Plain English with Derek Thompson
What Many Economists (and I) Got Wrong About This Economy
Mar 5, 2024
Judd Cramer, a Harvard economist and co-author of a paper on inflation metrics, challenges common economic perceptions. He explains how traditional inflation measures overlook the staggering impact of soaring interest rates on everyday costs. As housing prices rise, the true cost of living, especially in terms of mortgages and loans, is often misrepresented. Cramer argues that this disconnect fuels economic anxiety and questions the validity of current economic indicators, offering a fresh perspective on what really drives consumer sentiment.
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Quick takeaways
- Inflation metrics fail to reflect the burden of rising interest rates on living expenses.
- Government aid reductions, like the child tax credit, have a significant impact on poverty rates.
Deep dives
Challenges in Measuring Inflation for Poor Americans
When discussing the economy, it's crucial to consider the impact of inflation on low-income individuals. While real wages may be rising for the poor, they often face higher inflation rates due to the unique basket of goods they use. Additionally, the reduction in government transfers, like the child tax credit, has affected poverty rates, highlighting the complex interplay between wage growth and cost increases for those at the lower end of the income spectrum.
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