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Spokane, Washington  Est. May 19, 1883

Paul Krugman: Should Biden downplay his own success?

Paul Krugman new york times

The performance of America’s economy over the past two years has been remarkable, especially given the dire predictions of many observers. Remember the economists who forecast a recession in 2023? Remember all those warnings that getting inflation down would require years of high unemployment?

Instead, our economic growth has been the envy of other wealthy nations. Stocks are way up since President Joe Biden took office. Inflation has declined sharply and unemployment is still below 4%. The latest numbers seem to support the view that the apparent acceleration of prices earlier this year was a statistical blip, and that disinflation is still on track.

Yet there’s still a lingering conventional wisdom that says Biden shouldn’t trumpet his economic record. The Washington Post’s editorial board just wrote that “Telling Americans the economy is good won’t work.” The Financial Times’ editorial board wrote, “The president’s state of the nation address in March was littered with superlatives about the economy,” but that his messaging “risks negating the experience of voters on the ground” – basically saying that Biden shouldn’t talk about his economic achievements, even implying that he should try to relate to voters by acknowledging that the economic picture out there is bad, which it isn’t.

Now, I am neither a political strategist nor a political historian, but I think I know enough to say that a 21st-century replay of Jimmy Carter’s infamous so-called malaise speech would be a bad move.

That said, telling voters to buck up and realize how good they have it would also be a bad move. But has anyone in the Biden administration said anything like that? It would be pretty obtuse if they had. But I’m not aware of any examples. As far as I can tell, administration officials, including Biden himself, talk about low unemployment, falling inflation and rising real wages – and do so carefully, studiously avoiding the bombast and excessive boasting so common in the previous administration. But even mentioning good economic news is supposedly an affront to everyday Americans because it amounts to denying their lived experience.

Which brings me to a point I’ve been pounding on for a while that bears repeating: There’s overwhelming evidence that most Americans’ negative views about the economy don’t reflect their lived experience.

Here’s a relatively new example: fast food. Recently, the online lending marketplace LendingTree released the results of a survey in which nearly 80% of Americans said that inflation has turned fast food into a luxury they’re forced to consume less often. And indeed, fast food prices have gone up quite a bit in recent years.

But they haven’t surged to the extent that legend has it. Those headlines you see that say McDonald’s prices have doubled? They’re usually referring to prices from a decade ago, and are wrong even so.

A few days after that survey was released, management at McDonald’s issued an open letter responding to hyperbolic claims about the chain’s prices. Since 2019 (the last full year before the economic shocks of the COVID-19 pandemic), McDonald’s reports, the price of a Big Mac hasn’t doubled; it’s up 21%. That’s still substantial, but it’s less than the rise in the median worker’s earnings over the same period of time.

And it’s worth looking at what people are actually doing. Spending at restaurants was up 7% from March 2023 to March 2024; some of this was inflation, but not all of it, so Americans seem to be buying quite a lot of a luxury good they say they can’t afford.

To be clear, nobody is suggesting that Biden administration officials should tell Americans to sit down, eat their Happy Meals and stop complaining. And from my own conversations I can tell you that these officials are well aware that they have limited ability to change a negative economic narrative that has become widely entrenched, even if it’s inaccurate. But demands that Biden stay quiet about good economic news – particularly when there’s a lot of good economic news to talk about – seem to be saying that he should in effect validate misinformation. Why would anyone consider this a good idea?

Well, here’s my take: As I said, I’m no political consultant, but people telling Biden to downplay the fact that his big spending has worked out well for the economy are to some degree revealing their own ideological biases rather than giving solid political advice.

The situation today is not unlike what we saw in the early 2010s, when policy pivoted far too soon from fighting unemployment to obsessing about deficits, making it harder to make the case that sometimes government activism really does work. In the same way that the Great Recession became fodder for deficit hawks, for a little while, the inflation surge in 2021 and 2022 became glory days for the inflation hawks.

But it turned out that they were wrong: The almost painless disinflation of 2023 largely vindicated Biden economists, who argued early on that post-COVID inflation wasn’t the second coming of the 1970s, that it most resembled inflation after World War II – a transitory burst that ended as supply chains normalized. The “transitory” part ended up taking a bit longer than expected, but they were basically right.

So how should Biden and his people talk about the economy now? I’d suggest that they simply tell the truth as they see it.

Which, as far as I can tell, is what they’ve been doing all along.