An ex-chairman of the Council of Economic Advisers on Sunday said Sen. Joe Manchin, D-W.Va., is “absolutely right” to be worried about inflation amid Democratic plans to increase federal spending.
In an interview on CBS News’ “Face The Nation,” Jason Furman, who served as chair under the Obama administration, said Congress should cut the deficit, including by raising taxes on high income earners.
“Sen. Manchin is absolutely right to be more worried about inflation after the Friday report,” he said. “That means we’re going to need to do more, the [Federal Reserve] is probably going to telegraph larger rate increases in the future.
“It also means Congress should be trying to do their part and helping out if they can cut the deficit, including raising taxes on high income households,” he continued. “That would reduce a bit of spending in the economy. It would cool the economy down a little bit and actually take some pressure off the Fed. The Fed would not need to raise rates by quite as much if Congress did their job. So clearly, this is a time where everyone should be helping out and bring inflation down.”
According to Furman, about $500 billion of deficit reduction is on the table.
“It was a net reduction in the deficit. I think almost anyone, regardless of where they were on the political spectrum, that was an expert on this topic would agree that would lower inflation,” he said.
“There’s Republican friends of mine that would say, ‘Oh, I don’t like lowering inflation by raising taxes on high income households,'” he noted. “They might have some other way they’d rather lower inflation, but unambiguously on this is going to bring inflation down. And from my values and perspectives, it would bring it down in a fair way.”
Furman said decreasing gas prices doesn’t convince him other things are coming down.
“Oil prices have been coming down; gasoline prices have been coming down. So that headline number, that’s the one that Americans really feel could be coming down,” he said.
“What was worrisome in this last report is even if you strip out all the volatile things, the underlying core was actually strengthening. We might see the 12-month numbers rising in the months to come.”
The chance of a recession, according to Furman, is still unclear.
“I don’t have any confidence [that we’re on the cusp of inflation] in part because the economic signals are really unclear in the first half of the year,” Furman said. “It looks like [gross domestic product] fell. But jobs grew quite a lot. You have business leaders saying they’re worried we’re gonna go into recession, but they’re still hiring people. If they’re bankers, they’re still making loans to people. You have consumers saying they’re really negative about the economy, but they’re still spending money. It’s hard to square a lot of these contradictory signals right now.
“It’s certainly possible,” he added. “And certainly more likely than it normally is. The risks are much greater than they normally are. But the idea that a recession is a foregone conclusion — or even over 50% chance — I don’t see that.”
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