On Tuesday, top Democrat economist Larry Summers, who served in the Clinton and Obama administrations, responded to the news that the inflation crisis worsened in August, warning that the United States still has a “serious inflation problem.”
According to the newly released Consumer Price Index (CPI) report from the Bureau of Labor Statistics, inflation worsened last month as prices rose 0.1% on a monthly basis and 8.3% over the last year. Core inflation, which excludes volatile gas and energy prices, also rose 0.6% in August and 6.3% over the last year.
“Today’s CPI report confirms that the US has a serious inflation problem. Core inflation is higher this month than for the quarter, higher this quarter than last quarter, higher this half of the year than the previous one, and higher last year than the previous one,” Summers wrote on Twitter. “Median inflation used to be a favorite indicator for team transitory. This month it was at its highest ever reading.”
“It is highly implausible that inflation will fall to 2 percent without unemployment exceeding 4.5 percent. Yet this is the most pessimistic view among 19 members of the [Federal Open Market Committee]. Dangerous group think,” Summers added. “With core inflation running above 7 percent this month and likely, given rent behavior, to remain elevated, I fear it is unlikely that a peak Fed funds rate around [4 percent] will be enough to restore 2 percent inflation.”
Summers’ comments come shortly after he similarly warned that President Biden’s student loan forgiveness plan, which could cost taxpayers over $1 trillion, could drive up inflation and increase the overall cost of college
“Every dollar spent on student loan relief is a dollar that could have gone to support those who don’t get the opportunity to go to college,” Summers wrote on Twitter ahead of Biden’s announcement of the details of his plan.
“Student loan debt relief is spending that raises demand and increases inflation. It consumes resources that could be better used helping those who did not, for whatever reason, have the chance to attend college. It will also tend to be inflationary by raising tuitions,” Summers continued.
Biden’s plan also ended up including the extension of the student loan moratorium which Summers said was the “worst idea.”
“The worst idea would be a continuation of the current moratorium that benefits among others highly paid surgeons, lawyers and investment bankers,” Summers explained.
