Paul Krugman: “Americans have very good reason to feel unhappy about the state of the economy.”

By Ben Cohen

Paul Krugman is one of the better mainstream economists in the U.S. Painted as a looney-left socialist by the American media, Krugman’s ideology is actually very moderate, and would be considered a centrist in most other advanced democracies. However, his skill in simplifying complex economic concepts is second to none, and he makes vital reading for anyone interested in understanding current events.

In a recent post on the New York Times, Krugman spells out why Americans are deeply dissatisfied with the economy. He writes:

“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.”

Krugman contrasts this to the Clinton years where he says everyone shared in a sense of optimism:

“In the fall of 1998 almost two-thirds of Americans thought the economy was excellent or good.


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.”

Certain polls and figures can often be misleading, and Krugman could

certainly be accused painting a rosy picture of the Clinton years. But

Krugman’s point is still valid. In an article for Rolling Stone last year, Krugman states:

“Rising inequality isn’t new. The gap between rich and poor started growing

before Ronald Reagan took office, and it continued to widen through the Clinton

years. But what is happening under Bush is something entirely unprecedented: For

the first time in our history, so much growth is being siphoned off to a small,

wealthy minority that most Americans are failing to gain ground even during a

time of economic growth — and they know it.”

The results of this massive theft is a country so divided that the two

sides barely recognise eachother, something Krugman has consistently

spoken out against. In his NY Times article, he sends warning to the

Democratic Party:

“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.”

People like Krugman have been consistently right about things like the

Iraq war, the housing crisis and the collapse of the dollar (if you

read his book ‘The Great Unraveling’, there are a stunning amount of

prescient essays from 2000 onwards). Rather than dismissing ‘looney

left’ economists who speak out about such issues, the U.S would do well

to listen to them. 

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