What’s on Paul Krugman’s wish list this holiday season? Higher immigration, less aggressive inflation-squashing by the Fed—and a significantly bigger investment in families and children.
The Nobel Prize-winning economist and New York Times columnist spoke at length before a crowd of businesspeople at our Goddard Gold fundraiser in mid-October. Taking questions from Goddard Board Chair Chris Auguste, and then from the audience, he ruminated on issues from cryptocurrency to the future of Social Security to the state of the economy.
For the past year and a half, Krugman said, the US has had “kind of a Murphy’s Law economy—everything that could go wrong, did.” President Biden’s final COVID aid package, he argued, had been somewhat too large; this, combined with high oil prices and the war in Ukraine, led to inflation. The Federal Reserve has been combating that by raising interest rates—but as a result, the threat of recession looms.
“A bunch of us are screaming at the Fed saying you’ve already probably done enough,” he said. “We don’t need a severe recession. Now the question is whether we’ll stumble into one anyway.”
While he’s worried that chairman Jerome Powell and colleagues “may be locked into a hardline position,” he also expressed confidence in their abilities: “The Fed is not stupid.”
Krugman said he’d like to see the Securities and Exchange Commission regulate cryptocurrency more stringently to protect consumers. “Crypto is absolutely infested with scams and rip-offs, and often the people who are most vulnerable are the ones who can least afford it,” he said, noting that the alternative currency was being hawked by everyone from supermarkets to reality TV stars.
“When we’re in a situation where we’re actually fining Kim Kardashian, that’s telling you there’s something bad going on,” he laughed. (Kardashian recently agreed to pay the SEC $1.26 million to settle allegations she participated in a crypto pump-and-dump scheme).
As to Social Security, Krugman said it’s in no immediate danger of running out of money—but it is spending more than it takes in, thanks to our aging population. He proposed a fix: allowing more people into the country.
“Liberalized immigration, legal immigration, would mean more workers paying into the social programs,” he said. “But of course that’s become a huge political issue.”
Asked what changes he would make to fiscal policy, Krugman said it was time for the US to truly invest in families, especially children.
“Ideally we should be spending another 100 billion a year on aid to children,” he said, noting that “we have solid evidence” that this kind of spending has “huge social rates of return.”
“The US, compared to other advanced countries—the place where we really stand out is that we spend essentially nothing on families with children,” he said. “That should change.”