White House is misreading inflation, says economist Larry Summers

The White House is “behind the curve” and misreading the inflation that is taking over the U.S., said Larry Summers, former Treasury Secretary and head of the National Economic Council during the Obama administration.

“I think that the policymakers in Washington unfortunately have almost every month been behind the curve,” Summers said on CNN. “They said it was transitory; it doesn’t look so transitory. They said it was due to a few specific factors; doesn’t look to be a few specific factors. They said when September came and people went back to school, that the labor force would grow, and it didn’t happen.”

The Consumer Price Index (CPI), which tracks inflation across goods and services, rose 0.96 percent during October and 6.2 over the past year, according to a report released by the U.S. Bureau of Labor Statistics on Wednesday. The data shows the highest inflation rates in over 30 years.

Summers ties the inflation to the $1.9 trillion coronavirus relief bill passed by Congress this spring. “I think we’re speeding down the road at a really rapid rate,” he said.

While Summers commends the administration for taking steps to ease bottlenecks at US ports, he also urged officials to consider removing tariffs on foreign goods and encourage energy production to reduce gasoline prices.

On Monday, President Biden said that his spending plans are not raising prices and that inflation was “temporary,” “transitory,” and “expected.”

“Inflation hurts Americans pocketbooks, and reversing this trend is a top priority for me,” Biden said in a statement.

President Biden plans to get two bills through Congress this year, including the recently passed infrastructure bill, costing up to $4.7 trillion, in hopes to reduce inflation.

“My experience is that you should hope for the best and plan for something much less than the best,” said Summers.