Larry Summers, former U.S. Secretary of Treasury under President Bill Clinton, has stated that there is a “very high likelihood” of a recession befalling the United States in the near future, putting the economic expert at odds with many members of the current executive administration.
In an interview on Monday with CNN’s Fareed Zakaria, the influential economist and Democrat expressed his belief that a recession has become a very likely prospect in the near future, while expressing skepticism of the notion that the Federal Reserve and other economic policymakers can solve the problem of rampant inflation without triggering a recession—a so-called “soft landing.”
“I think there’s a very high likelihood of recession,” Summers told Zakaria. “When we’ve been in this kind of situation before, recession has essentially always followed. When inflation has been high and unemployment has been low, soft landings represent a kind of triumph of hope over experience. I think we’re very unlikely to see one.”
The former treasury secretary’s remarks put him at odds with the current occupant of the position, Janet Yellen, who previously served as the head of the Federal Reserve under President Barack Obama. Yellen has downplayed the risk of a recession in recent remarks, recently calling the market “extremely strong.”
“This is not an economy that’s in recession, but we’re in a period of transition in which growth is slowing. And that’s necessary and appropriate, and we need to be growing at a steady and sustainable pace … but you don’t see any of the signs now. A recession is a broad-based contraction that effects many sectors of the economy. We just don’t have that.”
With his recent remarks, Summers has become an unlikely champion to the economically conservative left and right, who have lambasted the administration of President Joe Biden for a package of policies they allege are responsible for the current economic troubles in the United States.
“Even Larry Summers now thinks there’s a more than 50 percent chance that an economic recession hits in the next 30 months,” U.S. Representative Claudia Tenney said. “Biden’s out-of-control spending will go down as one of the worst policy failures of our time.”
However, Tenney’s remarks were countered by her House of Representatives colleague Democrat Ted Lieu, who took to Twitter to express his disgruntlement with Summers’ remarks and challenge the former treasury secretary’s more conservative stance on policy.
“‘Fool me once, shame on you. Fool me twice, shame on me.’ Larry Summers was wrong when he pushed for a far too small stimulus during the Obama Administration,” Lieu remarked. Summers served as Obama’s director of the National Economic Council from 2009 to 2010. “Glad [President Biden] is not going to be fooled by Summers again. We went into a recession last year. We need the full stimulus.”
Summers explained more of his opposition to further stimulus spending on Twitter, saying, “Chairman Powell and the Fed have recognized their 2021 errors and committed themselves to doing what is necessary to restore price stability recognizing that the cost may be high but there is no viable alternative. The longer inflation persists and the higher it rises the more it will be entrenched and the greater will be the ultimate cost of restoring price stability.
He continued, “I support this policy approach not because I do not care about unemployment but because I do. I read the experience of the 1970s as demonstrating that an approach based on recession fears, seeing inflation in terms of specific micro factors, and avoiding short run pain leads ultimately to catastrophic unemployment.”
In any event, a growing number of economists and business professionals seem to agree with Summers. If a recession were to manifest in the current year, political consequences would likely follow for the Democratic Party in upcoming midterm elections, and American consumers will find themselves forced to contend with scarcity as the economy’s progress grinds to a halt.