Larry Summers raises inflation concerns as he blasts Biden’s spending

Former Treasury Secretary Larry Summers said he is skeptical of massive spending increases under Biden and the Federal Reserve – and is now worried about inflation more than ever, according to a report.

“The traditional role of the Fed is to remove the punch bowl before the party gets good, right?” Summers told Axios. “They have announced that their new policy is to remove the punch bowl only after they have clearly seen a number of people staggering around drunk.”

His comments come just days after April’s Consumer Price Index showed prices surged 4.2 percent from last April, making it the largest jump in prices since 2008. Over the past year the Fed has flooded the markets with money — $120 billion a month — as part of its bond-buying quantitative easing effort to stabilize markets.

Last week, Fed vice chairman Richard Clarida admitted he was surprised by the CPI report, but said the central bank still believes steep inflation will be temporary as the Fed sticks with its easy-money policies in a bid to prop up the labor market.

In February, Summers penned an op-ed for the Washington Post where he laid out his worries about Biden’s massive spending and said the trillions of dollars Biden wanted to spend could create “inflationary pressures of a kind we have not seen in a generation.”

Summers said now he is even more concerned as Biden unveils more plans to ramp up spending. Summers notes that spending first and taxing later could “add fuel to the [inflationary] fire” even if Biden does intend to raise taxes down the line to pay for coronavirus relief and infrastructure.

Summers has been a key figure in crafting economic policy for Democrats since the 1990s—in addition to serving as Treasury Secretary, he also served as Chief Economist of the World Bank and head of the National Economic Council under President Obama.

Other democratic economists have also broken rank with Biden. President Obama’s Council on Economic Advisors chief Jason Furman has also been critical of the massive spending — calling Biden’s coronavirus relief package “too big for the moment.”

The Biden White House is quick to defend its fiscal approach, saying once people are vaccinated and go back to work, any inflationary issues will be ameliorated.