Speaking of Biden spin, we can now definitely say that Larry Summers won his bout with the White House over inflation in a rout. Playbook has a good run-down:
On Feb. 4, as President JOE BIDEN’s nearly $2 trillion stimulus bill was making its way through Congress, LARRY SUMMERS took to the Washington Post with a warning:
“[W]hile there are enormous uncertainties, there is a chance 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. This will be manageable if monetary and fiscal policy can be rapidly adjusted to address the problem. But given the commitments the Fed has made, administration officials’ dismissal of even the possibility of inflation, and the difficulties in mobilizing congressional support for tax increases or spending cuts, there is the risk of inflation expectations rising sharply. Stimulus measures of the magnitude contemplated are steps into the unknown.”
It was better, Summers argued, to take some of the short-term ARP money that risked fueling inflation and devote it towards the longer term policies in the follow-up legislation that became BIF and BBB.
The reaction from the White House was fierce. Top advisers rushed to the cameras to push back. Summers was “flat-out wrong” that Biden’s team was “dismissive” of inflation risk, said economic adviser JARED BERNSTEIN, who repeated what would become the Biden mantra on the stimulus: “the risks of doing too little are far greater than the risks of going big.”
Privately, White House officials were withering in their attacks on Summers.
The White House continued to downplay inflation throughout the spring and summer. “We think the likeliest outlook over the next several months is for inflation to rise modestly,” Bernstein wrote in April, “and to fade back to a lower pace thereafter.” The following month, when asked about inflation concerns, White House press secretary JEN PSAKI said, “Our economists have conveyed that they feel that the impact of our proposals will be transitory.”
They were wrong.
Finally in August, with inflation showing no signs of the tapering Berstein predicted, with Summers arguing he may have understated the inflationary risks, and with polls showing that voters wanted Biden to focus on rising prices, the president finally shifted. His infrastructure and reconciliation packages, he now argued, were actually designed to fight inflation.
“If your primary concern right now is inflation, you should be even more enthusiastic about this plan,” the president said.
This morning, the Labor Department announced that the “consumer price index, which is a basket of products ranging from gasoline and health care to groceries and rents, rose 6.2% from a year ago,” CNBC’s Jeff Cox reports — more than experts had expected, and the nation’s highest annual inflation rate since November 1990.
In a statement this morning, Biden again tried to spin the news as a call to arms to pass the reconciliation package: “Going forward, it is important that Congress pass my Build Back Better plan, which is fully paid for and does not add to the debt, and will get more Americans working by reducing the cost of child care and elder care, and help directly lower costs for American families by providing more affordable health coverage and prescription drugs.”