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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