The Inflation Story Has Changed Dramatically. Paul Krugman Breaks It Down.

The Ezra Klein Show

New York Times Opinion

Society & Culture, Government, News

4.6 • 11K Ratings

🗓️ 17 February 2023

⏱️ 78 minutes

🔗️ Recording | iTunes | RSS

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Summary

In recent months, the story of the U.S. economy has changed significantly. The January Consumer Price Index showed that annual inflation slowed for the seventh straight month. That month, the economy also added over half a million jobs, and unemployment reached 3.4 percent, its lowest level since 1969. In light of these trends, comparisons to the 1970s stagflation crisis have weakened, and the possibility of a “soft landing” looks increasingly likely. But that doesn’t mean we’ve achieved victory. While the headline inflation numbers have looked promising, the devil is in the details. Answers to questions like how fast inflation has actually slowed, whether that slowdown will continue, how likely a future recession is, and how the Fed should act all next come down to which statistics and indicators you are looking at. So I decided to bring on the Times Opinion columnist and Nobel laureate economist Paul Krugman to break down the data and what it says about inflation moving forward. We also discuss the debt ceiling crisis, why the Republican Party has failed to embrace a coherent economic agenda, whether the Biden administration’s industrial policy efforts could undermine its climate objectives, the 20th-century economics book that best explains why the United States has gotten so bad at building things, why Krugman — a longtime advocate of free trade — has come around to embrace greater protectionism, why he believes China’s economic ascendence is no longer inevitable, whether A.I. will replace huge numbers of white collar workers and more. Mentioned: “Recession, Inflation or Soft Landing in 2023?”by Free Expression “We’re Going to Miss Greed and Cynicism” by Paul Krugman The Rise and Decline of Nations by Mancur Olson Book Recommendations: Slouching Towards Utopia by J. Bradford DeLong How the War Was Won by Phillips Payson O’Brien Ninth House by Leigh Bardugo Thoughts? Guest suggestions? Email us at [email protected]. You can find transcripts (posted midday) and more episodes of “The Ezra Klein Show” at nytimes.com/ezra-klein-podcast, and you can find Ezra on Twitter @ezraklein. Book recommendations from all our guests are listed at https://www.nytimes.com/article/ezra-klein-show-book-recs. “The Ezra Klein Show” is produced by Emefa Agawu, Annie Galvin, Jeff Geld, Rogé Karma and Kristin Lin. Fact-checking by Michelle Harris, Rollin Hu, Mary Marge Locker and Kate Sinclair. Mixing by Sonia Herrero. Original music by Isaac Jones. Audience strategy by Shannon Busta. The executive producer of New York Times Opinion Audio is Annie-Rose Strasser. Special thanks to Pat McCusker and Kristina Samulewski.

Transcript

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0:00.0	I'm Mr. Klein. This is the Ezra Conchell.
0:07.0	Go back eight months, six months, and the inflation news was really grim. Prices were going
0:27.0	up and up and up. The Fed was raising interest rates at a really rapid clip. A lot of economists
0:31.3	were warning about the possibility of stack inflation, suggesting we need to have a deeply
0:35.9	paid full recession to get out of this. But in recent months, it's been a bit of a phase change.
0:40.8	In January, annual inflation, so for the seventh straight month, unemployment is at 3.4%,
0:46.6	it's the lowest level since 1969. We are not in a recession. That doesn't mean we're out
0:51.6	of the woods. Inflation is still uncomfortably high, and those debate over what it will take
0:56.4	to get it to an acceptable level. A lot of the doomsday scenarios that were being thrown
1:02.1	around six months ago or a year ago, they look increasingly unlikely. A so-called soft landing
1:06.6	feels more attainable today than before. I want to have my colleague and noble price-winning
1:11.6	economist Paul Krugman on to trace how the story has changed and what we've learned and what he's
1:17.0	seeing in the data. There's another reason I want to bring him on, which is that inflation
1:21.3	is blocked out. Basically, every other economic policy debate you can imagine for the past year.
1:26.2	But there's a lot else going on with Republicans and the possible debt ceiling crisis with the Biden
1:31.4	administrations return to industrial policy with the decoupling with China, the crack-up of globalization.
1:38.4	There's a lot. And so I wanted to hear Paul on all of it. As always, my email as recline show at
1:43.6	mwtimes.com. Paul Krugman, always a pleasure. Always good to be on with you. So we're talking here.
1:53.2	It's February 14th, which people all over the country celebrate for the release of the
1:58.1	January Consumer Price Index data. They give each other cards and chocolates. It's a beautiful day.
2:03.8	What did that data say? How did you interpret it? It was telling us not much that we didn't already
2:10.8	know. Pretty much consistent with the story. Lots of problems with data these days.
	...

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