Prof. ST Hsieh
Director, US-China Energy Industry Forum
June 12, 2022
Larry Summer is a highly respected economist who headed Harvard University from 2001 to 2006. He is outspoken so not everyone agrees with him. But his advice or suggestion should be taken very seriously. His main points made to Dana Bash on CNN’s “State of the Union” June 12, are:
- A US recession would “more likely than not” occur within the next two years. But he is not, like many politicians, afraid of a recession. He is confident: “That is something we can manage. We have had them for the whole history of the country,” Summers said.
- He made these important comments by analyzing current economic data, not focused on voters’ sentiment. His key advice though is “We need to be prepared and to respond quickly if and when it happens.” Unfortunately, preparation for the recession and speedy responses will be a major challenge for Biden administration.
- Reducing Trump’s tariff against China will not completely solve US inflation overnight. But it will immediately help easing the inflation pressure. The reality is that, as of now, US inflation is only on the way up, but Biden Administration only has many ideas or internal debates but no action yet. It is wishful for the Administration to focus on any “perfect solution” that will wipe out 8.6% inflation by waving a magic wand.
- Reducing Trump’s tariff against China is one way to ease some US inflation. It is not a sign of US weakness against China. US is not doing any favor for the Chinese if the tariff is reduced. If, as Larry predicted that a (global) recession happens within two years then US and China will have to coordinate their rescue efforts!
Former Treasury head urges tariff cuts, warns of recession
Madison Fernandez Sun, June 12, 2022, 9:38 AM
Former Treasury Secretary Larry Summers urged the Biden administration on Sunday to ease tariffs on China to bring down costs and curb rising inflation.
Summers told host Dana Bash on CNN’s “State of the Union” that he disagrees with Treasury Secretary Janet Yellen, who last week said there is “nothing to suggest that a recession is in the works.”
“I think when inflation is as high as it is right now, and unemployment is as low as it is right now, it’s almost always been followed within two years by recession,” Summers said. “I think they’re wrong now if anyone’s highly confident that we’re going to avoid recession.”
The Federal Reserve has also indicated it doesn’t necessarily see a recession on the horizon. In May, Fed Chair Jerome Powell said there is a “good chance to restore price stability without a recession, without a severe downturn, without materially higher unemployment.”
Summers said there is a risk prices will continue to climb and called the central bank’s forecast that inflation will cool “much too optimistic.” The Fed is set to meet again later this week.
Summers acknowledged there is not much the Biden administration can do to bring down gas prices, but said inflation can be reduced by cutting tariffs and passing bipartisan legislation that would raise Trump-era tax cuts, impose taxes on corporations and take down prescription drug prices.
“We should focus on what’s important, not raising input prices for American producers so they’re less competitive, which is what much of those tariffs do,” Summers told Bash. “I have advocated that we need a much more strategic tariff policy vis-a-vis China that takes tariffs down and therefore takes prices down for American consumers and for producers.”
Even though rolling back the tariffs on China imposed by former President Donald Trump has been seen as a way to potentially tone down inflation, the Biden administration has not yet acted.
At a press conference last month, President Joe Biden noted that tariffs on imports from China “were imposed by the last administration” and said he was considering lifting them. Yellen has also advocated for lifting some of the tariffs, cautioning that the levies have a negative impact on the U.S. consumers and businesses.
Former US Treasury Secretary Lawrence Summers suggests it’s ‘more likely than not that we will have a recession within the next two years’
Taylor Ardrey Sun, June 12, 2022, 9:41 AM
- Former US Treasury Secretary Lawrence Summers said it’s “likely” that the country will see a recession.
- “I think there’s certainly a risk of recession in the next year,” he told CNN on Sunday.
- His opinion opposes Janet Yellen, who said last week nothing is pointing to a recession.
Former US Treasury Secretary Lawrence Summer suggested that “it’s more than likely” the country will grapple with a recession “within the next two years.”
“I think when inflation is as high as it is right now, and unemployment is as low as it is right now, it’s almost always been followed within two years… by recession,” Summers said on CNN’s “State of the Union” on Sunday.
“I look at what’s happening in the stock and bond markets. I look at where consumer sentiment is,” he added. “I think there’s certainly a risk of recession in the next year. And I think, given where we have gotten to, it’s more likely than not that we will have a recession within the next two years.”
He was responding to host Dana Bash’s question about current US Treasury Secretary Janet Yellen’s recent remarks, where she eased the fears of a possible recession, saying “there’s nothing to suggest that a recession is in the works.”
“Consumer spending is very strong, investment spending is solid,” she said at the New York Times Dealbook conference in Washington DC last week, responding to concerns tweeted by hip hop star Cardi B.
During the interview, Summers added that a recession is something the US can take on.