Biden Under Fire: Larry Summers Warns 'Bidenomics' Is 'Increasingly Dangerous' To US Economy

Author: Melanie Schaffer | July 28, 2023 07:27am

Prominent economist Larry Summers, who served in both the Obama and Clinton administrations, recently expressed deep concerns about elements of President Joe Biden's economic agenda.

In a virtual address at the Peterson Institute for International Economics on Tuesday, Summers labeled aspects of the administration's plan as "increasingly dangerous," warning that they could potentially lead to a surge in prices, negatively impacting American citizens, according to CNN.

“I am profoundly concerned by the doctrine of manufacturing-centered economic nationalism that is increasingly put forth as a general principle to guide policy,” Summers said, according to the outlet.

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The Details: The former Treasury Secretary expressed objections to the Biden administration's stance on trade, efforts to support U.S. manufacturing, and its approach to antitrust measures. He argued that such policies might create inflationary pressures, posing significant risks to the economy.

In response to Summers' critique, the White House defended its economic strategy. According to White House spokesperson Michael Kikukawa, who released a statement to CNN, “Bidenomics” represents a decisive departure from the supply-side economics of the past, which failed to adequately invest in the American people and foster competitiveness.

Kikukawa emphasized that Biden's targeted investments in infrastructure, clean energy, and semiconductors aim to enhance economic resilience, according to the news outlet.

“The pandemic and Russia’s war in Ukraine made clear that supply chains and critical resources can be easily disrupted, hurting consumers, workers, and the entire economy,” Kikukawa told CNN.

Effects On The Stock Market: The Federal Reserve applied a 25bps rate hike on Wednesday, reinstating its tightening campaign after pausing temporarily in June. The central bank has been walking a tightrope between bringing inflation down to its 2% target and throwing the U.S. into a recession.

 

Despite the Federal Reserve's independence from presidential influence, Biden's Inflation Reduction Act allocates billions to clean energy production, which experts say will boost critical minerals and metals.

Biden’s economic stance may prove beneficial for stocks pivotal to the EV battery supply chain, wind, and solar energy industries and clean energy infrastructure, such as those held in the Sprott Energy Transition Materials ETF (NASDAQ:SETM).

If Summers is correct, however, and the economy begins to suffer, the general stock market is likely to retrace. In that case, ETFs that follow bearish moves in the SPDR S&P 500 (NYSE:SPY), such as the Direxion Daily S&P 500 Bear 3X (NYSE:SPXS) could prove a solid play.

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Photo: Brookings Institution on Flickr and Shutterstock

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