Why Washington Can’t Quit Listening to Larry Summers

Many people who have served in top government jobs do stick around, commenting favorably on how their former team is doing. Others, like the former Treasury secretaries Timothy F. Geithner and Steven Mnuchin, fade out of the limelight. Few remain as front and center as Mr. Summers, or as apolitical and provocative.

Mr. Summers could turn out to be right, and is already taking a partial victory lap after the Fed increased its 2021 inflation forecasts. Most Fed officials now expect to raise rates by the end of 2023, a nod to faster-than-expected price gains. Mr. Summers has welcomed those developments, while seeing them as too little.

But he could yet be proved wrong, since part of the increase in prices was broadly expected and much of the rest came from categories affected by reopening wiggles, like airplane tickets and used cars. If price gains fall back into line after a bout of pandemic weirdness, there’s little reason for them to be destabilizing or problematic, from the Fed’s perspective.

Whether or not Mr. Summers turns out to be the sage of Scottsdale and Brookline, his staying power is perhaps best understood as a statement about what he represents: the belief that government spending has real if hard-to-know boundaries, and that trying to measure economic and practical limits can lead to better policymaking.

Those ideas are out of vogue among progressives, who embrace deficit spending and assessments of policy success that put more weight on the risk of underreacting. But Mr. Summers’s continued resonance in Washington — his words shaping policy debates that he is no longer, technically, integral to — shows that going out of fashion isn’t the same as going extinct.

Article source: https://www.nytimes.com/2021/06/25/business/economy/larry-summers-washington.html