KEY POINTS

  • Larry Summers previously warned that the COVID-19 relief bill could affect prices
  • Business executives have also questioned the government’s plans in addressing the issue
  • Biden said in July that the increase in prices was expected to be temporary

A top economist who served in the Obama administration slammed the Biden White House as being “behind the curve” in taming inflation, which has singed ordinary Americans as prices keep rising across the board. Larry Summers argued that inflation is not transitory, contradicting an assertion that President Joe Biden has stuck to for months, before he changed track recently.

Speaking with CNN’s Chris Cuomo, Summers said he thinks “the policymakers in Washington unfortunately have almost every month been behind the curve,” adding that “they said it was transitory; it doesn’t look so transitory.”

Summers, who also served as the Treasury Secretary under President Clinton, further pointed out how the administration said inflation was “due to a few specific factors” but it now turns out that there were other major aspects driving inflation.

“They said when September came and people went back to school, that the labor force would grow, and it didn’t happen,” he said.

Summers’ comments came after data released Wednesday indicated an increase of 0.9% in October in the consumer price index (CPI), which monitors goods and services pricing. The index further showed an increase of 6.2% over the past year, marking the highest inflation since 1990 and raising concerns about Summers’ previous warnings regarding the massive COVID-19 relief package having an effect on inflation.

Summers said earlier this year that the relief bill may overstimulate the economy and spark excessive inflation. Late last month, Treasury Secretary Janet Yellen said Summers was "wrong" on his inflation predictions. During his latest CNN interview with Cuomo, Summers said he hopes Yellen and the administration were "right."

Summers isn’t the only one concerned about inflation. A CEO of one of the largest companies in the country, who spoke on condition of anonymity for fear of receiving ire from the current administration, told Politico of his concerns about the administration’s knowledge about the effects of inflation on business.

“I don’t think the administration is on top of it all. How many people inside this White House really know what inflation is or how it impacts businesses?” he said.

Jack McCullough, the President of the CFO Leadership Council, said he doesn’t “sense a lot of optimism among our members on inflation or the government response to it.” He added that members don’t think rising prices is a transitory period. McCullough added that it appears the government isn’t “actually interested in doing anything about this.”

In July, Biden said inflation was expected to be temporary. At that time, the president noted that the administration was doing everything it could to address the increasing prices of cars, Reuters reported. He said “unchecked inflation” for a longer period would “pose a real challenge for our economy.” He said the government will remain vigilant in responding to inflation if necessary.

larry summers Lawrence Summers, director of the White House National Economic Council, waits to be introduced before delivering a speech on "Responding to an Historic Economic Crisis: The Obama Program," at the Brookings Institution in Washington March 13, 2009. Photo: REUTERS/Molly Riley