For months, Republican lawmakers had been lauding former Treasury Secretary Lawrence Summers as a soothsayer.
Republicans have repeatedly cited former Treasury Secretary Lawrence Summers in recent months as a prescient expert on inflation and government spending. But they are silent now that he is urging passage of President Joe Biden's $1.75 trillion jobs bill and undermining their talking points against it.
In a Washington Post column on Wednesday, Summers predicted that provisions in the Build Back Better plan that would crack down on wealthy tax cheats will bring in even more money than the Biden administration is predicting.
The Treasury Department has estimated that investing $80 billion more in IRS enforcement would bring in an additional $480 billion in revenue over the next decade in money already owed to the government but not paid by rich tax evaders.
"My judgment is that even Treasury is far too conservative," Summers predicted. "This estimate is less than half of what I concluded, in work with Natasha Sarin (who is now at the Treasury Department), can be generated by an infusion of resources into the IRS of about the same size as proposed by the Build Back Better Act." He further noted that other top economists have estimated the windfall might be as much as twice his own estimates.
This flatly contradicts a popular GOP talking point that the Congressional Budget Office reportedly believes the crackdown will bring in only $120 billion over a decade, proof that Biden's plan, which would invest billions of dollars in climate change, clean energy, child care, health care, home care, and an expanded child tax credit, is not really paid for.
"The CBO confirms Joe Biden lied," tweeted Colorado Rep. Ken Buck on Tuesday, sharing a link to an article in the National Review. "His radical reconciliation plan will increase the national debt, cause inflation to continually skyrocket, and raise taxes on middle class Americans."
Summers, who served as President Bill Clinton's treasury secretary and directed President Barack Obama's National Economic Council, opposed Biden's $1.9 trillion American Rescue Plan earlier this year, suggesting it might cause inflation. Congressional Republicans, who unanimously opposed the package, cited his prediction again and again before and after its passage.
"Democratic economist Larry Summers and former GOP Senator and economist Phil Gramm don't agree on much," opined Ohio Sen. Rob Portman in February, noting that both warned against the pandemic rescue spending. "But when they do, it's probably worth paying attention."
"Larry Summers was right," tweeted Texas Sen. John Cornyn in May, sharing another National Review headline: "Consumer Prices See Largest Yearly Jump Since 2008 as Evidence of Inflation Mounts."
"Wouldn't it have been nice to have been warned about rising inflation … Oh wait!" said Texas Rep. Michael Burgess. "Obama/Biden Advisor Larry Summers warned of the economic impacts the $1.9T #COVID19 bill would have."
"Larry Summers, Chief Economist for Obama, warned the latest COVID bill would trigger inflation," wrote Nebraska Rep. Don Bacon last Wednesday. "He was right."
But now they no longer seem interested in following Summers' advice as he backs Biden's current investment plans.
Last week, Summers told the Washington Post that he supports both the just-passed $550 billion Infrastructure Investment and Jobs Act and the pending Build Back Better plan and does not believe they will spur inflation. "Together, they are smaller over 10 years than this past year's stimulus was over a single year, and in addition they are substantially paid for."
On Monday, he wrote in another Post opinion column that Congress should pass Build Back Better: "The legislation would spend less over 10 years than was spent on stimulus in 2021. Because that spending is offset by revenue increases and because it includes measures such as child care that will increase the economy's capacity, Build Back Better will have only a negligible impact on inflation."
Not a single Republican in Congress backs the Build Back Better plan. Many have asserted — with no evidence — that its passage would spur even more inflation. "Don't be fooled — this socialist spending scam will exacerbate the inflation crisis," tweeted Texas Rep. Beth Van Duyne on Tuesday.
But financial ratings agencies and Nobel Prize-winning economists say that the bill will not cause prices to go up — and may actually slow inflation in the long term.
Moody's Analytics chief economist Mark Zandi told Reuters on Tuesday that Biden's investment legislation bills "do not add to inflation pressures, as the policies help to lift long-term economic growth via stronger productivity and labor force growth, and thus take the edge off of inflation."
Despite all this, Nebraska's Rep. Bacon tweeted Wednesday, "I voted against the inflationary $1.9T bill that Larry Summers warned would trigger inflation, and I'll oppose the $1.75T bill that will exacerbate inflation."
Published with permission of The American Independent Foundation.