By Paul Krugman
The recent economic figures have been remarkably positive, to say the least.
On Friday, we found out that job growth remains robust and unemployment is still at historic lows. It’s fair to assert that Donald Trump’s 2020 prediction of a “depression” under a Joe Biden presidency — a claim he’s reiterating by forecasting a “great depression” should Kamala Harris win — has proven incorrect.
Just a week prior, we learned that inflation has continued its downward trend and is now approximately at the Federal Reserve’s 2% target. This achievement has contradicted the belief held by many economists a couple of years back that disinflation would necessitate prolonged periods of high unemployment.
So, can we attribute this good news to Bidenomics? I would argue yes — though not in the way you might think.
Before diving deeper, a comment on the predictable denials from Trump and his associates regarding the positive news. Some, such as Sen. Marco Rubio, R-Fla., are outright declaring the figures to be “fake.” These statements not only undermine the diligent work of the federal statistics agencies but also overlook the fact that independent, private assessments reflect strong job growth and low inflation as well.
The primary rebuttal from the Make America Great Again camp, however, seems to revolve around the assertion, as Trump mentioned in a recent Fox Business interview, that “the illegal migrants coming into the country are getting the jobs.”
Such claims gain some superficial credibility from the observation that employment among native-born Americans has indeed been stagnant or declining in recent years. However, this is not due to native-born individuals being unable to find work; the native-born unemployment rate stands at just 3.8%. This situation arises because an increasing number of baby boomers are aging and reaching retirement, thus exiting the labor force. This phenomenon, by the way, has been a point of discussion among many economists, including myself, for quite some time.
When adjusting for an aging population and focusing solely on adults in their prime working years, the employment rate for U.S.-born adults is presently higher than it has been at any point during the Trump administration.
In summary, the positive economic developments are genuine, despite what Trump and his supporters might say. But does the Biden-Harris administration merit recognition for this?
The fiscal stimulus from the American Rescue Plan, passed early in 2021, undoubtedly played a role in the rapid recovery of the U.S. economy from the pandemic-induced recession. However, it’s challenging to assert that it is the primary driver of job growth as we approach the fall of 2024.
Regarding the decline in inflation, while the Biden administration did enact the Inflation Reduction Act in 2022, it had little to do with inflation itself; it primarily functioned as a climate initiative. Economists within the administration attribute the reduction in inflation since 2022 largely to the resolution of supply chain issues caused by the pandemic. While government policy may have facilitated this process to some extent, mainly, it reflects our economy’s remarkable capacity to adapt to disruptions.
Yet, if Biden’s approach wasn’t the main factor behind low unemployment and inflation, why do I contend it is vindicated? Because the progress we’ve achieved in reaching this favorable economic condition illustrates that progressive economic strategies are indeed viable.
Reading the misguided warnings from a few years back that our economy was set to face persistent inflation and recession, some represented genuine worries that the inflation surge of 2021-22 — which was, notably, a global issue affecting many nations — would become entrenched.
However, numerous warnings carried a discernible tone of glee, implicitly or explicitly stating, “See, this is the outcome of spending on things that liberals advocate.” Indeed, the Biden administration pushed for significant aid to families, substantial clean energy subsidies, and major technology investments. Many proponents of stagflation predicted a dire economic future as a form of retribution for this ambitious agenda.
In essence, a good portion of the bleak forecasts for the economy stemmed from ideological beliefs, or were mere cynical assertions that striving for environmental protection, assisting families, and bolstering key industries — rather than, say, cutting taxes for the wealthy — would inevitably harm the economy.
Some, like Elon Musk, are still articulating such views.
Except the anticipated consequences never materialized. Instead, America has undergone significant growth along with decreasing inflation.
Will those who vehemently argued that progressive policies are economically disastrous reassess their perspectives in light of our recent success? Don’t count on it.
For the rest of us, however, this positive economic news reaffirms that it is possible to thrive while doing good, demonstrating that the nation can flourish today while preparing for tomorrow through child support, infrastructure investments, promoting energy transitions, and more.
And that, fundamentally, encapsulates the essence of Bidenomics — the claim, now confirmed, that progressive policies can coexist with prosperity.
