Paul Krugman Schools Americans 'Righteously Angry' About Soaring Costs: Biden's Price Levels Mirror Reagan's Inflation Triumph

Zinger Key Points
  • Headline inflation rate has cooled from the cycle peak of 9.1% in June 2022 to 3.4% in April.
  • Thawing inflation below the Federal Reserve's 2% upper ceiling is important for the Fed to reverse its rate hikes.

President Joe Biden’s poll prospects have been stymied by public perception of elevated inflation and a sluggish economy despite the numbers telling an altogether different story. Nobel laureate and economist Paul Krugman on Monday weighed in on this conundrum.

What Happened: Krugman shared on X a chart showing consumer prices under Biden and former Republican President Ronald Reagan. The chart showed Biden starting his presidential tenure with a lower inflation than Reagan and boasting a lower inflation rate until the end of the first year.

In the subsequent months, inflation under the Biden regime was slightly higher than Reagan’s at similar points in their respective presidencies. And after 36 months, the consumer prices were beginning to converge.

Krugman commented on the chart, “For those saying that Americans are righteously angry because the level of prices is up even though the rate of inflation has fallen, a history lesson.”

See Also: Best Inflation Stocks

Why It’s Important: The economic policy of Reagan, popularly called Reaganomics, has been deemed a success by most economists. Economists Jeffrey Eisenach and James Miller III called Reagan’s reign a watershed presidency in a paper published on the website of the American public policy think tank Hoover Institution in 2004.

“He launched the longest peacetime expansion in the American economy. Inflation, interest, and unemployment rates all fell. Other relevant indexes rose: employment, the labor force participation rate, and productivity,” they said in the paper. His go-to tool for achieving prosperity was to cut taxes, reduce social spending, increase military spending, and implement market deregulation.

Reagan served two terms as president, spanning from Jan. 20, 198, to Jan. 20, 1989. Inflation under the former president fell from 13.5% in 1980 to 4.1% by 1988, with the decline attributed mainly to fiscal restraint and reducing government spending, combined with tax reforms and deregulation.

The most recent numbers showed year-over-year rates of headline and core inflation at 3.4% and 3.6%, respectively, in April. Thawing inflation below the Federal Reserve’s 2% upper ceiling is important as it would provide the central bank with the confidence to take down the Fed funds rate, which is currently at a 22-year high of 5.25%-5.50%.

The iShares TIPS Bond ETF TIP, an ETF tracking the investment results of an index composed of inflation-protected U.S. Treasury bonds, ended Friday’s session up 0.12% at $106.44, according to Benzinga Pro data.

Read Next: Inflation Stresses Retail Traders As Fed Cuts Look Unlikely, Crypto Doubts Increase: Survey

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Posted In: Analyst ColorNewsTop StoriesEconomicsFederal ReserveExpert IdeasInflationJoe BidenPaul KrugmanRonald ReaganStories That Matter
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