The Inflation Story Has Changed Significantly. Paul Krugman Breaks It Down.
About this episode
Krugman, the Nobel laureate economist, traces how the inflation story changed: inflation slowed for seven straight months with unemployment at 3.4 percent, making a soft landing plausible. He explains that a Bureau of Labor Statistics seasonal-adjustment revision softened the triumphant disinflation narrative, and argues the most reliable gauges are supercore inflation and wages — shelter-heavy core CPI misleads because rents lag far behind market reality. He judges the Biden administration's hot-economy experiment vindicated: full labor-market recovery arrived far faster than after 2008, and inflation proved transitory, if larger than expected. He criticizes the Fed's fixation on core services excluding housing as cherry-picking the one indicator not improving, questions the 2 percent inflation target as outdated orthodoxy, calls the GOP a culture-war party with no coherent economic agenda, defends the Inflation Reduction Act's industrial policy as the politically feasible climate path, and deems Biden's semiconductor export controls unfortunate but necessary.