The spate of strong economic data suggests President Joe Biden’s economic policy, aka Bidenomics, is alive and kicking, according to noted economist Paul Krugman.
What Happened: “Bidenomics looks a lot better in retrospect, signaling that the administration may have got it mostly right after all,” said Krugman in a New York Times op-ed published on Monday.
The Nobel laureate pulled up some recent data points to make his case. “The June employment report showed solid job growth, and more importantly, the employed share of American adults when adjusted for population aging, was at the highest level in decades,” said Krugman.
With consumer price inflation falling to its lowest level since Spring 2021 in June, American workers have higher real wages than they had before the pandemic, he added.
Krugman also pointed to GDP growth that defied recession predictions as well as the Fed’s preferred inflation gauge and the employment cost index, which showed moderation.
“There is no hint of wage price spiral,” said Krugman. “The prospects for getting inflation under control without a recession have never looked better.”
Past Actions Worked: The government’s COVID-19 largesse through the CARES Act enacted in 2020 under former president Donald Trump during COVID helped, Krugman explained.
Subsequently, Biden came up with the “American Rescue Act” fiscal package at a time the economy had not fully recovered from COVID-19. The initiative did stoke inflationary pressure more than expected, Krugman notes.
Critics slammed Biden for what they alleged as “the least responsible macroeconomic policy we’ve had in the last 40 years.” They argued that ending the initial burst of inflation would require many years of very high unemployment.
However, inflation in reality has come down significantly without a concomitant increase in unemployment, said the economist.
“It would be too much to argue that Biden’s economic policy was pure Goldilocks, that they set the economic temperature just right,” he added.
Produced in association with Benzinga
Edited by Priscilla Jepchumba and Judy J. Rotich