This was a bit cryptic, so a quick explanation 1/

https://twitter.com/paulkrugman/status/1801296665451593868

Imports are about 14 percent of US GDP. Federal income tax revenue (not including payroll taxes) is about 8 %. So you might think replacing it would require a tariff rate of 8/14 or around 57 percent. But ... 2/

The Fed survey of economic well-being is out; some changes at the margin, but the basic story remains that Americans say they're doing mostly OK, their local economy isn't too bad, but the national economy is terrible 1/ Consistent with polling. Here's Quinnipiac on Wisconsin voters 2/

With the recent rise in consumer sentiment, time to revisit this excellent Briefing Book paper. On reflection, I'd do it a bit differently; same basic conclusion, but I think partisan asymmetry explains even more of the remaining low numbers 1/ briefingbook.info/p/asymmetric-a… The Michigan sentiment index has two components: current conditions and expectations. It's kind of legitimate to have partisan diffs on expectations, if you think your party has better policies. It's the gap on current conditions that's startling 2/

Recent economic news has been extremely good. But there's a strange meme among some D consultants that Biden shouldn't boast about it, because it seems out of touch — that people aren't feeling the good economy. But they are! 1/ The venerable Michigan survey has rocketed up lately 2/

Immigration is looming larger in the campaign, partly because it's becoming harder for Republicans to run against Biden on the economy. But there's a strong case that immigration has been a key part of Biden's economic success 1/ Inflation has come down so easily in part because of strong labor force growth. How much of that growth can be attributed to foreign-born workers? All of it 2/

A tale of two inflation measures. Some analysts are still citing the blue line, when they should be citing the red line. This is professional malpractice 1/ Using annual core CPI puts you way behind the curve, for 2 reasons. First, annual: even core CPI was 4.6 in the first half of 2023, 3.2 in the second half. Second, known lags in official shelter prices lagging far behind market rents 2/

The debate over Fed policy, especially about when to start cutting rates, seems to have become disconnected from the reality of rapid disinflation. Thinking about it reminded me of ... an experience I once had on a cycling trip 1/ In 2015, I think, I went on a week-long cycling tour in Vermont. I was in pretty good shape, but hadn't done a trip like that for a while, and was slightly worried about my stamina 2/

Debates about the causes of inflation and disinflation are getting strangely tangled, partly because some people don't seem to recognize that both aggregate demand and aggregate supply can shift. Here, using standard textbook pictures, is what I think happened 1/ During the pandemic and early aftermath, we had a lot of fiscal stimulus. This sustained growth and employment despite an adverse supply shock, but doing so involved a temporary surge in inflation. Then the supply shock reversed, and we got immaculate disinflation 2/

OK, since the debate is mostly happening here, a thread on why I don't buy the argument that Fed rate hikes explain disinflation, and unwinding of transitory shocks does; Mike Konczal says most of it, but here's my version 1/

https://twitter.com/mtkonczal/status/1741276775378759807

First off, I like the idea of a nonlinear Phillips curve, and was very partial to it as late as spring 2023. And it's one way to explain how we got more or less back to target inflation without a massive Summers-type bulge in unemployment 2/

Good news for the future, but also calls for rethinking the past. Maybe big fiscal wasn't so disastrous after all 1/

https://twitter.com/mtkonczal/status/1707741086335025385

Assertions that Biden's 2021 policies were a disaster rested on the proposition that they would cause inflation that would be very costly to bring down. In fact, inflation has come down painlessly, probably as pandemic-era kinks are worked out 2/

This is an important point. Gonna do a newsletter on it, but I thought I should hit the high points — it helps explain consumer sentiment, and is also (believe it or not) good news for Biden 1/

https://twitter.com/NateSilver538/status/1701965341105033598

Some people saying that consumers don't care about inflation, only the level of prices. Bad news if true, because deflating back to price levels from the past would be a nightmare. But surely overstates the case 2/

Some more notes on the disconnect between what people say about their own financial situation and what they say about the economy 1/ nytimes.com/2023/09/07/opi… I'm seeing a fair amount of strawmanning, insisting that as long as people are feeling any stress there's no disconnect. But it's a question of proportionality. 2/

A few thoughts about Trump's proposed "ring around the collar" tariff; I think a lot of the commentary misses the real reason it's such a bad idea 1/ washingtonpost.com/business/2023/… Before I get there: it's a fixed belief among Rs that Biden is doddering and senile (he isn't, at all). Imagine what they would say if he promoted a big policy idea with a 55-year-old ad slogan mainly remembered bc it was so annoying — and ... 2/

There are dueling narratives about Ukraine right now. One says that it's a stalemate; the other, represented here, says that Ukraine is gradually winning a battle of artillery attrition and that RU forces will eventually snap 1/

https://twitter.com/MarkHertling/status/1693608430236258461

Those of us who aren't military experts can't judge which is right; even actual experts may not have enough information to be sure 2/

The amazing thing about this debate is that it's the same debate we've been having for almost 50 years, since Olivier and I were grad students 1/

https://twitter.com/ojblanchard1/status/1692882786099605766

It has almost never been a debate about evidence, because the evidence for short-run sticky prices, set in an uncoordinated fashion — and against the view that central banks can drive prices without real effects — has always been overwhelming 2/

There's a lot of fairly ill-tempered debate among economists about news that should make everyone happy — disinflation without recession. My thought: we should apply Occam's extended razor. When in doubt, go for the simpler story, and rely on standard models 1/ Most econ textbooks offer some version of an aggregate demand-aggregate supply framework that looks like this 2/

Thinking about the puzzling action in bond markets last week. Here are constant maturity yields from Treasury; they're based on market rates ~3:30 PM. The Fitch downgrade came after that on Aug. 1, although news may have leaked out before 1/ What's notable is that the spike took place mainly at the very long end; it has already been fully reversed for 10-years, although not for 30-years. This is really very odd 2/

A lot of people saying that disinflation was caused by Fed rate hikes.And even though I supported those hikes — I don't think there was any alternative — I'm puzzled by these claims. How is this supposed to have worked? 1/ The textbook story is that it works like this:

Higher rates => economic slack => disinflation

But where's the rise in economic slack? 2/

It's nice to see economists squabbling over who gets credit for declining inflation, as opposed to who gets blame for rising inflation. As I see it, there are two and a half possible stories 1/ The half story is that this is another head fake — maybe something about the seasonal adjustment factors or something, and the numbers will be revised to make things look less rosy. Probably not given all the private surveys, but history makes me nervous 2/

There's a lot to this — in particular, inflation came as a big shock after all those years of quiescence. But a lot of the discourse here seems to ignore a couple of points 1/

https://twitter.com/JosephPolitano/status/1677695635334524928

First, how upset are people about the economy, really? The venerable Michigan survey says they view it as awful. But the Conference Board survey, which has been running for a long time, puts consumer confidence around where it was in 2018 2/

I assume others have pointed this out, but the misery index — unemployment plus inflation — is all the way back to where it was when Biden took office 1/ In an ironic twist, efforts to minimize progress now involve asserting that the decline in inflation is transitory. But you really have to engage in statistical contortions to make this claim 2/