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Clinton, Obama Official Rails At Biden For Rationalizing Inflation Crisis

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OPINION: This article may contain commentary which reflects the author's opinion.


An economist for Presidents Bill Clinton and Barack Obama is warning President Joe Biden he needs to take the current inflation crisis a lot more seriously.

Lawrence Summers, who served as Clinton’s secretary of the Treasury and one of Obama’s top economic advisers, was reacting to Monday’s Labor Department report that the Consumer Price Index “rose 6.8% for the 12 months ending in October, the largest 12-month increase since the period ending June 1982.”

The report adds:

The monthly all items seasonally adjusted increase was the result of broad increases in most component
indexes, similar to last month. The indexes for gasoline, shelter, food, used cars and trucks, and new
vehicles were among the larger contributors. The energy index rose 3.5 percent in November as the
gasoline index increased 6.1 percent and the other major energy component indexes also rose. The food
index increased 0.7 percent as the index for food at home rose 0.8 percent.

The all items index rose 6.8 percent for the 12 months ending November, the largest 12-month increase
since the period ending June 1982. The index for all items less food and energy rose 4.9 percent over the
last 12 months, while the energy index rose 33.3 percent over the last year, and the food index increased
6.1 percent. These changes are the largest 12-month increases in at least 13 years in the respective series.

In addition, it should be noted that November is the sixth consecutive month in which year-over-year inflation surpassed 5 percent, which means Americans are paying a lot more for nearly everything across the board — kind of like a hidden tax on whatever it is they need.

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But the president and his staff don’t seem at all concerned or, at least, not concerned enough in Summers’ view, and he called them out for appearing to downplay just how serious the inflation problem has become.

“I cannot understand why so many in Admin & out cling to the idea that inflation is caused by bottlenecks & will soon recede to normal levels. Of course there is uncertainty but the idea that inflation will revert soon to levels anywhere near Fed’s target looks like a long shot,” Summers said in a Twitter thread.

“Nonpartisan BLS CPI report refers to inflation as ‘broad increases in most sectors…similar to last month.’ Inflation is not @ bottlenecks. Less than 10% of index saw inflation below 3% & aside from housing where figures are problematic, the share below 4% is less than quarter,” he added.

“We have all seen house prices & rents soar. Home prices based on Case Shiller are up 15 to 20%, as are rental prices, as reported by the nation’s largest landlords. If we assume 17% residential inflation, both CPI and core CPI would have exceeded 10 percent last month,” he wrote.

“Either the official indices are just wrong or more likely 3 to 4 points of inflation from housing are coming in 2022, even if there is no further increase in rents or home prices. This effect far exceeds any benefit from lower energy or used car prices,” he added.

Summers then went on to make some predictions about what he sees ahead, and it’s not good news for consumers — or for the Biden administration and Democrats in general.

“Inflation has trended up through 2021 and the economy is growing far more rapidly than potential output. Given housing prices and tightening labor markets, there is no compelling reason to expect major deceleration in inflation,” he wrote.

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“But, even if inflation subsided to .2 percent a month, the annualized inflation rate would be 6.5% in March 5.1% in June and 4.0% before the election in September,” added Summers.

“My guess is barring a major recessionary or financial shock next fall, headline inflation will round to 5 percent. We are beyond where the Vietnam inflation took us but still have plenty of time to stop a late 1970s situation from developing, if we have the will,” he concluded.

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