President Joe Biden has received much criticism for the recent passing of a $1.9 trillion relief package during the pandemic. Larry Summers, the former economic adviser to President Obama, is the latest to speak, blasting the Biden administration’s stimulus plan, saying it will result in a major inflation crisis. All eyes will be on the president as he is set to detail a new plan on Wednesday. While the plan is still unclear, many have speculated that it will include a corporate tax hike and a rise in income tax for high-earners. However, the pandemic may not have been all bad on the American wallet. Some financial advisors are reporting an uptick in the interest of investing, saying Americans are using the time to grow their savings accounts.
Fox Business/Evie Fordham
Obama’s economic adviser blasts Biden’s stimulus plan, says it could trigger high inflation
Former Obama economic adviser Larry Summers continues to blast the Biden administration’s stimulus plan and warns it will result in a major inflation crisis.
“We’re taking substantial risks,” Summers told The Washington Post. “This might not have struck as much a nerve if it didn’t reflect concerns that were widely felt.”
“I know the bathtub has been too empty,” he continued. “But one has to think about what the capacity of the bathtub is and how much water we’re trying to flow into it.”
Summers, who served as Treasury secretary during the Clinton administration, advised Biden in the summer of 2020, according to The Washington Post. He called Democrats’ $1.9 trillion relief package “the least responsible macroeconomic policy we’ve had in the last 40 years” during an interview with “Wall Street Week” earlier in March.
Summers has been critical of economic responses to the coronavirus pandemic, including stimulus checks, since last year. Summers argued for narrowly targeted relief in a Bloomberg op-ed in December.
“The question in assessing universal tax rebates is, what about the vast majority of families who are still working, and whose incomes have not declined or whose pension or Social Security benefits have not been affected by Covid-19? For this group, the pandemic has reduced the ability to spend more than the ability to earn,” he wrote.
President Biden is expected to push both an infrastructure proposal and a coronavirus recovery proposal in the coming weeks. Read more about his plan, here.
Here’s how the pandemic has upended the financial lives of average Americans: CNBC + Acorns survey
From jobs to savings to retirement plans, the coronavirus pandemic has upended many Americans’ financial lives.
While millions are still unemployed and many have seen their emergency savings run dry, it isn’t all necessarily negative. Many are saving more and spending less.
In fact of those surveyed in a new CNBC + Acorns Invest in You survey, 46% said they are “more of a saver now” compared to before the pandemic.
Additionally, 60% consider themselves “savers,” up from 54% last year. The poll, conducted by SurveyMonkey Aug. 13-20, surveyed 5,401 U.S. adults and has a margin of error of +/-2%.
About half, or 49%, said their monthly spending has decreased, compared to 33% last year.
Some of those savings can be attributed to the fact that people stayed home and didn’t do things like dining out, said personal finance expert Jean Chatzky, co-founder of HerMoney.
“We learned how to go to the grocery store, not every day, but once a week, which meant meal planning and shopping with a list and those are fabulous money-saving skills,” she said. “We learned which of our subscription services we actually watch and which ones we don’t.”
Read more about how financial advisors say the pandemic has impacted the desire to invest, here.
Fed will not keep interest rates low for government’s benefit, Waller says
The Federal Reserve won’t bend its interest rate or bond-buying policies to help finance the federal government’s rising deficits, Christopher Waller said on Monday in his debut speech as a member of the U.S. central bank’s board of governors.
“Because of the large fiscal deficits and rising federal debt, a narrative has emerged that the Federal Reserve will succumb to pressures to keep interest rates low to help service the debt and to maintain asset purchases to help finance the federal government,” Waller said in remarks prepared for delivery at an online event organized by the Peterson Institute for International Economics.
“My goal today is to definitively put that narrative to rest. It is simply wrong. Monetary policy has not and will not be conducted for these purposes.”
Policy, he said, will be set “solely to fulfill” the Fed’s mandated goals of achieving maximum employment and stable inflation.
The comments were Waller’s first since he joined the Fed’s board of governors in December, after serving as executive vice president and research director at the St. Louis Fed, and he used them to wade into a potentially contentious issue.
The Fed’s board members and the central bank’s powerful chief are appointed by the president with approval of the U.S. Senate, but the governors’ long terms and protection from partisan dismissals are meant to insulate the central bank from political pressures.
The Fed has pledged to keep its benchmark overnight interest rate near zero and continue its $120 billion in monthly bond purchases until the recovery from the economic fallout of the coronavirus pandemic is more complete.
Read more about when experts say interest rates may start to rise, here.