Biden-backed antitrust crackdown could worsen inflation, Larry Summers warns
The Biden administration’s push to crack down on antitrust violations could cause the ongoing inflation crisis to worsen rather than improve, economist Larry Summers warned this week.
Summers, the Treasury secretary during the Clinton administration, said proposed antitrust actions were “more likely to raise than lower prices.”
President Biden has called for scrutiny of top meat industry firms and US oil companies, arguing that a lack of competition has contributed to artificially high consumer prices during the COVID-19 pandemic.
“The emerging claim that antitrust can combat inflation reflects ‘science denial,’” Summers wrote on Twitter. “There are many areas like transitory inflation where serious economists differ. Antitrust as an anti-inflation strategy is not one of them.”
US consumer prices surged 5.7 percent in November compared to the same month one year earlier, marking the fastest increase in four decades, according to Commerce Department data. An ongoing labor shortage and supply chain issues have contributed to the problem.
Surging inflation has put pressure on American workers by effectively erasing wage gains and raising the cost of everyday goods. Biden has pushed back on critics who argue his pandemic-era economic policies are stoking inflation.
In November, Biden asked the Federal Trade Commission to consider opening a probe into whether “illegal conduct” was contributing to higher gas prices. He has repeatedly called out meat providers over increased profits during the pandemic.
Summers said he “strongly” supports the Biden administration’s push to ensure fair competition in business. However, the Harvard University economist asserted some measures, such as a Biden-backed push to crack down on prominent meatpacking firms, would result in reduced supply and higher prices.
“Monopoly may lead to high prices but there is no reason to expect it to lead to rising prices unless it is increasing,” Summers added. “There is no basis whatsoever thinking that monopoly power has increased during the past year in which inflation has greatly accelerated.”
Summers argued the labor shortage will be the “primary root” of inflation over time. He proposed a different approach to addressing the crisis, including a reduced emphasis on buying American-made products, lower tariffs and a cutback on regulatory delays.
Summers has been a vocal critic of the Treasury’s handling of the current inflation surge.
In October, Summers engaged in a war of words with Treasury Secretary Janet Yellen after she said he was “wrong” to claim the US faced a risk of runaway inflation without proper action.
“I don’t think we’re about to lose control of inflation,” Yellen said at the time. “I agree, of course, we are going through a period of inflation that’s higher than Americans have seen in a long time, and it’s something that’s obviously a concern and worrying them, but we haven’t lost control.”
Summers fired back, arguing there was “less than a 50/50 chance” that Yellen was correct in her assessment that inflation would soon return to target levels.
Yellen long argued rising inflation was transitory in nature and would return to the 2% level the Federal Reserve deems acceptable by 2022. But she reversed course earlier this month, telling lawmakers she was “ready to retire the word transitory” given the rise of new COVID-19 variants.
