Summers calls Biden’s economic policies ‘increasingly dangerous’

Former Treasury Secretary Larry Summers says he largely supports President Joe Biden’s economic policies but worries about the White House’s focus on industrial policy and outbound investment limits, describing the approach as nationalistic and “increasingly dangerous.”

“I am profoundly concerned by the doctrine of manufacturing-centered economic nationalism,” Summers said Tuesday at an event hosted by the Peterson Institute for International Economics, alongside Robert Zoellick, formerly the head of the World Bank and a chief US trade representative. 

The Chips and Science Act and Inflation Reduction Act — two prongs of Biden’s attempt to boost domestic manufacturing of key industries — were “appropriate steps,” said Summers, a Harvard University professor and paid contributor to Bloomberg Television who served in the Clinton and Obama administrations. 

Those marquee laws heavily subsidize the American semiconductor, electric vehicle and clean energy sectors and have promised to bring thousands of jobs to communities across the Midwest and Southeast while reducing the US reliance on China for critical technologies.

But the main challenge facing the US economy is rising costs, not a lack of jobs, Summers said — raising red flags when the administration touts its industrial policy achievements in terms of the employment opportunities they’ll provide at home. 

Summers and Zoellick were also critical of the restrictions on US investments in China and other countries the Biden administration is weighing, saying that while the curbs will likely be narrow and limited at the start, they could expand and cause harm over time.

“These things have a way of expanding and, all of a sudden, Congress starts to come in and say, ‘Well, why should we be investing in this, and this and this?’” Zoellick said.

“We need to be very mindful of the fact that once put in place, these policies endure for a very long time and often morph into having perverse consequences unimaginable at the time they were put in place,” Summers said, adding that policymakers need to “be extremely careful and cautious at their moment of implementation.”

“That’s why I find this new enthusiasm for these new policies to be such a problematic turn in direction,” he said.