The Economy -- WSJ Vs NYT -- February 4, 2024

Locator: 46743ECON.

Updates

February 5, 2024: CAT surges.

Original Post

I don't have the energy to tackle this debate tonight.

But I don't want to lose it. So I will link the two op-eds and come back to them later (perhaps). 

Regardless, these will be nice for the archives.

First, my two cents with regard to the economy:

• "Goldilocks" -- which I used long before the current pundits
• soft landing, vs hard landing argument: my opinion: a "touch and go."

Now, The WSJ, link here, in response to Paul Krugman, below.

Her lead? 

It's all about budget airlines. Apparently that's where most Americans now spend their money.

In case you missed the White House memo, the U.S. economy is fantastic. It’s never been better. Stock prices and jobs are booming. Inflation and mortgage rates are falling. Happy days are here again. Yet many Americans remain unhappy. What gives?

One explanation could be that government measures of inflation don’t fully reflect rising prices. Sure, headline inflation is nearing the Federal Reserve’s 2% target, but these statistics can be deceiving.

Shrinkflation, paying the same price for noticeably smaller quantities of the same thing, isn’t appearing only in the grocery aisle. It’s everywhere. Americans may be paying around the same prices as they did a year ago, but they are often getting less.

Take airline fares, which the Labor Department’s consumer-price index shows fell 9.4% during 2023. That sounds nice, until you consider that the calculation heavily weighs the “lowest available fare” for a trip—typically offered by budget airlines, which require customers to pay more to bring a carry-on and select a seat in basic economy. Flyers also get less legroom and a charge for beverages or snacks.

Now,  NYT, link here. 

Krugmans' lead: 

Contrary to what you may have heard, this is not a “Goldilocks economy” — get your children’s stories right, folks!

Goldilocks found a bowl of porridge that was neither too hot nor too cold.

We have an economy that is both piping hot (in terms of growth and job creation) and refreshingly cool (in terms of inflation).

Hence the Fed’s dilemma. It increased interest rates in an attempt to reduce inflation, even though this risked causing a recession.

Now that inflation has plunged, should it quickly reverse those rate hikes, or should rates remain high because we have not, in fact, had a recession (yet)? I believe that the risk of an economic slowdown is much higher than that of resurgent inflation and that rate cuts should come sooner rather than later.

But that’s not the kind of argument that’s going to be settled on the opinion pages. What I want to talk about, instead, is what the good economic news says about policy and politics.

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Street Cred

Allysia Finley:

Paul Krugman:

Paul Robin Krugman born February 28, 1953, is an American economist who is the Distinguished Professor of Economics at the Graduate Center of the City University of New York and a columnist for The New York Times. In 2008, Krugman was the sole winner of the Nobel Memorial Prize in Economic Sciences for his contributions to new trade theory and new economic geography. The Prize Committee cited Krugman's work explaining the patterns of international trade and the geographic distribution of economic activity, by examining the effects of economies of scale and of consumer preferences for diverse goods and services.

Krugman was previously a professor of economics at MIT, and, later, at Princeton University. He retired from Princeton in June 2015, and holds the title of professor emeritus there. He also holds the title of Centennial Professor at the London School of Economics. Krugman was President of the Eastern Economic Association in 2010, and is among the most influential economists in the world. He is known in academia for his work on international economics (including trade theory and international finance), economic geography, liquidity traps, and currency crises.

Krugman is the author or editor of 27 books, including scholarly works, textbooks, and books for a more general audience, and has published over 200 scholarly articles in professional journals and edited volumes. He has also written several hundred columns on economic and political issues for The New York Times, Fortune and Slate. A 2011 survey of economics professors named him their favorite living economist under the age of 60. According to the Open Syllabus Project, Krugman is the second most frequently cited author on college syllabi for economics courses. As a commentator, Krugman has written on a wide range of economic issues including income distribution, taxation, macroeconomics, and international economics. Krugman considers himself a modern liberal, referring to his books, his blog on The New York Times, and his 2007 book The Conscience of a Liberal. His popular commentary has attracted widespread praise and criticism.