By Paul Krugman / The New York Times
When Kamala Harris talks about economic policy, she talks a lot about the present and the future; about how we currently have low inflation and unemployment, and about things she will do to raise incomes and hold down prices. I’ve seen a number of commentators, however, saying that this isn’t enough, that she also needs to look back, to do more to defend the economic record of the administration in which she has been serving.
That’s a terrible idea. And I say that as someone who believes that the Biden administration did an excellent job coping with the aftermath of the pandemic. The trouble is that making the case for that record takes a fair bit of explaining. And as the old political saying goes, if you’re explaining, you’re losing.
Of course, this dictum applies to politicians, not policy wonks. So let me talk about why none of this should be in her speeches.
The economic numbers during the pandemic slump were deeply weird. Oil prices crashed, even going negative at one point; average wage data were distorted by the fact that many low-wage workers were laid off; and so on.
If we start in February 2020, what you can see right away is that inflation surged in 2021-22 but that the surge was temporary. Over the past year, consumer prices have risen only 2.5 percent, and even that number largely reflects a price nobody pays; “owners’ equivalent rent,” an estimate of what homeowners would be paying if they were renters. A measure that corresponds to the practice in many other countries, which don’t include that rent equivalent in their inflation numbers, is up only 1.3 percent over the past year.
Why did we have that temporary inflation surge? The best explanation is that it reflected pandemic-related disruptions. One strong piece of evidence for this proposition is that cumulative inflation since the beginning of the pandemic, using comparable measures, has been similar in many wealthy countries.
Still, prices are considerably higher than they were 4 1/2 years ago. But so are wages, which for most workers have risen substantially more than prices.
This is, objectively, a pretty good story. We had a one-time jump in prices, which was probably unavoidable, given the effects of the pandemic, or at any rate could have been avoided only at the cost of a severe recession; but inflation is back under control, and workers’ purchasing power is higher than ever.
But Americans in general are unhappy with the fact that things cost more than they used to and aren’t mollified by the fact that wages have gone up even more.
This shouldn’t come as a surprise. It’s a long-standing result that everyday people don’t think about inflation the way economists do. At times when both prices and wages are rising, people tend to believe that higher prices are taking away their hard-earned wage gains, rather than seeing rising wages and rising prices as two sides of the same coin.
So should Harris be giving lectures on Econ 101, telling voters, “Look, you just don’t understand”? Any adviser suggesting such a thing should be fired on the spot.
No, leave it to people like me to argue that President Joe Biden was right to allow a temporary spike in inflation; no matter how big the avalanche of hate mail that inevitably produces. I don’t pretend to be an expert on political strategy, but everything I see says that on economics, Harris is right to focus on what can be, unburdened by what has been.
This article originally appeared in The New York Times, c.2024.
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