ECONOMIST SAYS HE'S GOT A WHOLE LOT OF MORE

Former Treasury Secretary under the Clinton administration.

Director of the White House National Economic Council under President Obama.

Harvard University economist.

President Emeritus of Harvard University.

Notable economist contending that the economy is headed toward a crash--aka a "hard landing

Persistent thorn in the side of the Biden administration

The fellow who looms large in Cornell West's decision to leave Harvard.

The University Prof and President who once publicly hypothesized that biology, not discrimination, is the reason men "outperform" women in math and science.

He's all of that, and more. As in, for instance A high profile public intellectual who believes that, in order to take the steam out of the current bout of inflation, we need to swallow hard and be willing to tolerate a Black unemployment rate that could run as high as twenty percent.

Actually, Summers has never exactly said that the Black unemployment rate might have to be jacked up to as high as twenty percent to quench the fires of inflation; he has never--at least not to my knowledge-- explicitly said that we need to be ready to tolerate a Black unemployment rate more than three times as high as its current rate if we are drive the inflation rate back to 2 percent per year. But his recent comments about how high the aggregate unemployment might have to rise in order to return to price stability clearly implies that stomping out the flames of our current bout of inflation will necessitate accepting a level of Black unemployment we haven't seen since January1983, when the Black rate reached 21.2%.

Give me a second and let me explain why I said what I said.

IN A SACRIFICIAL MOOD

First off, Summers recently delivered a speech at the London School of Economics, and it contains a quote that's been making the rounds for the last several weeks. Here it is:

"We need five years of unemployment beyond five percent to contain inflation--in other words, we need two years of 7.5% unemployment or five years of 6% unemployment or one year of 10% unemployment."

Summers, in effect, contends that the Fed must pick its pain point: If they want to get back to price stability as soon as possible, then they need to jack up the interest rate high enough to get the unemployment rate to 10%--and keep it there for at least twelve months. At the other end, if they want to slowly get us back to price stability, then they--the Fed-- ought to kick their benchmark interest rate high enough that it'll drive the unemployment rate to 7.5% and be willing to do what it takes to maintain that 7.5% threshold for a couple of years. Or, says Summers, we could aim for the middle, choosing to get to-- and maintain-- a 6% rate of unemployment for a period of five years.

Underlying Summers suggested options is the widely accepted belief that joblessness and inflation are inversely related: Lower unemployment rates increase worker bargaining power, which leads to wage increases. These increases, in turn, are passed on to consumers-- all of which can set off inflation. Likewise, an increase in unemployment lowers worker bargaining power and, therefore, causes inflation to drop and moves the economy toward price stability.

Every single one of Summers options is premised on the belief that the current unemployment rate of 3.6% is "too low" and is a prime driver of the current bout of inflation. The solution is both simple and painful: Increase the unemployment rate so that it's above 3.6%. How much above? Well, following Summers' logic, that depends on how fast you want to break the back of inflation. An interest of rate of 10% could "do it" in twelve months, max. If that's too quick and you want to spread the pain out, then you could shoot for 7.5%/2 year pain point or that 6 %/5 year threshold.

Yet another way to think about Summers economic musings is this: Each one of his options involves increasing the numbers of people unemployed by millions. Well, to be more precise, it involves increasing the number of unemployed persons by tens of millions! The most recent Bureau of Labor Statistics Jobs Report estimates that the size of the labor force--people who are actually working or looking for a gig-- is slightly more than 164 million. Of that 164 million or so, almost 6 million (5.9 million) are classified as unemployed. This yields that 3.6 unemployment rate that we hear so much about.

But, as mentioned above, this 3.6% unemployment rate -- or 6 million-- is too high for economists like Summers. That number or rate needs to be higher, we are told, if inflation is to be wrung out of the economy. Using Summers numbers as a baseline, that 6% rate would result in an immediate jacking up of the number of unemployed persons to 9.8 million instead of the current 5.9 mil. If we go with his 7.5% figure, then instead of May's estimate of 5.9 million unemployed, the number would be 12.3 million. Or if Summers 10% figure ruled, then the most recent Jobs Report would have shown the number of jobless people to be a whopping 16.4 million.

It's easy to forget--and we must constantly remind others and ourselves-- that there are people behind all these numbers and techy- sounding solutions to economic challenges. Summers' hypothesizing is not mere hype; it's envisioning a "solution" to an economic issue that involves increasing the level and extent of human misery. It's an actual invitation to participate in a thought and possibly policy experiment that callously contemplates sacrificing workers in an effort to achieve price stability.

And it's a route toward some presumed price stability that'll be especially punishing for Black workers.

PUNISHING BLACK WORKERS

Just how would this be especially punishing to Black workers? To answer this question, remember that, historically, the Black tends to be twice as high as the White unemployment rate. Policies that increase joblessness usually smacks us particularly hard.

When Summer talks about manipulating interest rates to sustain jobless rates of 6%, for five years, or 7.5% for two years, or 10% for a year, what he's proposing, effect, driving Black unemployment up 12%, 15%, or as high as 20% for one year. In effect, he's envisioning a Fed policy where Black workers are disproportionately counted among the body count in this "war" against inflation.

If the Black unemployment rate was currently 12% rather than the 5.8% reported in the most recent BLS Jobs Report, the number of Black folk officially classified as unemployed, would be more than 2.5 million rather the current estimate of 1.24 million. Kick that number up to 15 and now you're staring at 3.2 million. And if the unemployment rate was now 20% rather than 5.8%, all of a sudden that last Jobs Report would have shown 4.24 rather than 1.24 million as the number of Black folk officially classified as unemployed.

Anyone of Summers' options, then, would constitute a punch in the gut to the Black working class. While all workers would experience pain, the pain that Black folks experience-- per usual-- would be off the chart.

So, yeah, we can--and should-- hear Summers as saying, "To contain inflation, we need two years of Black unemployment at 15%, or five years at 12% Black unemployment or one year of Black unemployment at 20%."

We can--and should-- hear him as saying that the very people who got punched by the pandemic, now need to get beat down further to extricate the country from the current bout of inflation.

We can--and should-- hear him as saying to us what Clubber Lang said to Rocky, when it comes to the infliction of pain, I got a whole "lot of more."

Catch you on the flip side,

Doc Greene