Paul Krugman Claims America Had Low Inflation This Summer. What Planet Is He Living On?

Lost in the brouhaha over the announcement of Uncle Joe‘s plan to cancel student debt this week was a puzzling claim from The New York Times columnist Paul Krugman.

Krugman claimed that inflation was low this summer, contrary to predictions of pain. His observations fly in the face of even a basic understanding of economics.

“Not long ago, many people were predicting a long, hot summer of inflation,” Krugman wrote.

“To their surprise — and, for some Republicans, dismay — that isn’t happening,” the pundit proclaimed. “Overall consumer prices were flat in July, and nowcasts — estimates based on preliminary data — suggest that inflation will remain low in August.”

It is true that regarding month-to-month inflation from June to July, there was zero overall inflation. Of course, what Krugman leaves out is that year-over-year inflation in July was at 8.5%.

That is now the fifth straight month with year-over-over inflation at 8% or higher. If that is considered low inflation, one would shudder to think of what Krugman considers “high inflation.”

He also pointed to evidence that “beef is already getting cheaper.” Yet, high-end steak and other red meat is getting cheaper not because inflation is coming down, but because demand for such items are decreasing as shoppers search for cheaper options. As noted by the Robb Report, ground beef is increasing in price.

“Over the same four-week period ending August 7, ground-beef prices jumped about 7 percent compared with the same timeframe last year,” The Robb Report’s Tori Latham wrote. “(In contrast, the price of ribeye and beef loin fell nearly 10 percent.)”

The purpose of Krugman’s article was to consider if there was any economic plan that could slow inflation (which he claims is already slowing) and help the economy without involving any pain. He points to an interesting historical example out of Israel, where the nation crafted a “package that included a temporary wage freeze and price ceilings” in the 80s.

Ultimately, Krugman concluded that “there don’t seem to be any realistic alternatives” to the Federal Reserve’s plan of “reducing inflation by engineering a slowdown.”

Indeed, that is the same conclusion that Federal Reserve Chair Jerome Powell reached in Wyoming earlier this week.

“While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses,” Powell said. “These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.”

Curiously enough, Krugman admitted last month that he was wrong about President Joe Biden’s spending package and the impact it would have on inflation.

“Some warned that the package would be dangerously inflationary; others were fairly relaxed. I was Team Relaxed. As it turned out, of course, that was a very bad call,” he wrote.

He also stated that “the whole experience has been a lesson in humility.”

With his latest claims about inflation, it seems that lesson didn’t quite stick.