Former Treasury Secretary Larry Summers predicted Sunday the United States will be in a recession within the next two years.
In an interview on CNN's "State of the Union," the Treasury Secretary under Bill Clinton, said the risk is that it will be sooner rather than later.
"I think when inflation is as high as it is right now, and unemployment is as low as it is right now, it's almost always been followed within two years ... by recession," he said.
"I look at what's happening in the stock and bond markets, I look at where consumer sentiment is. I think there is certainly a risk of recession in the next year. And I think given where we've gotten to, it's more likely than not that we'll have a recession within the next two years. "
But Summers said history also shows recession "is something we can manage."
"We've had them for the whole history of the country," he said. "We need to be prepared and to respond quickly if and when it happens."
"I think the optimists were wrong a year ago in saying we'd have no inflation," he added. "And I think they're wrong now, if anyone's highly confident that we're going to avoid recession."
According to Summers, there's not a lot the Biden administration can do to bring down gas prices, though he encouraged a lift of tariffs on China.
"The gas price piece of this is driven by the geopolitical developments around Ukraine," he said. "It's hypocrisy in the extreme when people … say we need to stand strongly with Ukraine and then blame the administration for the fact gas prices are higher than they were a year ago."
He also praised President Joe Biden for doing "something very important" by meeting with chair of the Federal Reserve Jerome Powell "and underscored his respect for the independence of the Fed and made clear he thinks the Fed needs to do whatever is necessary, even if it's painful, to reduce inflation."
"I've advocated that we need a much more strategic … policy, vis-a-vis China, that takes tariffs down and, therefore, takes prices down for American consumers and for producers," he said.
"Many of [the tariffs on China] should be [lifted] — many, many of them should be," he asserted. "We should focus on what's important, not raising input prices for American producers so they're less competitive, which is what much of those tariffs do."
"Instead we should be focusing on things that allow the leakage of key technologies to China," he countered. "We should pass at long last some kind of legislation, ideally on a bipartisan basis, that would raise the vastly excessive Trump tax cuts ... take down prescription drug prices. All of that would operate to reduce inflation."
Summers also said Congress needs to "take the temperature down."
"I think the banana Republicans who are saying that what happened on Jan. 6 was nothing or OK are undermining the basic credibility of our country's institutions," he argued.
"And that, in turn, feeds through for inflation because if you can't trust the country's government, why should you trust its money?
"So, I think it's terribly important that we take the temperature down in Washington, that we recognize behavior that's just out of bounds of reasonable, and decency, we give the Fed the room it needs, we bring down the budget deficit, we take down prices directly through prescription drugs. This is a challenge that we can meet if we're prepared to be serious about taking it on."
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