Krugman: Bidenomics Guiding U.S. Economy Towards a Smooth Landing
Economist Paul Krugman explores the concept of a “smooth landing” in the current economic climate, drawing comparisons to historical instances of inflation and economic strategies in a thought-provoking op-ed for The New York Times.
Paul Krugman, a distinguished professor and op-ed columnist for The New York Times, is an esteemed American economist who has greatly contributed to the field of international economics, particularly in trade theory and economic geography. In recognition of his work, he was awarded the Nobel Memorial Prize in Economic Sciences in 2008 for his analysis of trade patterns and the location of economic activity.
With a knack for simplifying complex economic concepts, Krugman has become known not only for his academic achievements but also for his ability to engage with the general public through his columns and books. He has played a significant role in shaping public debates on economic policy, promoting Keynesian economics, and offering critical perspectives on the fiscal policies of different administrations.
Krugman’s article, published on March 12, reflects on the optimistic yet unfulfilled prediction made by George Shultz, the Treasury secretary in 1973, regarding a smooth landing for the American economy amidst rising inflation. This sets the stage for an examination of the current economic outlook under President Biden’s administration.
Krugman closely analyzes President Biden’s recent statement during the State of the Union address, where Biden expressed confidence in achieving a smooth landing—an economic scenario characterized by low inflation without the burden of high unemployment. Using criteria outlined by Harvard’s Jason Furman in October 2022, Krugman evaluates the current economic indicators against these benchmarks to determine whether a smooth landing is within reach.
Through Krugman’s lens, recent economic data points towards cautious optimism. Despite some disappointing figures, such as higher-than-anticipated consumer price reports and potential signs of a weakening labor market, Krugman argues that concerns about a hard landing may be overstated. He believes that essential indicators of inflation, when excluding volatile or lagging factors like food, energy, and shelter prices, still offer promise.
Furthermore, Krugman extends his analysis to wage trends and productivity rates, presenting an alternative perspective on the underlying inflation rate, which he suggests may be closer to 2.5 percent. This analysis is supported by private business surveys and purchasing manager reports, further reinforcing the notion that inflation may not be as pressing a concern as some fear.
However, Krugman does not overlook the challenges that lie ahead, particularly in terms of unemployment. He highlights the Sahm rule, an empirical measure named after former Fed economist Claudia Sahm, as a reliable indicator of recession risk. Krugman points out the gradual increase in unemployment rates, raising concerns about the potential impact of sustained high interest rates on the economy.
In conclusion, Krugman’s analysis suggests that President Biden’s economic policies, often referred to as “Bidenomics,” are leading the United States towards a smooth landing. While challenges remain, the overall economic indicators provide reasons for cautious optimism.