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.
"Voters are very unhappy about inflation and inflation's not going away. And the first part of ‘Bidenomics’ definitely contributed to that inflation. There's no question about it," Harvard University professor of economics Kenneth Rogoff said on "Mornings with Maria" Thursday.
Speaking at a financial stability conference in Madrid, Spain, Powell stated that he does not expect core inflation to return to the central bank’s 2% target until 2025. Meanwhile, the president boasted about "Bidenomics" on the campaign trail, attributing it to pandemic recovery and "new" jobs.
"Today, the U.S. has the highest economic growth rate, leading the world economy since the pandemic, the highest in the world," Biden said on-stage in Chicago on Wednesday. "We created 13.4 million new jobs, more jobs in two years than any president has ever made in four."
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Rogoff corrected Biden on a "tight" labor market, with minimal GDP growth and "not very good" productivity.
"He has these other things: the CHIPS Act, which was to sort of protect us from Taiwan, actually a good idea, but had too much social policy mixed in," the economist said. "And then the Inflation Reduction Act, which I think it's more debatable. But the benefits, if there are, they're not coming for a long time. They're not going to be seen until after the election."
"So he's sort of stuck with the inflation and the stimulus that came from the first part of his administration," he continued.
The final rate for first-quarter GDP showed annualized growth of 2%, higher than economist expectations of 1.4%. Looking ahead to Q2, Rogoff noted that the "big picture" behind GDP depicts concerns around productivity.
"They are maybe creating jobs to the extent the policies are doing it, but they, at the same time, are possibly sacrificing productivity growth. I think that's a tradeoff that Bidenomics [is] probably willing to accept, but it has its costs in terms of our competition with China and America's stature in the world," the Harvard professor pointed out.
In terms of inflation, the Fed may have to be "very patient" in waiting to hit their 2% goal, Rogoff added. Last month, the consumer price index reached 4%, its lowest level in two years.
"I think 2025 is probably optimistic to get to 2%. I think it's going to be longer than that," he said. "I think they're going to keep raising interest rates until we see another financial crisis or some kind of big financial stress."
With no sign of inflation cooling down, Rogoff said that could mean policymakers and economists are still anticipating a recession.
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"[The Fed] won't be that successful in bringing inflation down to 2% without a recession," the Harvard economist said.
"It also ties in with: people aren't happy. Whatever they're doing, they're just not happy with the situation," Rogoff continued. "And I think the president's trying to correct that perception as he views that over the next year."
