Lawrence Summers, who served as Bill Clinton’s Treasury Secretary, rocked the Democratic establishment last year by predicting that his party’s overspending would cause inflation. He was right. But he is wrong now. On June 20, he told Bloomberg that “we need five years of unemployment above 5% to contain inflation” – or maybe a year of unemployment at 10%. It would put millions of Americans out of work.
Mr. Summers echoed the advice of his uncle, Nobel laureate in economics Paul Samuelson, who wrote in 1980, at a time of double-digit inflation, that “five to ten years of austerity, in during which the unemployment rate climbs to eight or an average of nine percent and real output rises by only one or two percent a year, could achieve a gradual containment of US inflation.