WINNING TIME — Larry Summers, the human economic airhorn that keeps blowing in West Wing ears, is declaring vindication. Again. The former Treasury secretary under President Bill Clinton and senior adviser and one-time Fed Chair candidate under President Barack Obama wrote in an op-ed today, noting that critics of his big inflation warnings were all wrong. And he, so far at least, has been dead-on accurate. Which he isn’t shy about reminding everyone. In an interview with Nightly today, Summers blew off any concerns about declaring victory too often. He said it was important to take on critics’ objections to his inflation theories one by one. He also noted that inflation wasn’t the only thing he got right: “What’s been less highlighted is my predictions that pushing for such a massive rescue act would endanger much of the Build Back Better agenda.” That’s exactly what happened, Summers said. Inflation, he noted in his Washington Post op-ed, is way higher than the White House or Fed thought it would be. And predictions from President Joe Biden and Fed Chair Jerome Powell that inflation would be “transient” are now dead. It’s still here, and it’s getting worse. Summers also isn’t ready to concede that Biden and the Fed are taking the problem seriously enough even now. “The question isn’t whether inflation will come down from about 8 percent on the current policy path,” Summers wrote in the latest example of a column that will be cursed and fumed over at the White House. “It is whether it will come down to an acceptable level. That’s a very different proposition.” Summers in the interview gave the Fed some credit for its recent pivot to tightening mode. But he added that it isn’t enough yet. “They’ve come an enormously long way to recognizing reality,” Summers said. “But they still don’t have a realistic forecast of the relationship between the economy and inflation.” The numbers back Summers up even as his arguments (as opposed to those of a much more White House-beloved columnist, Paul Krugman of the New York Times) have angered even Summers’ friends in the White House. Summers went out of his way to poke at Krugman in the op-ed over the Nobel Prize-winning columnist’s seemingly new contention that only inflation expectations matter when talking about federal investments. Not current rates. In the interview with Nightly, Summers said Krugman’s take on only caring about inflation expectations is inconsistent with Krugman’s “previous stance of yelling at people who make up new arguments to support previously held positions. Because it feels like that’s what he’s doing here.” There have long been policy disputes between Krugman (and many on the left) and Summers on Summers’ views of the risks of inflation and ever-larger deficits. But it’s a bit personal as well, as Krugman has emerged as a hero of the administration and the left while Summers keeps getting beat up on. Summers has been arguing since at least February 2021 that Biden’s big spending agenda plus strong post-Covid price pressure would drive inflation much higher very quickly. That’s exactly what’s happened as inflation hit close to 8 percent in February and could be closer to a scary 9 percent in March on soaring gas, food and housing prices. The Fed’s annual target for inflation is closer to 2 percent, and the central bank only just now started to bump up rates. Summers first spiked the ball in an interview with POLITICO in July. “These figures and labor market tightness and the behavior of housing markets and asset prices are all rising in a more concerning way than I worried about a few months ago,” he said at the time. “This raises my degree of concern about an economic overheating scenario.” Welcome to POLITICO Nightly. Reach out with news, tips and ideas at nightly@politico.com. Or contact tonight’s author at bwhite@politico.com, or on Twitter at @morningmoneyben.
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