November 26, 2007
Op-Ed Columnist
Winter of Our Discontent
By PAUL KRUGMAN
“Americans’ Economic Pessimism Reaches Record High.” That’s the headline on a recent Gallup report, which shows a nation deeply unhappy with the state of the economy. Right now, “27% of Americans rate current economic conditions as either ‘excellent’ or ‘good,’ while 44% say they are ‘only fair’ and 28% say they are poor.” Moreover, “an extraordinary 78% of Americans now say the economy is getting worse, while a scant 13% say it is getting better.”
What’s really remarkable about this dismal outlook is that the economy isn’t (yet?) in recession, and consumers haven’t yet felt the full effects of $98 oil (wait until they see this winter’s heating bills) or the plunging dollar, which will raise the prices of imported goods.
The response of those who support the Bush administration’s economic policies is to complain about the unfairness of it all. They rattle off statistics that supposedly show how wonderful the economy really is. Many of these statistics are misleading or irrelevant, but it’s true that the official unemployment rate is fairly low by historical standards. So why are people so unhappy?
The answer from Bush supporters — who are, on this and other matters, a strikingly whiny bunch — is to blame the “liberal media” for failing to report the good news. But the real explanation for the public’s pessimism is that whatever good economic news there is hasn’t translated into gains for most working Americans.
One way to drive this point home is to compare the situation for
workers today with that in the late 1990s, when the country’s economic
optimism was almost as remarkable as its pessimism today. For example,
in the fall of 1998 almost two-thirds of Americans thought the economy
was excellent or good.
The unemployment rate in 1998 was only slightly lower than the
unemployment rate today. But for working Americans, everything else was
different. Wages were rising, yet inflation was low, so the purchasing
power of workers’ take-home pay was steadily improving. So, too, were
job benefits, including the availability of health insurance. And
homeownership was rising steadily.
It was, in other words, a time when Americans felt they were sharing in the country’s prosperity.
Today, by contrast, wage gains for most workers are being swallowed
by inflation. In fact, the reality for lower- and middle-income workers
may be worse than the official statistics say, because the prices of
necessities like food, transportation and medical care are rising
considerably faster than the Consumer Price Index as a whole. One
striking statistic: the cost of a traditional Thanksgiving turkey
dinner was 11 percent higher this year than last year.
Meanwhile, the percentage of Americans receiving health insurance
from their employers, which began to decline in 2001, is continuing its
downward trend. And homeownership, after rising for several years on a
tide of subprime mortgages — well, you know how that’s going.
In short, working Americans have very good reason to feel unhappy
about the state of the economy. But what will it take to make their
situation better?
The leading Republican candidates for president don’t even seem to
realize that there’s a problem. A few months ago Rudy Giuliani,
denouncing Hillary Clinton’s economic proposals, declared that “she
wants to go back to the 1990s” — as if that would be a bad thing.
In fact, memories of how much better the economy was under Bill
Clinton will be a potent political advantage for the Democrats next
year.
But simply putting another Clinton, or any Democrat, in the White
House won’t ensure that the good times will roll again. President
Clinton was a good economic manager, but much of the good news during
the 1990s reflected events that won’t be repeated, including low oil
prices and the great medical cost pause — the temporary leveling off of
health care spending as a percentage of G.D.P. that took place in the
1990s despite his failure to pass health care reform.
And there are good reasons to think that the negative effects of
globalization on the wages of some Americans are larger than they were
in the ’90s. That’s a hugely contentious issue within the progressive
movement, with no easy resolution. I’ll write more about it in the
months ahead.
Despite these caveats, Democrats have every right to make a
political issue out of the failure of the Bush economy to deliver gains
to working Americans — especially because conservatives continue to
insist that tax cuts for the affluent are the answer to all problems.
But Democrats shouldn’t kid themselves into believing that this
will be easy. The next president won’t be able to deliver another era
of good times unless he or she manages to tackle the longer-term trends
that underlie today’s economic disappointment: a collapsing health care
system and inexorably rising inequality.