Paul Krugman: Don't be fooled, the American economy is an extraordinary success story a job

When it comes to economic news, we've won so much that we've grown tired of winning, or in any case, we've become uninterested in it. Last week, we received another great jobs report — employment growth for 39 straight months — and it seemed almost no one noticed. Specifically, it is not clear whether the good news will impact the still widely held, but false, narrative of the poor state of the economy under President Joe Biden.

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When it comes to economic news, we've won so much that we've grown tired of winning, or in any case, we've become uninterested in it. Last week, we received another great jobs report — employment growth for 39 straight months — and it seemed almost no one noticed. Specifically, it is not clear whether the good news will impact the still widely held, but false, narrative of the poor state of the economy under President Joe Biden.

Let's start with the facts: Job creation under Biden has been astonishing, especially when we remember all those confident but wrong recession predictions. Four years ago, the economy was hit hard by the Covid pandemic, but we have more than recovered. The unemployment rate has been below 4% for 26 months, the longest period since the 1960s. Inflation rose in 2021-2022, but has declined significantly. The incomes of most workers increased in real terms. Over the past four years, wages for non-supervisory workers, who represent more than 80% of employment in the private sector, have risen by about 24%, while consumer prices have risen by a smaller rate, by about 20%.

So why do so many Americans keep telling interviewers that the economy is bad? All too often, anyone who claims that we are experiencing a state of “shake,” where citizens’ perceptions do not match economic reality, is stigmatized as elitist, out of touch with people’s real-life experience. And there's a whole bunch of comments that if you look closely at the data, they show that the economy ends up being really bad. But these comments are an attempt to explain something that is not happening. There is no doubt that there are Americans facing economic difficulty; Unfortunately, this is always true to a greater or lesser extent, especially in light of the weak social safety net in America. But Americans in general are relatively optimistic about their finances.

I recently wrote about two Quinnipiac polls that asked registered voters about the economy and their personal finances. In both Michigan and Pennsylvania, more than 60% of interviewees rated the economy as neither good nor very bad; A similar percentage reported that their personal situation was excellent or good. Americans are optimistic not only about their situation, but also about their domestic economy. A recent survey of The Wall Street Journal Among voters in swing states, voters have negative views of the national economy, but have significantly more positive views of their state's economy. This is consistent with the Federal Reserve's 2022 Economic Well-Being Report (released in 2023), which shows that the percentage of Americans who rated their local economy as good or excellent was much higher than the percentage who said the same about the national economy. Economy. . Basically, Americans say: “I'm doing well, and the people I know are doing well, but somewhere bad things are happening.”

What explains this discontinuity? There is no doubt that inflation contributes to creating bad feelings about the economy. A new study by Stephanie Stancheva of Harvard University confirms an old idea: When wages and prices rise, people tend to believe they got their pay raises, but inflation robbed them of what they deserved so much. It was difficult to win. .

However, aversion to inflation does not explain why people think their country is doing well, but the country is in disaster.

The elephant in the room is partisanship. Today, Americans' views on the economy tend to be determined by political affiliation rather than the other way around.

This is true for supporters of both parties, but statistical analysis shows that the effect of partisanship on economic perceptions is much stronger for Republicans – who for most of last year were as pessimistic about the economy as they were after the 2008 financial crisis. During the 1980 stagflation period, the fact A Democratic president would lead to lower average consumer sentiment. Any discussion of economic outlooks that does not take this factor into account misses a large part of the picture.

It is not difficult to see where this discrepancy comes from. Republican politicians and the media are united in destroying Biden's economy, which Donald Trump says is “sinking in a cesspool of ruin” where “stores are not stocked,” which is simply not true. For their part, Democrats are divided, with some progressives speaking negatively about the economy because they fear acknowledging the good news will undermine the case for shoring up a weak social safety net.

If you ask me, more progressives should be celebrating the current economy, not just to help Biden get re-elected, but because economic success justifies the progressive vision. I'd say Biden deserves some credit for the good news, but more importantly, policies like expanding Obamacare and student debt relief haven't hurt the economy, contrary to conservative expectations, which means it's okay to ask for more. The truth is that the American economy is an extraordinary success story. Don't let anyone tell you otherwise.

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