Down on the Biden Economy

AUSTIN – In a recent CNN interview, Paul Krugman of The New York Times finds it hard to understand why ordinary American voters do not share his euphoric view of US President Joe Biden’s goldilocks economy – which appears to be neither hot nor cold. Inflation is falling, unemployment remains low, the economy is growing, and stock-market valuations are high. So why, Krugman asks, do voters give Biden’s economy a lousy 36% approval rating?

Journalist Glenn Greenwald sees class bias in Krugman’s wonderment: as though Krugman were just another pampered rentier with ample cash, real estate, stocks, and bonds. But this is most unfair. Though I have not been to Krugman’s home, I have seen his ultra-modest office at the City University of New York. He’s certainly done well, but I suspect his plebeian tastes have changed little since his junior faculty days at Yale, when I was a graduate student there.

No, Krugman’s problem is not too much money. It’s the obsolescence of his ideas. He and I came of age, professionally, during Jimmy Carter’s presidency. Republicans, gunning for Carter, availed themselves of the “misery index,” a measure comprising the sum of the unemployment and inflation rates in a given month or year. As a polemical device, the index was devastating, especially in 1980, when Carter’s credit controls caused a short recession, just after the Iranian Revolution’s shock to oil prices. Ronald Reagan rode to the presidency on that horse.

Today, with inflation and unemployment both running between 3% and 4%, the misery index is low. Back in the 1970s, those in power would have been thrilled. Mainstream economists would have been perplexed, and that hasn’t changed. They were in thrall to something called the Phillips curve; or worse, the Non-Accelerating Inflation Rate of Unemployment. To this day, some of them still can’t figure out why low unemployment doesn’t cause high inflation. That is why they marvel when the misery index is low – as Krugman does today.

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