The White House and allies fired back at longtime party economist Larry Summers Friday for suggesting that their plans for pandemic relief were too aggressive, in a sign of Democrats’ commitment to big spending.
“The one thing we learned is we can’t do too much here,” President Biden said at the White House. “We can do too little. We can do too little and sputter.”
White House officials and other Democrats pushed back on Summers’s argument that Biden’s proposed $1.9 trillion relief package will unleash “inflationary pressures of a kind we have not seen in a generation” and limit the administration’s ability to address public investments in other priority areas, such as infrastructure and renewable energy.
Summers was a senior Treasury Department official during the Clinton administration and directed the National Economic Council under President Barack Obama. Summers helped craft the recovery package following the 2008 financial crisis, which liberals argue was too small and undercut Obama’s presidency.
“Whereas the Obama stimulus was about half as large as the output shortfall, the proposed Biden stimulus is three times as large as the projected shortfall, Summers wrote in a Washington Post op-ed. “Relative to the size of the gap being addressed, it is six times as large.”
Austan Goolsbee, former Council of Economic Advisers chairman under the Obama administration, responded that he feared the economy stalling out more than he did the government spending too much.
Goolsbee told the Washington Examiner: “I think that relief money during a catastrophe is critically important to prevent permanent damage, and it’s not the right way to think of it, to compare it to the current output gap. That’s a stimulus argument. This isn’t stimulus.”
Goolsbee’s comments come hours after the January jobs report showed meager jobs gains last month and steeper jobs losses in November and December than previously thought.
However, Goolsbee did caution that Summers’s argument about infrastructure spending was “important for us to think through.”
“If we spend more on relief, will it mean we have to spend less on infrastructure?” Goolsbee said. “I don’t think it has to mean that, but we should think about that.”
Biden economic adviser Jared Bernstein told CNN that Summers was “wrong in a pretty profound way.”
“We have consistently said the risks of going too small are much greater than the risks of doing too much,” Bernstein said. “Now, that doesn’t mean there are no risks engaged in the kind of work we are doing … but what Larry is worrying about here is inflation overheating, and right now, we have inflation that’s been below the Fed’s target rate of 2% for well over a decade.”
Biden economic adviser Jared Bernstein pushes back on the Larry Summers op-ed (https://t.co/Rjg7rXm3fd) warning that the $1.9T stimulus plan could be too big and carry its own economic risks: “I think he’s wrong. I think he is wrong in a pretty profound way about that.” pic.twitter.com/1GiNlxrStB
— Megan Cassella (@mmcassella) February 5, 2021
“Where Larry got something importantly wrong, by the way, is by suggesting that the administration was being dismissive of any potential inflationary pressure — that’s flat-out wrong,” Bernstein added.
“The president and the administration have a lot of respect for Prof. Summers, but we disagree here,” Deputy National Economic Council Director Bharat Ramamurti told CBS News Radio.
Hawaii Sen. Brian Schatz also laid into Summers’s op-ed on Twitter, asking, “Why would we listen to the economist who admits he went too small last time if he’s warning us to go small again?”
Why would we listen to the economist who admits he went too small last time if he’s warning us to go small again? I swear this town is nuts. It’s like people can only remember thirty names and so they just keep going back to the same people.
— Brian Schatz (@brianschatz) February 5, 2021
“I swear this town is nuts,” Schatz added. “It’s like people can only remember thirty names and so they just keep going back to the same people.”
