Some of Larry Summers’s critics believed his warnings about inflation were so wrong that he could only be acting out of some hidden motive. But Summers’s warnings turned out to be fairly prescient. jonathanchait writes on the lessons of the episode
Larry Summers opposed the American Jobs Plan on the grounds that it would risk overheating the economy, stoking inflation, and potentially forcing the Federal Reserve to raise interest rates, triggering a recession. Many people, including me, disagreed with his analysis at the time.
Of course, most people now recognize Summers’s warnings about inflation were fairly prescient. But it was also relatively clear at the time that Summers, regardless of whether he was right or wrong, was not trying to sandbag the Biden administration. Even as he opposed Biden’s jobs plan, he argued in favor of his much larger social legislation. Summers supported the full-size version of Build Back Better.
Assumptions about motives are often wrong. Once you assume every position you hold is obviously correct and good, it is easy to believe that everybody who disagrees is evil or corrupt. Summers was not trying to sabotage Biden — he was trying to steer the administration away from what he genuinely believed was a risky policy choice.
Credibility matters. Suppose Summers had been a good team player and swallowed his fears that the American Jobs Plan would stoke inflation. He would have become a less persuasive advocate for Biden’s social policies. His willingness to openly admit the American Jobs Plan risked an inflationary spiral gave him more credibility to argue that Build Back Better — now the Inflation Reduction Act — would reduce inflation.
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