Biden Boom Vs. Trump Freeze: Paul Krugman Says We Traded Pro-Worker Recovery For K-Shaped Recession
Economist Paul Krugman warns that the United States has traded the inclusive, pro-worker recovery of the Joe Biden years for a stratified “Trump freeze,” creating a new K-shaped economy where the wealthy thrive while the working class falls behind.
Reversal Of Fortune
In a new analysis, Krugman challenges the “lazy cynicism” that economic inequality is an unchangeable constant in American life. He points to Atlanta Fed data showing that the Biden presidency presided over a rare “Great Compression.”
Between 2021 and 2023, wage growth for the bottom 25% of earners consistently outpaced the top 25%, driven by a tight labor market that gave leverage to low-paid staff.
That trend has sharply reversed under the current administration. Since late 2024, the gap has widened again; high-income earners—particularly those with stock portfolios—are seeing gains, while wage growth for low-income workers has stalled, barely outpacing inflation.
‘Frozen’ Labor Market
Krugman identifies the primary culprit as a “frozen” job market. Contrasting sharply with the easy hiring environment of 2023, today's employers are paralyzed by uncertainty. Krugman argues that President Donald Trump's erratic tariff policies have made businesses reluctant to commit to new hires.
“Trump may claim that we are economically ‘the hottest country in the world,’ but the truth is that we last had a hot labor market back in 2023-4,” Krugman writes.
See Also: GDP ‘Nowhere Near’ 4.3%: Rosenberg Dismisses Q3 Report As ‘Fugazi,’ Pegs Real Growth At 0.8%
Impact On The Marginalized
The consequences of this freeze are falling disproportionately on marginalized groups. While overall unemployment has drifted up to 4.6%, Black unemployment has been “soaring” since the summer of 2025.
Krugman concludes that this inequality was not inevitable, arguing that the Biden years proved that deliberate policy choices can promote full employment and reduce the wealth gap.
US Benchmarks Begin Santa Claus Rally
On Christmas Eve, both the S&P 500 and Dow Jones indices ended at a record close. The S&P 500 was 18.12% higher, whereas the Nasdaq Composite and Dow Jones gained 22.47% and 14.95%, respectively, on a year-to-date basis.
The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, closed higher on Wednesday. The SPY was up 0.35% at $690.38, while the QQQ advanced 0.29% to $623.93, according to Benzinga Pro data.
The futures of Dow Jones, S&P 500, and Nasdaq 100 indices were lower on Friday.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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