Former economic leaders Cohn and Summers warn on U.S. fiscal path

"On a panel Monday, Summers, a former U.S. Treasury secretary, said the U.S. economy remains remarkably resilient and is unlikely to fall into recession soon, but he cautioned that inflation remains above the Federal Reserve's 2% target. He also noted that strong spending and output data contrast sharply with softer employment figures, creating what he called an unusual degree of mystery for policymakers."

"Cohn, the former director of the White House National Economic Council and now vice chair of IBM, described the current landscape as a K-shaped recovery, with asset owners benefiting from rising housing values while others see little gain. The Fed, he said, faces a conundrum in balancing full employment with price stability amid persistent inflation. Cohn continued, There's clearly a bifurcation people who have money invested in housing today the appreciation of that side of their balance sheet has been pretty dramatic."

U.S. economic growth remains remarkably resilient and is unlikely to fall into recession in the near term, while inflation stays above the Federal Reserve's 2% target. Strong consumer spending and robust output contrast with softer employment figures, producing uncertainty for policymakers. Economic recovery shows a K-shaped pattern where asset owners gain from rising housing values while non-owners see little benefit. The Federal Reserve confronts a conundrum between maintaining full employment and achieving stable prices amid persistent inflation. Federal fiscal trajectory appears unsustainable, raising the risk of future interest-rate spikes. Political incentives in Washington favor short-term actions over long-term fiscal solutions.

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