Paul Krugman got to be a guest recently on a regular NY Times feature: Matter of Opinion podcast. The subject was something of which he should know a thing or two:
He joins the hosts to talk inflation, bad vibes, and how voters will respond in November
Kugman took questions from Michelle Cottle, Ross Douthat, and Carlos Lozada. The link above will allow full access to the podcast if you want to listen, but you can also read a transcript from the link on the audio page if you prefer. After the greetings, here’s the intro,
...So our beloved Lydia is out, but we have drafted an extra special guest to help us out this week. We’ve been talking a lot about big issues at play in this year’s presidential election. And today, by God, we’re going to try to understand what exactly is going on with the economy. Are we headed into a recession? Are we just having what all the cool kids call a vibe session? What’s driving public feelings about the situation? And do those feelings favor Joe Biden or Donald Trump?
Now, we’ll get to politics later. But first, our “Times” colleague, the Nobel Prize winning economist Paul Krugman, has graciously agreed to step in and help everyone, especially me, make sense of a very confusing economic picture. Paul, welcome. Thank you so much.
Now, we’ll get to politics later. But first, our “Times” colleague, the Nobel Prize winning economist Paul Krugman, has graciously agreed to step in and help everyone, especially me, make sense of a very confusing economic picture. Paul, welcome. Thank you so much.
...Michelle Cottle
So we are obviously delighted to have you here. And my opening question for you about the economy is, am I right to be confused? Are you confused? Help me out here.
Paul Krugman
I’m actually not feeling very confused, which is probably a bad sign. But —
— basically it’s still mostly a story of a soft landing, that a very rough couple of years, mostly as a result of aftershocks from the COVID-19 pandemic, inflation with some bumps, pretty close to where we wanted to be. Could there be a recession? Always.
[Chuckles]
There can always be a recession. But there’s very little hint of one in any of the data that we have right now. So I’m much less confused now than I was a year ago. Right now the picture looks pretty clear.
The three regulars take turns asking Krugman questions; it’s an interesting exchange outside the usual constraints of a column.
Some points of interest in the discussion:
• The supply chain issues and inflation rose because of disruption from the pandemic. People changed what they were buying (like home fitness equipment versus gym memberships) and it took a while for the economy to shift. Krugman compared it to post World War Two, when there was inflation while the economy was shifting from a war footing back to trying to meet domestic demands.
• Inflation wasn’t just an American thing, and can’t be blamed on Biden’s policies. As Krugman put it:
By the way, I think it’s worth pointing out — we’re Americans, we don’t believe the rest of the world exists. But the cumulative increase in prices in the euro area is almost exactly the same as it was in the United States. So you have a place that never had the Biden stimulus, never had a lot of our policies, and yet their inflation experience — it was a little delayed. Inflation took off sooner and ended sooner — came down sooner in the US. But if you look at the cumulative from January 2020 to January 2024, both sides of the Atlantic look the same.
We’ve recovered faster, and are in better shape than the rest of the world on this.
• As far as being unhappy about the economy, Krugman notes the partisan effect. Democrats seem to be more in touch with reality, whereas Republicans are far more partisan. If Republicans aren’t running things, the economy is bad, and and it’s always better when they are. As for independents and how they are reacting, Krugman cites political scientists who say there’s really no such thing. (It might be more accurate to describe independents as people who have left or right preferences, but don’t identify publicly either way.) The conclusion is that as the economy continues to produce good news, Democrats and left-leaning independents will feel increasingly better about it — and those on the right will simply refuse to believe it. Further, polling about sentiments on the economy is going to be distorted by the stronger feelings expressed on the right.
• “It’s the economy, stupid” is what everyone remembers from Bill Clinton’s campaign — but there was more to it. Carlos Lozada puts it as: “...the full slogan in the war room with Carville and company, it was three parts. It was change versus more of the same, the economy, stupid, and don’t forget about health care”. So, the economy matters — but there are other things too.
There’s a lot more to glean from this discussion — and some might also note the importance of what’s not discussed. Robert Reich for one has been practically yelling his head off that a lot of the high prices people are complaining about are being driven by corporate greed and monopoly power. This is a topic corporate media really doesn’t like to talk about…
Overall though, it’s a worthwhile discussion that gives Krugman the opportunity to talk about the economy and address questions about it in ways an editorial doesn’t allow. It’s a bit more informative than the stock media narrative that reports everyone is unhappy with the economy and therefore it’s bad news for Democrats. Krugman at least thinks it’s going to work out for Biden. Find time to listen or scroll through the transcript.
