The Biden administration needs to reduce regulations and assist oil and gas companies in order to bring down inflationary price pressures on the U.S. economy, said former Treasury Secretary Larry Summers during a recent interview with CNN.
When asked what the administration could do about the recession that many fear could hit the economy next year, Summers said: “I think the Fed has to do what’s necessary to contain inflation. I think the Biden administration could think about a range of measures to reduce costs, making it easier for energy companies to start drilling or fracking for oil and natural gas, reducing tariffs … doing away with regulations like the Jones Act, the rules about shipping that raise prices needlessly for, for example, moving oil from Houston to Newark.”
Summers said that the plethora of governmental regulations make everyone, including small businesses, to overcharge. This contributes to inflationary pressures on the economy, which can be relieved once the administration cuts red tape and simplifies rules for companies.
“We could get rid of all kinds of rules that require people who are going to manicure fingernails or cut hair to have licenses and that makes those kinds of tasks in short supply and makes them more expensive than they otherwise would be.”
When President Joe Biden took office, he rolled back his predecessor’s executive orders aimed at cutting federal regulatory burden. Deregulations, considered one of the Trump administration’s top achievements, reduced the final rule page count in the Federal Register to less than 21,000 in 2019, from the more than 38,000 left behind by the Obama administration.
Looming Recession
Summers was asked when he predicts a recession to strike, given that a Fitch ratings report forecasts a recession in the country starting next spring and that JP Morgan CEO Jamie Dimon predicts a recession to hit in the next six to nine months.“We’re going to have a recession next year,” Summers said, adding that he did not have a clear timeframe, and that it was “inevitable” that “unemployment is going to go up.”
As for the economic downturn hitting the United States in 2022, Summers said that near-term indicators suggest that is “relatively unlikely.”
President Biden had said earlier that “slight recession” was possible. Summers said that the recession will not be “terrible,” and while “unemployment rates are likely to rise perhaps toward 6 percent,” it was better to have it “sooner” rather than allow inflation to accelerate unchecked, at which point people will face “a much greater set of difficulties.”
BNP Paribas predicts a recession beginning in the second quarter of 2023, and estimates the Federal Reserve to raise interest rates to 5.25 percent by the first quarter next year.
The Conference Board’s Leading Economic Index (LEI) declined by 0.4 percent, to 115.9, in September, after remaining unchanged in August, indicating that the United States will soon enter a recessionary period.
