Larry Summers, a former top economic adviser to ex-President Barack Obama, is predicting that economic conditions and the policies of President Joe Biden will soon result in a recession.
Summers previously correctly predicted "inflationary pressures of a kind we have not seen in a generation" in a February 2021 Washington Post opinion article about Biden's $1.9 trillion American Rescue Plan. In an interview released Friday by Politico's Playbook Deep Dive podcast, Summers said the current combination of a high inflation rate and a low unemployment rate was nearly certain to trigger a recession.
"We have had soft landings because we tightened at moments when the inflation rate was low and the unemployment rate was high," said Summers. "We have not had soft landings for moments when the unemployment was below 4 [percent] and the inflation was well above 4 [percent] ... Never happened in the United States going back 60, 70 years."
Summers said that "the odds are probably better than half that a recession will start next year." He suggested that a recession could begin sooner if crude oil prices were to reach $150 per barrel in the fall due to "the geopolitical situation." Oil prices fell on Friday, landing at less than $95 per barrel for the first time since April.
"I think this will depend a lot on what happens outside the economic realm," said Summers. "It will also depend on how lucky and, you know, how skillful the [Federal Reserve] turns out to be ... They've got a very, very difficult problem of balance in setting monetary policy, given the situation in which we find ourselves."
Summers, a Democrat, said factors that helped the economy reach the "overheated" state that caused high inflation included the large stimulus package that Congress passed and Biden signed into law in March 2021.
During a CNN interview last month, Summers said that high inflation and low unemployment "almost always" lead to a recession within two years. He said that it was "more likely than not" that the equation would be no different under Biden.
A report released by the White House on Thursday attempted to downplay fears of a recession, insisting that "recession probabilities are never zero, but trends in the data through the first half of this year used to determine a recession are not indicating a downturn."
Summers said that the forecasts offered by Biden's economic advisers represented "the possible but very optimistic case," while urging the administration to do more to address inflation.
"I wish my friends in the administration would turn their attention to what they can do to reduce inflation rather than clinging to the idea that this is something that's been done to them by the fates," he said.
In March, Summers predicted that gas prices would reach an average of $5 per gallon, which he said would be "disruptive for many people" but "a price that is very much worth paying" to push back against "tyrant" Russian President Vladimir Putin's invasion of Ukraine.
His prediction on gas prices also proved to be correct. The national average gas price peaked at just more than $5 per gallon on June 16, although it had fallen to an average of $4.38 per gallon as of Friday, according to Gas Buddy.
Newsweek has reached out to the White House for comment.
