new york
CNN
—
Larry Summers, former Treasury secretary in Bill Clinton’s administration, is hopeful the Fed will be able to achieve a successful soft landing after shocking jobs figures, but the economy has “came out of the woods.” He warned that it would be a “big mistake” to think that Fareed Zakaria GPS Sunday.
Friday’s jobs report added a staggering 517,000 jobs in January and the unemployment rate fell to 3.4%. This is his lowest level since 1969.
Reflecting a sense that inflation is calming, the Federal Reserve once eased rate hikes this week. Can the US achieve a successful soft landing and lower inflation without triggering a recession?
“It looks more like a soft landing than it did a few months ago,” Summers said, but he fears inflation indicators are back to reality but still too high for his liking. .
“It’s still incredibly high compared to a few years ago, and it’s still going to be very difficult to get back to target inflation,” Summers said.
Zakaria asked whether it would be worth it to bring down inflation if 3-3.5% inflation could become the norm.
Summers said this was a trade-off between a short-term decline in unemployment and a permanent change in inflation.
“The benefits of keeping unemployment low are likely to fit most economic theories and not be permanent,” Summers said. “But if we push inflation up and those problems take hold, we’re going to endure that inflation for a long time.”
There are approximately 3 million people in the United States who have just stopped looking for work. Summers attributes it to older people who have decided to retire earlier than the normal pattern due to COVID-19.
He said there is a “massive reassessment” of workplaces post-COVID.
“You can’t be a CEO if you don’t like being in the office,” Summers says. “So CEOs want all employees to come back to work, but many people prefer their dens to cubicles.”
Summers also advised President Joe Biden as the debt ceiling crisis erupted in Washington.
“I would advise him that default is not a viable strategy for the country,” Summers said. “It’s about the Banana Republic and he’s not going to get involved in that sort of thing.”
Zakaria added that a crisis could be on the horizon as House Republicans don’t want to pay. Even though the budget was set by both parties, we won’t introduce the bill until President Biden agrees to cut spending.
Biden should argue that “Congress will do its job and authorize borrowing to finance spending.”
Summers said a few responsible Republicans could raise the debt ceiling.
“Just because some Republicans may give in to extremist demands doesn’t mean the president of the United States should.”
