Larry Summers, the former treasury secretary under President Bill Clinton, slammed President Biden’s economic agenda as “increasingly dangerous” because it will end up driving prices higher.
“I am profoundly concerned by the doctrine of manufacturing-centered economic nationalism that is increasingly put forth as a general principle to guide policy,” Summers, who also served as an economic adviser to President Barack Obama, told the Peterson Institute for International Economics on Tuesday.
Summers’ comments were first reported by CNN.
He said the administration’s decision to eschew free trade agreements with other countries while focusing on boosting manufacturing in the US could contribute to even higher levels of inflation.
Summers said that while he agrees with key pieces of legislation such as the CHIPS Act and the Inflation Reduction Act, he fears they could have unintended consequences.
“It is wrong to suppose that manufacturing-based economic nationalism is a route to higher incomes or better standards of living for the middle class,” Summers said Tuesday.
“We do not have a problem of a shortfall of jobs … We do have a problem with costs.”
Summers said increased free trade and other benefits of globalization are the key to bringing down inflation.
“That is why I am so concerned by the administration’s attitudes, or non-attitudes, toward trade,” he said.
Summers also criticized the Biden administration’s aggressive antitrust stance.
Under Biden, the Federal Trade Commission has tried to block Microsoft’s acquisition of video gaming giant Activision Blizzard.
The FTC has also pursued legal action against large tech firms for alleged antitrust violations.
Summers said he fears that the administration’s antitrust guidelines “discard” longstanding policy geared toward reducing consumer prices.
“Yes, we should enforce the antitrust law more than we have over the last 30 years … But we should do that in service of a doctrine of higher incomes through lower costs for consumers,” Summers said.
A White House spokesperson criticized Summers’ comments, telling CNN: “Bidenomics is a fundamental break from trickle-down economics, which underinvested in the American people and our competitiveness.”
“The pandemic and Russia’s war in Ukraine made clear that supply chains and critical resources can be easily disrupted, hurting consumers, workers, and the entire economy.”
US data from June showed that inflation cooled last month, but it wasn’t enough to stop the Federal Reserve from further hiking interest rates.
Fed Chairman Jerome Powell announced a quarter-point hike, raising the benchmark federal funds rate to a range between 5.25% and 5.5%.
Summers has been a vocal backer of aggressive interest rate hikes by the Fed in order to bring down inflation — even at the cost of higher unemployment.