Brace yourselves! White House expects even MORE inflation

[Editor's note: This story originally was published by Real Clear Politics.]

By Philip Wegmann
Real Clear Politics

If there is one economist that this White House can’t stand sometimes, a dismal scientist with an uncanny knack for offering the gloomiest but most accurate analysis at the worst moments politically, that very well might be Larry Summers.

It was Summers, a former Treasury secretary under President Clinton and later a senior economic adviser to President Obama, who warned the White House for months last year that, no, inflation would not be temporary or transitory as they had hoped.

And he was right: the Consumer Price Index rose by 7.9% through February, the fastest annual increase in four decades. Eventually President Biden came around, announcing last month that addressing inflation would be his “top priority.” Now, ahead of new data to be released by the Labor Department Tuesday, the White House warns that inflation numbers will be “extraordinarily elevated.”

Given that Summers was right about inflation, does Biden believe the economist will be right about a recession? “That is not a projection we have made from here,” Jen Psaki told reporters in the briefing room Monday. “We believe,” added the White House press secretary, “that the economy is strong.”

Psaki was responding to a Washington Post op-ed written by Summers last week that has subsequently been ricocheting through the West Wing. It was the latest in what some in the press call an “I-told-you-so tour” of late, and while the Harvard professor believes the inflation that he spent so many months warning about could come down, he now predicts more bad news.

“Over the past 75 years, every time inflation has exceeded 4 percent and unemployment has been below 5 percent, the U.S. economy has gone into recession within two years. Today, inflation is north of 6 percent and unemployment is south of 4 percent,” he warned.

Is the U.S. economy strong, as Jen Psaki claims?

That last number has been a particular area of pride for the president. During his first State of the Union address, Biden trumpeted the fact that 6.5 million jobs were added during his tenure, and Psaki repeated that data as if by rote from the White House podium, saying, “We have created more jobs last year than any year in American history. We saw the unemployment rate at 3.6% last month.”

Some economists worry that an economy, awash in government stimulus, may be rebounding from the pandemic and expanding too quickly. The fear is an overheating economy driven by unsustainable growth. That’s what Summers says he saw last year when so many others refused to look.

“We had a tidal wave of demand between zero interest rates from the Fed, a huge outpouring of saving that people had pent up from the COVID period, and massive fiscal policy from the December bill and then the stimulus bill that was passed,” he told Chuck Todd last Sunday on NBC’s “Meet the Press.”

There was too much demand between all those factors, and labor shortages would be the natural result even as Americans returned to the workforce. “The bathtub was going to overflow, so to speak,” Summers said, “and the inflation rate was going to pick up.” A land war in Europe and the subsequent spike in oil prices that followed U.S. sanctions of Russia have only made things worse. But the White House remains bullish.

They’ve taken precautions throughout the recovery, and everything should be fine. That was the message Brian Deese, director of the White House National Economic Council, shared with reporters over breakfast last week.

“The core question is whether the strength of the U.S. economy is now an asset or a liability,” he said. “What we have done over the course of the last 15 months is driven a uniquely strong economic recovery in the United States, which positions us uniquely well to deal with the challenges ahead.”

Wall Street still worries. Some economists fear that, as demand continues to outstrip supply, a booming economy runs the risk of consuming itself. The Federal Reserve has signaled that they believe they can bring down inflation and cool the economy without triggering a recession by increasing interest rates. That is, they can deliver a so-called “soft landing.” This is easier said than done, however. In an interview with the New York Times, Tara Sinclair, a professor of economics at George Washington University, likened that task to “trying to land during an earthquake.”

Voters are already spooked. According to the RealClearPolitics average, 59% of Americans disapprove of Biden’s handling of the economy, while 22% approve – a negative 22.6% spread. According to one CNBC survey, 81% of U.S. adults expect a recession to hit sometime this year.

A recession is not, however, inevitable. At least, so says Summers, even after noting again that the historical trends may be heading in the wrong direction. There were options he recommended such as continuing to tap the strategic petroleum reserve to lower oil prices, reduce tariffs, and direct the government to purchase goods at cheaper prices.

“Perhaps we will be fortunate and there will be sufficiently rapid adjustments in commodity prices and other bottlenecks that will make that not happen. Perhaps the Fed will be extraordinarily skillful,” Summers said before outlining those options.

“But it's not going to be easy,” he concluded, “starting from where we are.”

IMPORTANT NOTE: The latest issue of WND's critically acclaimed Whistleblower magazine (available in both print and digital versions) insightfully explores the rapidly growing runaway inflation being visited upon America by the Biden administration, and is titled "THE LOOTING OF AMERICA: How the elites are robbing everyone else through runaway inflation and skyrocketing prices."

[Editor's note: This story originally was published by Real Clear Politics.]

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