Trump's policies in a second term would be 'substantially inflationary,' Larry Summers says
By Victor Reklaitis
The prominent economist also knocks Biden for 'the degree of interventionism in the economy'
'I think the Trump economic agenda is likely to be very substantially inflationary.'Larry Summers
The comment above came Tuesday from prominent Democratic economist Larry Summers as he spoke at an Economic Club of New York event with Republican economist Glenn Hubbard.
Summers listed policies proposed by presumptive 2024 Republican presidential nominee Donald Trump that he views as likely to drive prices higher, saying he was worried about "the disrespect for the independence of the [Federal Reserve], the strong signals about the desirability of a weak dollar DXY, the desire for tax cutting - absent any programmatic commitment to spending cutting - [and] the imposition of unprecedented, in the last half century, tariff policies."
In his reference to the Federal Reserve, Summers appeared to be talking about an April report that said some Trump allies have proposals that would erode the U.S. central bank's independence.
In addition, the economist warned on Tuesday that the likely restrictions on labor supply resulting from Trump's immigration policies would be inflationary.
Related: Trump's immigration plan could add trillions of dollars to national debt, fueling inflation and market jitters
Summers, who was a top economic adviser in the Obama administration as well as Treasury secretary in the Clinton administration, drew attention in 2021 for warning that President Joe Biden's COVID-19 stimulus plan would help bring about inflation.
But lately he has been warning repeatedly about the effects a second Trump term in the White House could have on the cost of living. He said in a social-media post on Sunday that there is a "real risk during a Trump presidency that we would again see mortgage rates above 10 percent as inflation expectations rose and long-term interest rates increased."
Hubbard, who served as a top economic adviser to President George W. Bush, responded to Summers in part by noting that Biden has supported many of his predecessor's tariffs and has also imposed new ones.
"You pointed to inflationary effects in tariffs, but of course while that's true, President Biden is embracing that agenda," Hubbard said.
But Summers pushed back on that, saying: "I would really very strongly reject any suggestion of symmetry of sin on protectionism. It seems to me that there's every reason to think that there will be far more in a Trump administration."
Summers also offered some criticism of Biden's economic agenda, even as he argued that it's better than Trump's.
"I would like to hear more about plans for fiscal sustainability. I'm concerned about the degree of interventionism in the economy, but I think there is much more recognition that we need to respect our central bank and respect our currency. I think there is less instinct to pervasive large-scale protectionism" in Biden's policies, he said.
"I think there's substantially more commitment to research and development for competitiveness in key technologies, whether it's artificial intelligence BOTZ or whether it's clean energy ICLN," Summers continued, "so I am much more optimistic about the economic prospect on that agenda than I am on the Trump agenda as it now appears."
The Trump campaign didn't immediately respond to MarketWatch's request for comment.
Greg Robb contributed.
Now read: Trump's tariffs could overshadow the benefits of his tax cuts, economists say
-Victor Reklaitis
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06-05-24 1712ET
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