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Biden privately called Lawrence Summers, a critic of White House agenda, to discuss economy

Lawrence Summers, center, then director of the White House National Economic Council, flanked in 2010 by Treasury Secretary Timothy F. Geithner, left, and Jared Bernstein, a top economic adviser to Vice President Joe Biden.
Lawrence Summers, center, then director of the White House National Economic Council, flanked in 2010 by Treasury Secretary Timothy F. Geithner, left, and Jared Bernstein, a top economic adviser to Vice President Joe Biden. (Charles Dharapak/AP)

President Biden recently called former treasury secretary Lawrence H. Summers, a Democrat who has been openly critical of his economic agenda, to acknowledge Summers’s concerns and ask him to explain his objections, according to three people with knowledge of the private exchange.

Biden made the call as the White House is weighing critical decisions on the economy, including how much and whether to trim a far-reaching infrastructure plan in response to Republican demands. The conversation also unfolded against the backdrop of warnings from Summers and others that Biden’s spending plans present a risk of inflation and an overheating economy.

The White House has downplayed the extent of the threat posed by inflation, arguing it will likely be transitory and manageable if necessary by the Federal Reserve. But in recent months, Summers has engaged in increasingly bitter disagreements with White House aides.

Summers — a treasury secretary under President Bill Clinton, top economic adviser to President Barack Obama and former president of Harvard University — is a prominent Democratic voice on economic matters. But he has also become a nemesis of the party’s left flank, which sees him as representative of a misguided centrism that Democrats have moved beyond.

Summers has been warning that Biden’s $1.9 trillion stimulus package is too big and will overheat the economy, spurring inflation that could prove hard for the Federal Reserve to control. White House officials have routinely dismissed Summers’s concerns and in private express frustration with his attacks, which have bolstered Republican criticisms of the administration.

Summers: the risks in Biden’s stimulus

The Biden-Summers phone call, which has not been previously reported, occurred late last month, according to three people with knowledge of the conversation who spoke on the condition of anonymity to describe the private conversation. Summers, a contributing Washington Post columnist, declined to comment.

A White House official said Biden seeks “a wide spectrum of views” and the call was “brief and informal.” The official said it took place before the president gave a speech in Cleveland on Friday, in which he laid out his economic vision.

"The president has a large network and has spoken to a number of voices with economic expertise outside of the administration, including many with whom he has disagreements,” the official said.

The White House noted that Biden has spoken frequently with Sen. Bernie Sanders (I-Vt.), a leader of the party’s liberal wing, as well as numerous labor leaders.

After passing the covid relief plan with no Republican votes in Congress, the White House is now focused on pushing another $4 trillion in spending on a mixture of infrastructure, education and other domestic priorities. Officials say they will pay for these plans through tax hikes on corporations and the wealthy, but Republicans are opposed to such tax increases.

Summers has broadly cheered Biden’s infrastructure package, but has issued a warning that lawmakers should regard inflation as “the primary risk” to the U.S. economy.

Late last month, Summers urged policymakers to pay for new infrastructure spending in part by repurposing unspent money from the covid stimulus, an approach endorsed by congressional Republicans but thus far rejected by the White House. Summers also said policymakers should consider letting unemployment benefits expire sooner than the current deadline of September — another recommendation the administration has not considered.

And he has challenged “Made in America” requirements — a centerpiece of Biden’s jobs package — as potentially exacerbating economic problems by driving up prices and fueling labor shortages. “I think this is the least responsible macroeconomic policy we’ve had in the last 40 years,” Summers told Bloomberg News as the stimulus package was passing.

The White House has shown some sensitivity to the inflationary concerns raised by Summers, but aides say current price spikes largely reflect the economy snapping back from its pandemic lows, not a long-term problem or an indictment of Biden’s policies.

New data from the U.S. Census Bureau suggest that the stimulus plans passed last December and again this spring helped dramatically reduce poverty and hunger in the United States. At the same time, short-term bottlenecks, exacerbated by surging demand, have driven up the cost of lumber, food, gasoline and other commodities.

Biden himself last week praised the goal of “full employment,” and administration officials note that an urgent need for labor has prompted employers to bid up wages for the first time in decades.

But the stark warnings from a figure like Summers are difficult for the White House to ignore, and officials have pushed back publicly.

“With respect to Larry in his piece, it’s just flat-out wrong that our team is ‘dismissive of inflationary risks,’ ” Jared Bernstein, a member of the White House Council of Economic Advisers, said in February after one Summer article. “Janet Yellen is our treasury secretary. She knows a little something about inflationary risks.” Yellen is a former chair of the Federal Reserve.

Republicans, however, have seized on Summers’s unease with the Biden agenda, gleefully highlighting his position as an elder statesman of Democratic economic policy.

“He said at the beginning of the year that the previous package, the so-called rescue package, would create a wave of inflation. And only this week, he reiterated that happened just as he predicted,” Senate Minority Leader Mitch McConnell (R-Ky.) said last week.

The dispute between Summers and the administration is unusually personal. Beyond his contact with Biden — who he occasionally advised during the 2020 presidential campaign — Summers has extensive ties to senior White House economic personnel. Brian Deese, the head of the National Economic Council, served as a close aide to Summers during the Obama administration, when Summers ran the NEC.

Summers is also close friends with Gene Sperling, who is overseeing the implementation of the stimulus package, and he served as an adviser to Cecilia Rouse, the chair of the Council on Economic Advisers, when she was in graduate school.

Summers’s inflation argument “was what a lot of people were saying privately, what was being whispered by people without his voice or without his platform who were nervous about going public,” Jason Furman, who was Obama’s Council of Economic Advisers chair, told The Post in March.

But liberals close to the administration have urged the White House to tune out his commentary. They point to Summers’s role in the Obama recovery, which led to only tepid economic growth and which many Democratic officials now believe contributed to historic electoral losses for the party.

“Larry has gone unchallenged for decades. It’s time for other people to lead. The old models are out of place,” said Claudia Sahm, a former economist at the Federal Reserve who is supportive of Biden’s stimulus package. “You could say Larry Summers suffers from a skills gap in the current environment.”

Summers and Biden have operated in overlapping circles for decades. As deputy treasury secretary, Summers testified before the Senate Foreign Relations Committee when Biden served as a member in the 1990s. They later worked together as the Obama administration tried to pull the nation out of the Great Recession, at one point jointly traveling to Michigan to tout the rescue package.

But Summers’s position in the Democratic Party has become far more complicated. Critics have highlighted his controversial quotes about women’s aptitude in the sciences while he served as president of Harvard. And Yellen, now the treasury secretary, beat out Summers for the position of chairman of the Federal Reserve under Obama.