As Federal Reserve Chair Jerome Powell and President Joe Biden tout their fiscal policies on the world stage, one Harvard economist set the record straight on the state and future direction of the U.S. economy.
In the midst of Federal Reserve Chair Jerome Powell and President Joe Biden
championing their fiscal policies on the global stage, a Harvard economist provides a candid assessment of the current state and future trajectory of the U.S. economy.
During an appearance on "Mornings with Maria," Harvard University professor of economics Kenneth Rogoff addressed the public's dissatisfaction with inflation and debunked President Biden's claims about the success of his economic agenda.
Rogoff pointed out that voters are increasingly unhappy about inflation, which shows no signs of abating. He noted that the initial phase of 'Bidenomics' played a role in fueling this inflationary pressure. In a speech at a financial stability conference in Madrid, Powell expressed his belief that core inflation would not return to the Federal Reserve's 2% target until 2025. Meanwhile, President Biden boasted about the accomplishments of 'Bidenomics,' citing pandemic recovery and the creation of "new" jobs.
However, Rogoff countered Biden's assertions, highlighting the challenges in the labor market, lackluster GDP growth, and subpar productivity. He acknowledged the positive aspects of certain policies, such as the CHIPS Act, aimed at protecting the U.S. from supply chain disruptions. However, Rogoff also criticized the Inflation Reduction Act, emphasizing that any benefits it may bring would not be seen until after the upcoming election.
The first-quarter GDP figures revealed annualized growth of 2%, surpassing economists' expectations of 1.4%. Looking ahead to the second quarter, Rogoff expressed concerns about productivity and its impact on overall economic growth.
While the policies may be creating jobs, Rogoff cautioned that they could come at the expense of productivity growth. He suggested that 'Bidenomics' may be willing to accept this tradeoff but warned of the consequences in terms of competition with China and America's global standing.
In terms of inflation, Rogoff argued that the Federal Reserve may need to exercise patience in achieving its 2% target. The recent dip in the consumer price index to 4%—the lowest level in two years—suggests a longer timeline. He even speculated that the Fed might continue raising interest rates until another financial crisis or significant stress event occurs.
Rogoff also highlighted the potential link between persistent inflation and expectations of an impending recession. He expressed skepticism about the Fed's ability to bring inflation down without an economic downturn.
As Rogoff concluded, the underlying sentiment remains that people are dissatisfied with the current economic situation. President Biden recognizes the need to address this perception in the coming year.
As the economy continues to face challenges and policymakers grapple with the consequences of economic policies, all eyes will be on the trajectory of 'Bidenomics' and its impact on the well-being of the nation.