Krugman on the impending energy crisis:
We’re hearing a lot of talk about stagflation now, for good reason. Tariffs and mass deportations are both stagflationary: They increase inflation while depressing growth.
It’s becoming increasingly clear that there’s a third major stagflationary force coming into play: Soaring electricity prices, which will also hurt growth while increasing inflation.
Now, during the 2024 campaign Donald Trump boasted a lot about how he would bring down energy prices. He talked very big, and made specific promises. Notably, he declared that he would cut the price of electricity in half within 12 months of taking office:
So how’s that going?
And this is only the start. Many analysts expect further large increases in electricity prices over the next year or more, largely because of surging demand from AI data centers. The electricity outlook is sufficiently scary that Texas — Texas! — has passed a new law giving the grid operator the right to cut off data centers during periods of power shortage.
An aside: In the America I grew up in, people who made big boasts about what they would achieve then completely failed to deliver were considered unserious blowhards. What happened to that country?
But Trump has a scapegoat, which probably won’t surprise you — renewable energy:
It’s unclear what his theory is. How does adding wind and solar generating capacity — increasing electricity supply — lead to higher prices?
To the extent that there is a story here, it involves what I’ve called MAGA brain, “the belief that the only way you can get results is by being tough and nasty, avoiding anything that might be considered woke” — which includes renewable energy.
As it happens, the data overwhelmingly reject Trump’s claims about renewables and prices. The Department of Energy has data on the share of each state’s electricity generated by renewable sources. For example, Iowa gets 80 percent of its utility-scale power from renewables, mostly wind, while New Jersey only gets 4.6 percent from renewables. Yet Iowa’s electricity prices actually fell slightly from May 2024 to May 2025, while NJ prices rose 10 percent.
Trump is hallucinating again:
Except New Jersey doesn’t have any windmills. There have been proposals for large offshore wind farms, but they have never come to fruition — and Trump has signed executive orders that will effectively ban future offshore wind development.
He’s actually stopping wind farms that are about to come on line. Insane.
Krugman goes on to point out that prices are mostly soaring because of power consumption by data centers driven by AI and Crypto. Needless to say, Trump has no solutions to that problem. He’s actively blocking the renewable energy that has been boosting our supply in recent years because he thinks they’re ugly.
So the electricity crisis is set to get worse. And it will matter a lot. Households spend a substantial share of their budgets on electricity, but the overall impact of electricity prices goes well beyond your utility bills: electricity is an important cost of doing business, and an increase in that cost will be passed on to consumers. By my estimate, overall spending on electricity — both direct spending by consumers and spending by businesses that ultimately gets passed on to consumers — is about 2 percent of GDP. So large electricity price increases could have a significant effect on the cost of living.
He writes that business will also be adversely affected and it could end up being the AI boom to a “screeching halt” — and it’s what’s holding up the financial markets. Without it we’re effectively stalled.
So the electricity crisis is serious, adding significantly to the risk of stagflation. Unfortunately, it would be hard to find policymakers I’d trust less to deal with this crisis than the Trump administration, whose energy policy is driven by petty prejudices (Trump is still mad about the windmills he thinks ruin the view from his Scottish golf course), macho posturing (real men burn stuff), and hallucinations (the imaginary windmills of New Jersey.)
So … accelerating climate change and pollution, destroying the economy and raising prices on average consumers. And Trump is bragging about it. Yet another atrocity.