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

Top former U.S. economic leaders, Gary Cohn and Lawrence Summers, raised red flags about the nation’s fiscal trajectory, the challenges of balancing monetary policy and the global context of U.S. debt. However, they Summers says economy is “remarkably resilient.”

Speaking at the 2025 Mortgage Bankers Association‘s Annual Convention and Expo, Cohn and Summers also credited the resilience of the American economy.

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.

“I do have some concerns that there is no lack of optimism, shall we say, in financial markets,” Sumners added.

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. People [who] do not own real assets… have not been able to get the windfall that others have gotten during this period of time.”

Regarding Fed policy, Cohn said, “The other problem that people see with the economy right here is… we’ve got a Federal Reserve that’s stuck in a conundrum. One is full employment… the second part… is something they call stable prices. Stable prices means 2% inflation or less. We’re not [at] stable prices right now, we’re a little higher than 2%.”

Both leaders weighed in on federal debt and fiscal sustainability. Summers cautioned, “The current federal fiscal trajectory is unsustainable… Will we hit a wall where interest rates spike in nine months or nine years? My guess is somewhere in between.”

Cohn expressed skepticism. “More of Washington unfortunately lives in the moment. Remember, 435 House members have one job and one job only, and it’s to get reelected.”

Summers, meanwhile, took a wry view of the global financial landscape, quipping that “the dollar is fortunate in its alternatives,” describing Europe as “a museum,” Japan as “a nursing home,” and China as “a prison.”

On emerging technology, both were optimistic about AI’s promise. “I’m extremely bullish on AI… When you grow productivity; you grow the economy,” Cohn said.

Summers and Cohn closed by stressing the importance of central bank independence. “Fed bashing is a fool’s game,” Summers said. “They will not listen — very much.”