President Joe Biden reiterated that a US recession isn’t “inevitable” following a conversation with former Treasury Secretary Lawrence Summers, who sees a significant chance the country will find itself battling stagflation.
“I was talking to Larry Summers this morning, and there’s nothing inevitable about a recession,” Biden told reporters Monday at Rehoboth Beach, Delaware. “I think we’re going to be able to get a change in Medicare and a reduction in the cost of insulin.”
The White House and congressional Democrats are in talks on legislation that aims to fight inflation, rein in the deficit and revive parts of Biden’s agenda. The contours of a potential deal remain under negotiation, but the package would likely include capping the price of insulin -- a key medicine for diabetics -- and federal investments in both clean energy and fossil fuels, people briefed on the talks said last week.
It would also further reduce the budget deficit and boost taxes on the wealthy, corporations or both, they said.
Democrats are desperate for a policy response to inflation, which is at a four-decade high and, unless curbed, is all but certain to cost them control of the House, Senate or both in November’s midterm elections. Gasoline, a critical component of the American household budget, costs US$5 ($6.94) a gallon on average nationwide, according to the AAA motor club, and hit a record earlier this month.
Seeking to quell the surge in living costs, the Federal Reserve accelerated its monetary-tightening campaign last week, executing the biggest interest-rate hike since 1994. The move drove fresh losses on Wall Street and has increased the odds of a recession that would only compound Biden’s political troubles.
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Summers, a Harvard University professor and paid contributor to Bloomberg Television, has criticised the Fed for failing to account for its mistakes and to realize the damage to its credibility after the latest inflation data dashed hopes that a peak had been reached.
