Former U.S. Treasury Secretary warns Trump: Do not fulfill campaign promises!

On Wednesday local time, former U.S. Treasury Secretary Larry Summers offered some unsolicited advice to President-elect Trump: do not fulfill campaign promises unless he wants to see prices soar again.

The renowned economist expressed shock at the potential impacts of Trump's proposals to cut taxes, raise tariffs, deport undocumented immigrant workers, and undermine the independence of the Federal Reserve. Summers served as a senior official during both the Clinton and Obama administrations.

“If he follows through on what he said during the campaign, the inflation shock that the U.S. will experience will be significantly greater than in 2021,” Summers said.

Given the scale of the previous round of inflation, this is a rather serious warning.

U.S. consumer prices began to rise rapidly in the spring of 2021, with inflation ultimately reaching a 40-year high of 9.1% in June 2022. This is something many Americans had never experienced, and even today, the impacts are still felt in the U.S. economic and political systems.

Although inflation has eased significantly, price levels remain high. Voter dissatisfaction with high living costs has helped Trump return to the White House.

Of course, no one knows how Trump plans to implement his economic agenda now, or whether he will be persuaded to moderate his proposals.

“I hope he takes the message from this election and adjusts his plans so that inflation does not occur,” Summers told CNN. “I hope that if inflation does occur, the Federal Reserve will not accommodate it.”

Trump's transition team rebutted Summers' inflation warnings.

“During Trump's first term, he imposed tariffs, created jobs, stimulated investment, and did not lead to inflation,” Trump transition spokesperson Karoline Leavitt said in a statement. “Trump will act swiftly to repair and restore the economy by bringing jobs back to America, lowering inflation, increasing real wages, cutting taxes, reducing regulations, and unleashing American energy, creating more jobs for American workers.”

Scott Bessent, a hedge fund executive who may become Trump's Treasury Secretary, also dismissed concerns about inflation.

Bessent told Axios, “The idea that he (Trump) would recreate an affordability crisis is absurd,” adding that Trump “sees himself as the mayor of 330 million Americans, and he wants them to do well and have a great four years.”

Of course, Summers is not the only one warning that Trump's agenda could lead to inflation.

Nobel laureates in economics have also warned that Trump's agenda would “reignite” inflation. More than two-thirds (68%) of economists surveyed by The Wall Street Journal recently indicated that prices under Trump would be higher than under Vice President Harris.

In Summers' view, the Biden administration's excessive economic stimulus in 2021 triggered inflation. He noted that the current situation bears similarities to the period following the last election.

“The large checks sent out in 2021 were what people dreamed of, they just didn’t want to bear the consequences of the ensuing inflation,” Summers said The outbreak of inflation at that time was also related to supply chain issues caused by the COVID-19 pandemic and the Russia-Ukraine conflict, which led to soaring oil and gasoline prices.

Now, Summers sees a similar setup in Trump's agenda.

Summers said, "These agendas—controlling the Federal Reserve, raising tariffs, driving out undocumented immigrant workers, and expanding the budget deficit—will cumulatively be highly inflationary, and the consensus among those concerned with economic issues is the most I can remember in any proposal in my 40 years of work."