NOVEMBER 12, 2021
Kuttner on TAP
Is Summers Owed an Apology—or Does He Owe Us One?
The policies that he promoted helped produce the supply chain crisis, and his diagnosis of today’s inflation is just plain wrong.
Politico ran a piece the other day contending that the White House owes Larry Summers an apology for dismissing and disparaging his warnings beginning last February that Biden was spending too much and courting inflation.

Politico quoted a piece Summers wrote in The Washington Post last February 4, as the $1.9 trillion American Rescue Plan was heading for final legislative passage in Congress, warning that macroeconomic stimulus of this scale could “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.”

Well, inflation just clocked in at a 6.2 percent annual rate, the fastest in three decades. Ergo, says Politico, Summers was a prophet whose advice should have been heeded.

The reality, however, is that the current bout of inflation has little to do with Biden’s recovery program—and is actually the result of perverse policies that Summers and his confreres foisted on America over three decades. As that Bolshevik, Fed Chair Jerome Powell, could explain to Summers, the current inflation has little to do with macro pressures and everything to do with bottlenecks resulting from the supply chain crisis.

If you dig a little deeper, the supply chain mess is precisely the consequence of economics according to Summers—deregulate, globalize, ignore the risks and hyper-concentration promoted by unhinged finance.

The usual sources of macro pressure are not part of the story. Wages on average are rising more slowly than prices.

The “inflation expectations” cited by Summers as supposedly feeding on themselves are another myth of right-wing economics, as demolished in this technical paper by senior staff economist Jeremy Rudd, published by that same citadel of radicalism—the Fed.

Weirdly, Summers’s most recent view is that neither the infrastructure bill nor Build Back Better, with its emphasis on human caregiving, its long-term payout, and its minimal impact on deficits, is inflationary. “A lot of it is vitally needed investments in the future of the country,” he told Chris Cuomo on CNN. At least he has that right.

So—apology tally: The apology for the supply chain debacle and the resulting shortages and price hikes is owed from Summers to us. Politico also owes one to its readers.
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