With his typical zeal and poignant analogies, Professor Larry Summers took to the JFK Jr. Forum’s stage at the Institute of Politics on Thursday, September 15th. In an hour-long conversation guided by Linda Henry MC/MPA ’21 and questions from a probing audience, Professor Summers presented his candid analysis of the current state of the American and global economies, as well as thoughtful criticism of The Federal Reserve System’s approach so far.
Secretary of Treasury for Clinton, Director of the National Economic Council for Obama, Chief Economist of the World Bank, Summers certainly had experience under his belt as he addressed the current high rate and the threat of recession.
Henry started the discussion by recognizing, quite frankly, that Summers was “right.” Early in February of 2021, Summers accurately predicted high inflation by looking at the data. Yet given the current political economy where speculation of recession hinges on political parties, interpreting data is not enough to be a successful economist, Summers argued. He was able to distinguish between analysis and preference, avoiding the tendency of many economists to let partisan debate infiltrate policy.
Summers’ analysis of inflation rested not on his political views, but on what he observed: a two or three percent GDP gap, fourteen percent of GDP in fiscal stimulus, labor shortages. These issues altogether led to an overstimulated economy. Summers expressed regret that it “doesn’t look like the U.S. has moved on its inflation problem as a country.”
Indeed, the latest inflation report released by the Bureau of Labor Statistics last week recorded an 8.3% rise in prices in one year. As Americans’ concerns grow and prices continue to soar, the Fed must recognize that taming inflation should be its primary policy focus, Summers contended, in a “firm and resolute” manner. To that end, Summers proposed raising interest rates up to at least 4 percent, if not further. “The soft landing of the U.S. represents the triumph of hope over experience,” Summers offered, criticizing the overdue and insufficient policy actions to curb inflation.
Summers has been criticized for providing a weak response to the financial crisis of 2007-2008 while serving as Director of the National Economic Council for the Obama administration: a meek stimulus coupled with too lenient bailouts. Now, he emphasizes the importance of learning from history.
During his talk, Summers carefully combined his prior work with sharp analogies to help the audience understand his economic prescriptions. He compared monetary policy, for instance, to a course of antibiotics: the medicine is only effective if you stay the course, not if you stray away and omit the last few days, hoping your expectations will turn into reality.
Summers’ ability to craft such precise arguments and comprehensive metaphors reflects another one of his skills: teaching. He admitted that he, too, is still learning and teaching enables him to better formulate his own views. On the stage of the JFK Jr. Forum and in his own classes, Summers is unafraid to go against any wave of thought, actively combating groupthink. He urges audience members to think about contentious issues through different lenses, offering hope for the triumph of reason and wisdom in future economic policy.
Alice Khayami ’25 (alicekhayami@college.harvard.edu) writes News for the Independent.