In his column for the New York Times, Nobel Prize-winning economist Paul Krugman called out House Minority Leader Kevin McCarthy (R-CA) for using the price of gas to attack President Joe Biden saying it is yet one more example of the Republican leader's "dishonesty."
Pointing out that McCarthy tweeted, "These are not Putin gas prices. They are President Biden gas prices,” the economist wrote, "Kevin McCarthy, the Republican House minority leader, said something cynical and transparently dishonest the other day," and then added, "... you could have said the same thing about him just about any week over the past few years. But this particular statement seemed important, because it involved a lie that has a direct bearing on how America will respond to Russia’s invasion of Ukraine."
Labeling McCarthy's assertion as "false" Krugman proceeded to explain that the blame for surging gas prices can be attributed to Putin's unprovoked war on Ukraine.
Writing, "Aside from the crassness of McCarthy’s attempt to blame Biden for something that really, truly isn’t his fault," the economist continued, "a surge in the prices of oil and other commodities as a consequence both of Russian aggression and of the West’s retaliation with economic sanctions."
Using that as a springboard, Krugman made the case that the Fed should not "overreact" and raise interest rates.
"Rising oil prices will lead to some big inflation numbers over the next few months, and there will be a lot of pressure on the Fed to overreact. Some of this pressure will be coming from people like McCarthy, who insist in the teeth of the facts that high gasoline prices are being caused by domestic policy choices. Some of it will be coming from permahawks, in whose minds we’re always about to see a reboot of that ’70s show," he wrote.
"Current inflation is high, as are expectations of inflation over the next year, but medium-term expectations of inflation haven’t gone up much and are nowhere near their levels circa 1980. This suggests that inflation isn’t getting entrenched in the economy. If the economy cools off a bit and the inflationary shock from oil prices is, as I expect it to be, a one-off affair, we’ll do OK if the Fed just keeps calm and carries on," he suggested.
You can read his whole column here.
