Krugman Warns Trump Risks 1970s-Style Stagflation as Inflation Expectations Hit Worst Since 1980s
Updated
Updated · AlterNet · May 23
Krugman Warns Trump Risks 1970s-Style Stagflation as Inflation Expectations Hit Worst Since 1980s
2 articles · Updated · AlterNet · May 23
Record-low U.S. consumer sentiment and inflation expectations at their worst since the 1980s led Paul Krugman to warn the economy could turn “really, really ugly.”
Krugman said the bigger danger is not a temporary price spike but inflation becoming entrenched after Trump’s tariff shock and the war on Iran push households and businesses to expect persistently higher prices.
Those expectations can create a self-reinforcing loop, he said, as companies and employers set future prices and wages based on what they think competitors’ costs and prices will be.
The historical parallel is the late 1970s and early 1980s, when breaking entrenched inflation required years of punishingly high unemployment.
Krugman said that if the pattern is taking hold now, the policy mistakes of the past 18 months could leave the U.S. paying the price for years.
Can the U.S. economy escape entrenched inflation without repeating the painful recession of the 1980s?
Amidst stagflation fears, is a potential 'AI bubble' the next major shock awaiting the global market?
With global shipping in crisis, how will new tariffs and soaring oil prices reshape the world economy?
Double Supply Shock: How Tariffs and the Iran War Are Driving U.S. Inflation Back to 4% and Sinking Consumer Confidence
Overview
In May 2026, the U.S. economy faces a troubling mix of high inflation, slow growth, and a tough job market, prompting Nobel laureate Paul Krugman to warn of stagflation risks. Americans are struggling with rising costs for essentials like gas, while the Federal Reserve battles persistent price pressures as inflation climbs back toward 4%. Despite some job creation, many find it hard to secure work, and consumer sentiment has dropped to record lows. This challenging environment highlights the complex interplay between stubborn inflation, weak economic growth, and everyday financial stress for households.