Summers Criticizes Biden Again: "Windfall Tax Is Incomprehensible... Will Lead to Investment Contraction"

[Asia Economy New York=Special Correspondent Seolgina Jo] "I don't understand." Larry Summers, a Harvard professor who served as Treasury Secretary under the Bill Clinton administration, has once again publicly criticized the Joe Biden administration's policies. Summers accurately predicted last year that the Biden administration's economic team underestimated inflation as a temporary phenomenon and warned that inflation would become a bigger problem.

On the 1st (local time), Professor Summers tweeted, "I do not understand the call for a windfall tax on energy companies," adding, "Lowering profitability will discourage investment and work against our goals." This came after President Biden warned in a speech the previous day that oil companies making huge profits from the Ukraine war are "profiting from war," and threatened to impose a windfall tax if they do not invest in additional production and lowering oil prices.

Professor Summers stated, "Even if it (imposing a windfall tax) is a fair claim, I will not follow that logic," adding, "ExxonMobil has underperformed the overall market average profits over the past five years despite windfall gains." The oil industry is considered a representative sector experiencing a downturn. After introducing Summers' tweet, CNN reported that many oil companies went bankrupt due to the downturn caused by the sharp drop in oil prices in 2020. Summers' point essentially argues that collecting corporate taxes based on a boom is unreasonable.

The oil industry is also strongly opposing the windfall tax. Mike Sommers of the American Petroleum Institute (API) argued, "President Biden should be serious about solving the supply-demand imbalance problem in the U.S. instead of shifting the blame for price increases." The API warned that the windfall tax would discourage industry investment in new production in the future, calling it "the exact opposite of what is needed." The Independent Petroleum Association of America (IPAA) also criticized, saying, "President Biden should stop the blame game as the election day approaches."

Summers, who served in the Clinton administration, is a prominent Democrat but has continued to criticize the Biden administration's economic policies. Last year, when Fed Chair Jerome Powell and Treasury Secretary Janet Yellen underestimated inflation as a temporary phenomenon, he pointed out that inflation would become a bigger problem. The U.S. administration, including Secretary Yellen, publicly rebutted him, but ultimately Summers' statements that "it will trigger inflationary pressures never experienced before" and "the Fed will lose control over inflation" all proved correct.

Earlier this year, he refuted Secretary Yellen's claim that there were no signs of a recession and warned that the possibility of a recession within 1 to 2 years is very high. In June, President Biden even spoke directly with Professor Summers.

Meanwhile, President Biden also posted on Twitter that day to pressure oil companies. He stated, "Oil companies must stop profiting from war," and added, "It is time for them to fulfill their responsibilities to America and extend a helping hand to Americans at gas stations."

This content was produced with the assistance of AI translation services.