Boston University economics professor Laurence Kotlikoff told Newsmax Thursday that inflation gains momentum and gets into people's heads, but it should be something we "live with" instead of using the Federal Reserve or government to try to fix it while destroying the economy.
"I think inflation is largely psychological. If it gets going, for policy reasons, for non-policy reasons, it's gets into people's heads," Kotlikoff said during "The Record With Greta Van Susteren" Thursday. "We have 33 million businesses out there who are setting prices. It's not [Federal Reserve Chairman] Jerome Powell, or [former Treasury Secretary] Larry Summers, or President [Joe] Biden. So inflation is now into people's heads, that they have to keep up with it."
He said that some companies are raising prices to pay their workers more and that we should live with it and adjust to it so prices come down gradually, rather than enacting policies and interest rate hikes that could destroy the overall economy.
"I think we should start thinking about living with inflation, high inflation, and letting it gradually come down, rather than trying to kill the economy, which is what former Secretary Summers would like to do."
Kotlikoff said that Summers would want Powell to raise interest rates like former Federal Reserve Chairman Paul Volcker did in the late 1970s and early 1980s, when rates jumped to as much as 20%.
"The economy [during that time] produced a 10% unemployment [rate], that's not very smart, to tell you the truth," he said. "That's not what we need."
Kotlikoff said that it took a while for the rate of inflation to go down during those times, including people getting the idea inflation was here to stay out of their heads.
"I think what we need to do is, first of all, you talked about indexing Social Security benefits; that's happening once a year," he said. "We should be adjusting every month, so the people are not behind the eight ball and losing money through the course of the year. In terms of purchasing power, we should be adjusting the tax system so that it's not taxing nominal capital gains and nominal asset income."
He also said the government should talk with the 33 million businesses to develop a plan for raising prices at a lower rate that declines from year to year until inflation is under control.
"This is what [former President] John Kennedy did with steel companies," he said. "When he took office, they were trying to jack up prices 3%, I believe. He got them together in a room and yelled at them, and they walked out of the room and publicly told everybody they weren't going to take the price hike."
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