Former US Treasury Secretary Lawrence Summers warned in an interview that the United States is suffering from the “most irresponsible” macroeconomic policies in 40 years, once again criticizing the Biden administration’s $1.9 trillion economic rescue plan, Bloomberg reported Wednesday.
The retreat of COVID-19 will spur economic recovery, he said, along with loose fiscal policy from the government and loose monetary policy from the Federal Reserve. These policies would trigger a “dramatic collision of fiscal and monetary policies”.
He said the current macroeconomic policy would create significant risks. There is a one-in-three chance that inflation will accelerate in the next few years, plunging the economy into a “stagflation” trap.
US President Joe Biden signed into law a $1.9 trillion economic rescue plan Wednesday. Analysts say the huge economic rescue package, while likely to help speed the U.S. recovery, has added to the federal government’s debt burden and is detrimental to its fiscal health.