How Larry Summers became the preeminent critic of the Biden era’s economic consensus
There’s a story that progressives like to tell about Larry Summers. The doyen of Establishment economics is dining out with a populist politician. The two have made it through the meal with minimal awkwardness — their ideological tensions eased by booze and food — when Summers leans back in his chair and offers his left-wing foil a hard-won insight. There are two kinds of political actors in this world: insiders and outsiders.
Outsiders are free to speak their truth, Summers explains. But the price of such freedom is irrelevance in the halls of power. Insiders, by contrast, have a seat at the table where history is made. But to keep those seats, they must take care not to criticize other insiders. So, Summers asks his dining companion, which are you?
The anecdote has an apocryphal air. It makes Summers sound like the one-dimensional villain of a third-rate Sorkin script. Yet in their respective memoirs, Senator Elizabeth Warren and former Greek finance minister Yanis Varoufakis each claimed that Summers subjected them to such an after-dinner lecture and advised them to take the inside track.
If the story is true, then Summers has ceased taking his own advice. These days, the former treasury secretary is the outsider — or at least he’s acting like one.
Back in March 2021, blue America was in high spirits. Thanks to their improbable sweep of Georgia’s special Senate elections, Democrats found themselves in full control of the federal government. They would waste little time in using it, with President Biden swiftly unveiling a $1.9 trillion COVID-relief bill known as the American Rescue Plan. The package won plaudits from all corners of his big-tent coalition. Everyone from the conservative columnist David Brooks to the socialist economist J.W. Mason hailed the bill as a landmark achievement. In polls, a similarly broad spectrum of voters evinced their approval.
But Larry Summers was not among them. In a series of op-eds and interviews, the Harvard economist warned that Biden’s bill was excessively large and could “set off inflationary pressures of a kind we have not seen in a generation.” The president’s first major legislative achievement was, therefore, “the least responsible fiscal macroeconomic policy we’ve had for the last 40 years.” [Continue reading…]