I’ve said it over and over again, and it’s not an especially popular talking point among my Democrat-leaning readers: The pandemic stimulus, and particularly the Biden stimulus, absolutely contributed to inflation in the US.

Relatedly, the US probably needs a proper recession if there’s any hope of taming price pressures.

Being the progressive-minded individual that I am, I resisted that admission for as long as it was possible to hold out. But, being the honest individual that I also am, I was compelled to acknowledge, in February of 2022, that resistance had become futile.

Contrary to what you’d be inclined to believe if you rely solely on progressive economists for your macro analysis, this isn’t a debate anymore. You can argue that policymakers had little choice but to do what they did in 2020, but 2021’s stimulus was another story.

It wasn’t clear in early 2021 that the economy still needed fiscal stimulus, and it was even less clear that emergency monetary settings were still appropriate. And yet, the overt fiscal-monetary partnership inaugurated in COVID’s wake continued to operate in March and April of 2021 as though it were March and April of 2020.

Economists, including some Democrats, suggested that wasn’t a good idea, particularly given lingering supply constraints. Yes, a lot of people still needed help, but a lot of people always need help in our late-stage, hyper-capitalistic society. The fix entails accepting the harsh reality that the system no longer works. We need structural changes, but many of those changes sound “bad” to ears conditioned by four decades of supply-side propaganda.

Expanding the social safety net, raising taxes on corporations, requiring billionaires to pay at least something irrespective of whether their accountants can legally justify their paying nothing and dispensing with nonsense notions about the “limits” of federal government spending, are all good places to start.

But to even have the conversation, we need to get back to a stable macro state, where that means, among other things, that upward pressure on wages isn’t self-defeating (for workers) through the price spiral channel. We need to be sure that if we do want to try running a hotter economy in the interest of facilitating better outcomes for Main Street, the experiment is at least a semblance of controlled. We need to be reasonably confident that, say, stable 3.5% inflation actually can be stable, and that hot nominal growth doesn’t result in levels of demand that are constantly pushing up against supply constraints.

As we sit here today, in late April of 2023, we have what looks like entrenched core inflation. Some believe that, notwithstanding the Fed’s best efforts, that isn’t likely to resolve anytime soon, or at least not absent a fairly deep downturn. The incoming data generally supports that conclusion, even as the balance of recent macro releases in the US does suggest some cooling.

It’s with that in mind that I wanted to highlight a few remarks from Larry Summers who, on Wednesday, spoke at a Morningstar event in Chicago. By now, a lot of Democrats are tired of hearing from Larry (a Democrat) and not for the usual reasons. In the 2020s, Summers is grating because he’s been right. Annoying or not, I don’t see why we should castigate him until he’s wrong again, which he will be eventually.

In Chicago on Wednesday, Summers said the combination of fiscal and monetary largesse during the pandemic transformed the US from “a 2% inflation country to a 5% inflation country.” He called 5% the new standard in America, and said he’s not optimistic about the likely path of inflation going forward.

“Unless the economy slows down substantially, we’re going to have difficulty getting near a 2% inflation target,” he added, suggesting the scope of the necessary recession will be “meaningful.” The Fed, he said, has lost some of its credibility.

He did concede that the banking crisis likely means Jerome Powell won’t have to do as much to restore price stability. “We don’t need as [many] rate increases as we would if the banking system were working smoothly,” he mused.

In other, less contentious remarks, Summers said he’s enjoying hybrid work and goes in two or three days per week. If you were wondering, he’s “long blockchain, short Bitcoin.” I assume he meant that figuratively.