Summers worried about the Biden budget or the risk of overheating the U.S. economy

U.S. President Joe Biden released his first budget address, seeking to implement a $6 trillion budget in fiscal year 2022. But former U.S. Treasury Secretary Summers argued that Biden’s budget is based on outdated economic forecasts and could create a risk of economic overheating for the United States.

Summers explained that Biden is right to try to enhance infrastructure and reduce inequality, but real economic activity is stronger than some of the projections in the budget, such as the 10-year U.S. Treasury yield, which has exceeded the 1.2 percent assumed in the budget. Currently, the 10-year U.S. bond yield is at 1.584 percent.

In addition, the Biden budget for this year’s economic growth forecast of 5.2%, also lower than market expectations of 6.5%.

Summers worries that the United States may have a large budget deficit, while worrying about the risk of economic overheating in the short and medium term, reiterating that loose monetary and fiscal policy may aggravate inflation. He hopes that the U.S. government will ensure that it can secure the needed tax increases, lengthen the spending cycle, and withdraw previous allocations to state and local governments.