Former top Obama economic adviser shoots down Biden's favorite inflation argument; former treasury secretary says admin's 'misdiagnosis' puts US at risk of recession
The U.S. Bureau of Labor Statistics announced on Wednesday that the consumer price index rose by an alarming 7% over a one-year period — the largest 12-month increase in nearly 40 years. A poll that was released last month found that inflation was the top concern of Americans. A new CBS News/YouGov poll released on Sunday shows that 70% of Americans disapprove of President Joe Biden's handling of inflation, and 65% say he hasn't paid enough attention to U.S. inflation.
When the Biden administration has been pressed about inflation in the past, he has deflected and blamed others — especially corporations.
In November, Biden said there was "mounting evidence" that higher oil and gas prices may have been caused by "anti-consumer behavior by oil and gas companies." He then called on the Federal Trade Commission to launch an investigation into energy companies.
In December, White House press secretary Jen Psaki blamed skyrocketing meat prices on the "greed of meat conglomerates."
However, Jason Furman — a former top economist for President Barack Obama — shot down the Biden administration's corporate greed defense.
"Corporate greed is a bad theory of inflation," said Furman, who is now a Harvard University professor. "I think almost everything other than the Federal Reserve is a sideshow when it comes to the dynamics of inflation."
"The main reason prices go up is companies are trying to make as much as they can, they just can't make enough to satisfy everything that people want," Furman continued. "When that happens, prices go up. If they didn't go up, we'd have worse shortages right now."
Another former Obama economic advisor cautioned against Biden blaming corporate greed for inflation, and went so far as to say that continuing to do so puts the U.S. at risk of a recession.
Lawrence Summers — who served as the Secretary of the Treasury under former President Bill Clinton and was the Director of the National Economic Council under Obama — warned the Biden administration, "Misdiagnosis of the problem around greed or around particular sectors raises the risk that ultimate recession will be necessary."
“Every time a Washington policymaker suggests that this is caused by corporate greed or some such, they are delaying the date at which we will achieve the credibility necessary to bring down inflation with stable employment," Summers said on Bloomberg Television's "Wall Street Week."
"I think the data flow is saying what I’ve thought for quite some time that, yes, there are transitory elements in inflation, and very likely they will recede, but we are basically moving towards higher entrenched inflation,” noted Summers, who is now a Harvard University professor. "It’s there in expectations, it’s there in wages, it’s there in labor shortages, it’s there in the pervasive pattern across many different prices."
"We have a massive, overheated labor market," Summers explained "We have the highest ratio of vacancies to unemployment in the country’s history, by a large margin. We have shortages of labor, in everything from psychotherapy, to McDonalds, in everything from investment analysts to gardeners, that suggests a surfeit of purchasing power and demand relative to the capacity of the economy to produce and unless we bring those things into balance, we’re going to have not just higher inflation, but possibly even accelerating inflation. And we need to recognize that we have an overheated economy that we are going to need to cool off.”
We're Moving Toward Higher Entrenched Inflation, Says Larry Summers www.youtube.com
'What the hell were you thinking?': Fox News host confronts Obama official who called economic woes 'high class problems'
Fox News host Bill Hemmer confronted a former top Obama economics official Friday for claiming that skyrocketing inflation and supply chain disruptions are "high class problems."
What is the background?
Harvard economics professor Jason Furman, who served as chairman of former President Barack Obama's Council of Economic Advisers, downplayed current economic woes last week as problems only for American elite.
"Most of the economic problems we're facing (inflation, supply chains, etc.) are high class problems. We wouldn't have had them if the unemployment rate was still 10 percent. We would instead have had a much worse problem," Furman tweeted.
Most of the economic problems we're facing (inflation, supply chains, etc.) are high class problems. We wouldn't ha… https://t.co/N5QNseCFhm
— Jason Furman (@jasonfurman) 1634170666.0
Notably, White House chief of staff Ronald Klain was clobbered on social media after endorsing Furman's claim. By supporting Furman's claim, Klain was seemingly attempting to deflect responsibility from President Joe Biden for current economic struggles.
What did Hemmer say?
"Jason, you started a prairie fire yesterday," Hemmer said. "To paraphrase Jay Leno, what the hell were you thinking?"
Furman, however, defended his claim. He alleged rising inflation is a "good thing" because it means Americans are spending more money.
You need to keep two things in your head at once. One is, inflation is real. Inflation is creating a problem for families, and we should do something about it. Number two, the reason we have this inflation is actually a good reason: that the unemployment rate has come down, that families got money, and people are buying more things than ever before.
The problem isn't that our ports stopped working, it's that people are buying so much stuff, that so much is trying to come through our ports right now. We have record volumes, you know, that both has a good side, a bad side, you need to keep both those in your head.
Furman went on to admit the U.S. economy "has an inflation problem, and we need to deal with that," but softened the blow by claiming inflation is up because demand for goods is through the roof.
Hemmer, though, pushed back, grilling Furman over how significantly increased gas prices, for example, is a "high class problem."
"Middle-class America is paying for that," Hemmer said.
"Americans are traveling more than they were a year ago. That's a good thing. Americans are spending more; they're spending more in restaurants; they're spending more on sporting goods; they're spending more on nights out; they're spending more on travel," Furman responded. "That's all a really good thing. That's what's most important."
When asked whether he stands by his "high class problems" remark, Furman did not waiver.
"There's a good side to what's going on — people are spending more than they've ever spent before — and there's a bad side to what's going on," he said. "When everyone spends more than they've ever spent before, that drives prices up."
Former Obama economist grilled on controversial inflation tweet www.youtube.com
Top 'White House ally' sharply undercuts key Biden, Dem narrative on stalled economic recovery
Democrats and the Biden administration have attributed the blunted economic recovery, in part, to a lack of child care services for working parents. They have used the problem to push support for President Joe Biden's American Families Plan, a massive legislative proposal that would cost taxpayers $1.8 trillion.
However, new analysis released by economic experts including Harvard professor Jason Furman, whom Politico described as a "prominent White House ally" and "Biden-friendly economist," severely undercuts the Democratic narrative.
After April's shockingly disappointing job's report showed the U.S. economy stalled last month — adding only about one-quarter of the 1 million jobs experts predicted — Democrats have called for Congress to act on Biden's plan, and the White House has said lack of child care access is preventing parents from rejoining the workforce.
Politico reported:
Democratic officials have used the jobs report to call on Congress to urgently approve hundreds of billions of dollars in child care aid that Biden has proposed under the American Families Plan, which also includes two free years of universal pre-K. "If we don't solve our child care crisis, there isn't going to be an economic recovery," Sen. Patty Murray (D-Wash.), who chairs the Health, Education, Labor and Pensions Committee, said at a Thursday press conference.
White House press secretary Jen Psaki told reporters earlier this month that passing the Families Plan "would have a huge benefit in addressing some of the impacts of child care, on educational needs … that is preventing women from rejoining the workforce."
What did Furman discover?
The economic analysis co-authored Furman, who served as chairman of former President Barack Obama's Council of Economic Advisers, found that child care challenges are not contributing to the stalled economic recovery.
"School closures and lack of child care are not holding back the recovery," Furman said, Politico reported. "And conversely, we shouldn't expect a short-term economic bump from reopening schools and making child care more available."
In fact, the analysis discovered the employment rate for parents with young children decreased at a lower rate than the unemployment rate for people without young children, yet another indicator that child care challenges are not contributing to the stalled jobs recovery.
Instead, the analysis concluded that enhanced unemployment benefits is partly behind the disappointing economic numbers from April.
While school closures and ongoing childcare challenges have substantially burdened parents and children alike, they do not appear to be a meaningful driver of the slow employment recovery. This means that the factors responsible for the slow employment recovery and depressed labor supply are issues that are not exclusively related to the struggles of working parents, such as the continued concern about the threat of getting COVID-19 at work or expanded unemployment insurance benefits and eligibility.
Furman had said previously child care challenges and closed schools were contributing to poor economic recovery numbers.
How did the White House respond?
Jared Bernstein, a member of Biden's Council of Economic Advisers, essentially dismissed the analysis, saying it "doesn't obviate our concerns about the child care barrier either in the near-term or the long-term."
"Many factors remain in play: fear of the virus, barriers to child care, school closures, concerns about the vaccination rates for working-age people," Bernstein told Politico. "All of these factors are in the mix, and I don't think you can find one piece of research that says, 'Aha, here is the main factor or the sole factor.' These factors are all interacting with each other as we continue making a gradual return back to pre-crisis conditions."
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