around the country claiming that still more deficit-financed spending will somehow cut prices. Everyone else is busy looking for other scapegoats. Anything so as not to hold Biden, or themselves, accountable for the damage being done.
— Written by the I&I Editorial Board