Paul Krugman Says “We Won” the War on Inflation. Is He Right?

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If economists are to earn their keep, they must put their necks on the proverbial chopping block from time to time and issue non-obvious opinions. Moreover, one can’t expect any expert, renowned or otherwise, to bat a thousand in every game.

Still, I find it reasonable to hold a man of Paul Krugman’s stature to a higher standard. He’s a well-known op-ed columnist who also happens to be a Nobel Prize winner. Furthermore, Krugman has around 4.5 million followers on X (formerly known as Twitter). Thus, when he makes a pronouncement, people listen.

People were indeed listening when Krugman recently made a statement or two and posted a chart pertaining to the trajectory of U.S. inflation. As you might expect, opinions about Krugman’s proclamations are plentiful, but concrete conclusions remain frustratingly elusive.

What is “winning,” anyway?

Without further ado, I’ll direct you to Krugman’s lightning-rod tweet:

This reminds me of the “war on poverty” of the 1960s and the “war on drugs” of the 1980s. It’s easy to declare war on something and even easier to declare victory because there are no established, verifiable parameters for winning or losing.

In other words, whether the “war on inflation” is actually “over” or not is impossible to confirm or deny, strictly speaking. Of course, tweets aren’t doctoral dissertations and needn’t be held to high standards.

Yet, it’s Krugman we’re talking about here. Even his social-media postings merit examination. However, it’s difficult to examine this particular posting since it’s so vague. Even beyond the lack of definition of “winning” the war on inflation, I’m not even clear on who “we” are, exactly.

I’m referring to Krugman’s second statement, “We won, at very little cost.” Who are “we,” Mr. Krugman? Is this the Federal Reserve, which is attempting to tamp down inflation through interest-rate policy? Does he mean policymakers like the president and Congress? Alternatively, does he mean the American people, most of whom have had no control over the inflation rate?

On top of all that, I can’t get past the phrase “at very little cost.” Cost to whom? The high prices of essential goods affect poor people much more than the top 1% of earners. Thus, even before assessing what Krugman stated, it’s a challenge just to pin down precisely what he means.

Everything but the essentials

Since Krugman attached a chart to his tweet, it’s fair to assume that the chart is supposed to support the “war on inflation is over” claim. As you’ve surly noticed, Krugman’s posted chart visually displays the change in the Consumer Price Index (CPI), excluding food, energy, shelter and used cars.

That’s a lot of exclusions, and those exclusions include what might arguably be the four most essential consumption categories for low- and middle-income Americans. In other words, that chart counts everything but the most important things.

Take a trip to the grocery store and then fill up your vehicle with gasoline, and that’s all the evidence you should need that food and energy costs are still quite elevated. While you’re at it, check your electricity bill if you can handle the sticker shock.

Additionally, it’s not difficult to find charts opposing the idea that the war on inflation has been won. I’ll start you off with these:

Maybe Krugman isn’t an orange juice drinker and simply hasn’t noticed. What’s more likely is that he has noticed what’s going on in the real world, which would explain why his chart specifically excludes food, energy, shelter and used cars.

The Fed might disagree

Thus, I won’t dispute the accuracy of Krugman’s chart. Rather, I’ll call into question whether it supports the “victory against inflation” idea.

I’m not the only one who’s inclined to take issue with Krugman’s tweet. The replies to his tweet are numerous and harsh. They’re also pretty funny, and many of them can’t be reprinted here without repercussions.

More consequentially, the Fed and its chairman, Jerome Powell, would probably disagree that the war on inflation has been “won.” In the Fed’s eyes, September’s 3.7% year-over-year CPI growth is unacceptable and nowhere near the target rate of 2%.

At the end of the day, what the Fed thinks is much more important than what Krugman and other social-media participants think, even when one of them happens to be a Nobel Prize laureate.