Larry Summers, the former Obama and Clinton official, slammed parts of President Joe Biden’s economic agenda as “increasingly dangerous” this week, saying it could end up causing higher prices for Americans.
“I am profoundly concerned by the doctrine of manufacturing-centered economic nationalism that is increasingly put forth as a general principle to guide policy,” Summers said on Tuesday while speaking virtually at an event held by the Peterson Institute for International Economics.
Specifically, Summers took issue with the administration’s trade stance, efforts to prop up US manufacturing and its antitrust crackdown. The former Harvard president argued this approach could prove to be inflationary.
“It is wrong to suppose that manufacturing-based economic nationalism is a route to higher incomes or better standards of living for the middle class,” Summers said.
“Bidenomics is a fundamental break from trickle-down economics, which underinvested in the American people and our competitiveness,” White House spokesperson Michael Kikukawa told CNN in a statement in response to the Summers criticism. “The pandemic and Russia’s war in Ukraine made clear that supply chains and critical resources can be easily disrupted, hurting consumers, workers, and the entire economy.”
The White House spokesperson added that Biden’s investments in infrastructure, clean energy, and semiconductors “are not just creating new factories and jobs, they are making our economy more resilient.”
Manufacturing on the rise
Biden has made reviving American manufacturing a central part of his economic agenda. Biden signed into law legislation that incentivizes domestic manufacturing around clean energy, computer chips and other areas.
The White House has hailed a surge in private investment in American manufacturing under Biden’s watch.
“It used to be: find the cheapest market in the world, send the job overseas, and bring the product back. Not on my watch. Right here, we’re doing — we’re creating jobs in America, and we’re exporting American products,” Biden said during a speech about “Bidenomics” in Philadelphia last month.
Booming manufacturing investment has helped boost the US economy, with Morgan Stanley economists citing that as a key reason for their brighter economic projections.
Summers said he agrees with a “large part of” what the administration has done, including the passage of the Inflation Reduction Act and the CHIPS Act, which sought to boost domestic semiconductor manufacturing.
“I believe those two signature items of Biden policies were appropriate steps,” Summers said.
Inflation concerns persist
However, the famed economist and former president emeritus of Harvard University, and former Secretary of the Treasury, is taking issue with the doctrine behind those policies.
“We do not have a problem of a shortfall of jobs,” Summers said, noting that the number of open jobs relative to people looking for work remains high. “We do have a problem of costs.”
High inflation has hurt workers by eating into their paychecks. Real wages, adjusted for inflation, have declined, making it harder for Americans to get by.
Summers argued that globalization and the reduction of trade barriers have helped consumers by lowering inflation and ushering in a period of low interest rates.
“That is why I am so concerned by the administration’s attitudes, or non-attitudes, toward trade,” he said.
On the antitrust front, last week the Biden administration released new guidelines that signal officials plan to continue a tough approach when it comes to stopping harmful mergers.
“Unchecked consolidation threatens the free and fair markets upon which our economy is based,” Attorney General Merrick Garland in a statement last week. “These updated merger guidelines respond to modern market realities and will enable the Justice Department to transparently and effectively protect the American people from the damage that anticompetitive mergers cause.”
Summers, however, argued that the new guidelines “discard” a long-standing focus on lowering consumer costs when it comes to antitrust actions.
“Yes, we should enforce the antitrust law more than we have over the last 30 years,” Summers said. “But we should do that in service of a doctrine of higher incomes through lower costs for consumers.”
