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Paul Krugman Says Things Are Getting Better

Thousands of shipping containers at the terminal at Port Elizabeth, New Jersey. Port Elizabeth, New Jersey.

Paul Krugman, Nobel laureate in economics, New York Times columnist, distinguished professor at the City University of New York Graduate Center, and the author of (now in paperback) Arguing with Zombies: Economics, Politics, and the Fight for a Better Future (W. W. Norton & Company, 2020) talks about the debt ceiling, the long-term economic picture and more.

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Brian Lehrer: It's The Brian Lehrer Show on WNYC. Good morning again everyone. One sign of a return to normality, New York Times columnist Paul Krugman is doing his first in-person event since before the pandemic. It'll be at the 92nd Street Y on Sunday night, and that gives us an excuse for our latest visit by the Nobel Prize-winning economist right now. Among Paul Krugman's recent intriguing columns is one from last Thursday called "What If Things Are About To Get Better?" Can't wait to talk about that. Dr. Krugman, always great to have you on the show. Welcome back to WNYC.

Dr. Krugman: Hi there. Good to be on.

Brian Lehrer: Since there was so much doom and gloom around all the time these days, let's focus right away as I bite on last week's column, what might be about to get better?

Dr. Krugman: Almost everything, not everything, but almost everything that's going wrong economically right now is related to the fact that the pandemic ain't over, is related to lingering effects from the previous waves of pandemic and the fact that we had this delta wave which really knocked everybody back for a loop. If the pandemic is receding, and it does look as if it is, and if vaccination gets more comprehensive, which with the spread of vaccine mandates is probably going to happen, then a lot of things will start to improve. Not just the fewer people will be dying but a lot of the economic scene will get a lot better too. A lot of the things that we're seeing, the supply shortages, and all of that are actually directly or indirectly the result of the pandemic and will get a lot less severe once normal life can be resumed.

Brian Lehrer: Let me ask you about an aspect of the supply chain problems. President Biden just got the ports of LA and San Diego to start working 24/7. Why would a COVID pandemic clog up the ports?

Dr. Krugman: That's an interesting story, it's-- God, I sound like a professor guy, but anyway, the point about the ports is the ports are actually not processing noticeably less stuff than in the past. The unloadings are proceeding at a normal pace, pretty much. What's happened is that we've had this incredible surge of demand, which is all pandemic related. Basically, people couldn't consume services and so they bought stuff instead. You couldn't go out to eat so you remodeled your kitchen, you couldn't go to the gym, so you bought exercise equipment.

A few months ago, demand for durable goods was running more than 30% above pre-pandemic levels, and a lot of those durable goods, of course, come from overseas. What's happening in the ports is not that the Port of Los Angeles has somehow ceased to be able to unload ships, what's happening is that people are trying to buy so much stuff that comes in through the Port of LA that it can't keep up. If the pandemic eases, and people can start going back to restaurants, can start going back to the gym, can start just returning to a normal pattern of spending, then the supply chain issues will start to fade away, although it's not going to happen overnight.

Brian Lehrer: I saw that you cited improving statistics in your column about maybe things are getting better on the three Cs, containers, which refers to this supply chain, COVID, COVID itself, and crime which has been secondary to COVID in so many ways. That surge in crime that we've seen over the last year, which is now beginning to recede. I saw your tweet today about inflation. This would be more good news, I guess. You wrote "Three-month core inflation, why isn't everyone calling this a win for team transitory?" What's team transitory?

Dr. Krugman: All right, there's an argument, and by the way, I got a lot of pushback on that some of which was justified. Inflation has been high this year, and there's one group of economists, which by and large, I'm part of who says, "Look, this is really mostly a blip," that underlying inflation has not gone up or that hasn't gone up much and that patience, this will recede. Then there's another-- That's team transitory. Then there's team permanent or whatever which says that no, no, this is the 1970s Redux.

Now, is it credibly in a way the weeds are so deep here, I don't even want to put a toe into them. How you read the various price measures is very much a matter of what do you choose to emphasize. The headline inflation, the top number is high, core inflation, which is the normal way that the Fed tries to cut through the noise, which is to exclude food and energy.

Core inflation after having gone high for a while has dropped off, but then there's a big argument about whether that's really telling us the story, how much of that is-- That if used car prices were a big factor in core inflation a couple of months ago, they aren't now but rents, in particular, seem to be rising quite a lot and that isn't really showing yet. You can argue, around and around, I would still say that the balance of evidence is that this is a temporary disruption. It's associated with all of these things that we've been talking about supply chains, and that it will go away.

The main thing is that you want to ask yourself, what's the right thing to do given that we don't know, given that it could go either way? I would still say that the risks of prematurely tightening, of raising interest rates, and turning out that that was the wrong thing to do, are much higher than the risks of letting inflation run for at least another few months.

Brian Lehrer: There's a big social justice, economic justice question that I want to ask you about inflation too. We generally root for inflation to be transitory, to be temporary. I saw a take on TV last night from Derek Thompson of The Atlantic, and I hope I'm characterizing him accurately. The way I understood it, he was arguing that the inflation we've been seeing might be a good thing, why? Because the global economics that we've been pursuing for the last 30 years, has been driven by low prices from cheap goods made primarily in China, but that came with declining real wages for most workers here, decline to the middle class.

Now, because of the pandemic labor refuses to work that cheap anymore and so inflation, the result of higher wages, might be a sign of a little more economic equality creeping into the system. It made me think of your column about things getting better because it would be yet another sign that things may be starting to get better in that way. I'm curious if you see inflation right now, in that same light?

Dr. Krugman: Not much of the inflation we've been seeing these past few months is about wages. The higher prices of used cars is not doing anything good for the American worker, but we are seeing now significant rises in wages, we're seeing particularly extraordinary rates of wage increase in leisure and hospitality, pretty good wage increases across the economy as a whole, and just in general, it seems to be a kind of you can take this job and shove it mood among American workers, The Times wouldn't let me use that as a headline but it's clearly what's happening.

That's a good thing. American workers have been really badly treated relative to their counterparts in other advanced countries where we were overworked, wait, not me, but the population at large is overworked and underpaid. We have far less vacation than just about any other wealthy country, we have lower wages for ordinary workers than most other wealthy countries. It looks as if the workers are saying, "Enough of that. I'm going to quit. I'm going to find-- I hate this job. Unless you pay me more, I'm not going to do it." We're actually seeing a wave of strikes now which is actually, on a fundamental level, that's a good thing it's saying that workers are feeling empowered. I don't know if that inflation being a good thing, but a workforce that feels more able to stand up for its rights, that is a good thing.

Brian Lehrer: Listeners, now you have a little behind-the-scenes glimpse of New York Times line writing. They wouldn't let Paul Krugman use the headline "Take this job and shove it." Is that because it's a copyrighted title of something or because that shove it is too spicy for the New York Times?

Dr. Krugman: It's still a bit grey lady. We've gotten looser, but it's still a Victorian sensibility about not using language that could be interpreted as being a little over the top. All right, usually, I get it away, but they wouldn't take that one.

Brian Lehrer: Before you go you want to say anything about your first in-person events since the start of the pandemic which also returns us to your theme of things are about to get better. I see it Sunday night at 7:30 at the 92nd Street Y in conversation with MSNBC's Ari Melber. Why is this the moment you're going in-person again?

Dr. Krugman: Basically because tax rates are pretty high. New York is a place where everything is-- Indoor events have vaccination requirements and I've forgotten my booster shot. I think we're at the point now where at least in high vaccination parts of the country, it's starting to become safe to go back to normal. God knows I miss it. I've been living my life on Zoom like everybody of a certain class for the past 18 months and I'm sick of it. I'm looking forward very much to being able to talk to a live audience.

Brian Lehrer: I see that's a benefit for the Y because WNYC and other cultural institutions, they've been hit hard by the pandemic economics. Have anything special you're going to do there Sunday night.

Dr. Krugman: Nothing, to my knowledge. If there's going to be any stage theatrical, I don't think so. What I'm going to do is find out actually, I actually haven't worn any of my suits in all this time. We're going to find out if my suits still fit.

Brian Lehrer: Quick. You'll see if the 24-hour dry cleaning places still work. All right. Dr. Paul Krugman, New York Times columnist, he'll be in conversation at the 92nd Street Y Sunday night with MSNBC's Ari Melber. Thanks as always for coming on with us.

Dr. Krugman: Thanks.

Brian Lehrer: Brian Lehrer on WNYC much more to come.

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