The Case For Being Anti-Anti-Larry Summers

The former Treasury Secretary fears inflation. He’s likely wrong. So are the Democrats who shun him.

Last week, former Obama administration economic adviser and Clinton administration Treasury Secretary Larry Summers tried to influence the Biden administration from the outside. He penned a Washington Post column warning that the president’s proposed $1.9 trillion pandemic relief package risked “inflationary pressures of a kind we have not seen in a generation.”

Soon after, Politico suggested the op-ed was getting read in the White House, and that “liberal wonks” were already “whispering” Biden’s ask was too big. But soon after that, Summers’s view faced strong pushback from liberal wonks inside and outside the White House.

Biden’s longtime economic adviser, Jared Bernstein, challenged Summers by name on CNN, saying he was “wrong in a pretty profound way,” that “the risks of going too small are much greater than the risks of doing too much” and that the White House plan had already taken into account the risk of inflation. New York Times columnist Paul Krugman echoed Bernstein and added that the Federal Reserve was capable of addressing any inflation threat by hiking interest rates.

Some commentary went beyond the narrow policy debate over pandemic relief and sought to discredit Summers completely. The American Prospect’s Robert Kuttner wrote that with his missive in the Post, Summers, who was not offered a job in the Biden White House, has “proven once again that he’s a vindictive SOB.” Jeet Heer reminded progressive readers of The Nation of Summers’s support for Clinton-era financial deregulation, and concluded, “Summers as an editorial-page Cassandra is as wrongheaded as he was as policy-making panjandrum.”

The arguments of these progressive critics were backed up by important figures who are anything but liberal. The economic analysts at Goldman Sachs, have argued that inflation risks from Biden’s plan are low because much of the relief in the plan is temporary, and the economy is well below full employment with scant danger of overheating. And the Federal Reserve Chair Jerome Powell, who was appointed by Donald Trump, sounded like a Biden surrogate on Wednesday, urging policymakers to pursue full employment and downplaying inflation risk.

While the legislative process has not yet run its course, it would seem Summers has lost this round of public debate. For those who didn’t want Summers to blunt the momentum currently propelling Biden’s pandemic relief proposal, that’s good. And for those who didn’t want Summers to have outsized influence on the Biden administration and on our overall discourse, that’s even better.

But regardless of this debate’s outcome, we shouldn’t look at Summers as an insidious political threat that must be extinguished. Summers provided an informed contrarian view that served as a healthy check on what had become conventional wisdom inside the Democratic-progressive echo chamber.

Summers may be a vicious SOB and an overhyped panjandrum. He still bears the scars of his Harvard presidency where his flippant speculation about women’s abilities in STEM, tangling with Cornel West and cheering the ROTC made many liberals consider him a first-class ass. But there are only so many former treasury secretaries in our midst, not to mention accomplished economists who had the experience of crafting policy during a severe economic crisis. That doesn’t make every utterance from Summers correct, but it does give him rare perspective. An argument from Summers shouldn’t automatically be declared QED on the basis of his name, but neither should it be declared DOA.

Perhaps the strong reaction to Summers stems in part from the fact that he risks ruining the Democrats’ unusually good time. Liberals are not accustomed to being able to shape media narratives during the legislative process, not even during the honeymoon phase of a new Democratic presidency. Jimmy Carter, Bill Clinton and Barack Obama all faced stiff headwinds and tough headlines immediately upon entering office.

Jimmy Carter sought to capitalize on his early popularity by proposing a comprehensive energy bill after three months in office. But a scandal involving his budget director broke big, bruising Carter’s numbers, just as Congress began to consider the package. The resulting legislative process was fractious and protracted and did nothing for Carter politically.

“DISTRACTIONS HAVE PLAGUED CLINTON’S FIRST 10 DAYS,” blared one headline in January 1993, thanks to early controversies about Bill Clinton’s cabinet picks and (ultimately unfulfilled) plans to allow gays to serve openly in the military. Clinton quickly proposed an economic stimulus package but was too politically hobbled to create a sense of urgency for it. In April 1993, filibustering Republicans claimed there was no economic emergency and handed him his first big defeat.

Obama had a relatively better start; his economic stimulus plan became law. But Republican leaders and all but a few of their troops instantly pounded it as wasteful pork. Politico declared Obama was losing the “message war” before his first month as president was over. By the summer Obama’s job disapproval numbers had doubled, fueled in part by white backlash over his response to the arrest of African American Harvard professor Henry Louis Gates in his own home.

Biden, so far, provides a stark contrast to his predecessors. He has proposed a recovery plan of enormous size. Public opinion is strongly in favor. Republican opposition has been dulled. Nearly every voice heard in the media is generally in support of it. So, for Summers to get in the way of this good time rankles many Democrats.

Obviously, one would much rather be in Biden’s position than that of his Democratic predecessors. But there is a downside risk of owning the narrative so completely: Your proposals may not get tested and toughened in the public arena.

Like most Americans, I am not an economist, and I am not in a position to adjudicate a debate between prominent economists. I don’t know if Summers is correct about Biden’s plan. And while Summers has a pretty good resume, I’m inclined to side with all the others who have good resumes and gave solid rebuttals.

But it was absolutely useful to have these policy disagreements aired. While we don’t want to see contrarian, views get disingenuously weaponized by obstructionists, we do want policymakers to make informed policy decisions. Bigger numbers may feel right, but it’s worth questioning whether they are right.

Maybe we don’t want Summers at the nexus of Biden’s economic policy team, but he has value as an outside voice, making everyone check their work and sharpen their talking points. And as we have seen this past week, even if Summers is behaving as an SOB, the Biden administration can still control the narrative.

Support Nonprofit Journalism

If you enjoyed this article, consider making a donation to help us produce more like it. The Washington Monthly was founded in 1969 to tell the stories of how government really works —and how to make it work better. More than fifty years later, the need for incisive analysis and new, progressive policy ideas is clearer than ever. As a nonprofit, we rely on support from readers like you.

YES, I'LL MAKE A DONATION

Bill Scher

Bill Scher is the host of the history podcast "When America Worked" and the co-host of bipartisan online show and podcast "The DMZ"