There are two big questions about the US economy right now. One is why it’s going so well. The other is why so many Americans insist it’s going terribly.
I have no illusions about convincing conservatives that the economy is in good shape; They are not going to change their minds, and pointing out facts that contradict their point of view only irritates them.
But there also seems to be a significant number of progressives who, for different reasons, are reluctant to accept the good news. And at the very least this group might be willing to listen to the arguments that President Biden has achieved more than they think, as well as the premise that half a loaf is better than none and much better than what Biden’s adversaries would achieve if they gave them the opportunity.
On the good economic news: Two excellent economic reports were added to the pile this week. On Wednesday, the Bureau of Labor Statistics reported that in the third quarter, labor productivity had increased at an annual rate of 5.2%, which is a very, very fast pace. It is too early to talk about a trend, but there are more and more reasons to hope that our economy will be able to grow much faster than we thought. Oh, and unit labor costs only rose 1.6% last year, another indicator that inflation is under control.
Another report indicates that unfilled jobs have decreased. Last year many economists argued that high vacancies meant we needed high unemployment to control inflation. Now that difference has largely disappeared. It is one of the many signs that the economy is recovering after covid. And this healing process explains why we have managed to bring down inflation without causing a recession or an increase in unemployment.
However, many Americans still have a very negative view of the economy. This may be due in part to the fact that although inflation has come down a lot, prices are still high compared to the recent past. This effect may disappear over time; As I wrote not long ago, there has to be some statute of limitations that establishes how far back people can go to get their idea of what things should cost. An interesting recent analysis suggests that it takes about two years for lower inflation to be reflected in consumer confidence, in which case Americans could feel better for next year’s elections.
On the other hand, inflation has been a global phenomenon, but the enormous gap between favorable economic indicators and gloomy public perceptions is unique to the United States, where people believe many bad things about the economy that simply are not true. .
I can say from experience that talking about these issues with people on the right is basically impossible. If you point out that most workers’ incomes have grown much faster than inflation since pre-pandemic times, you’re told you’re a member of the elite who has no idea what things really cost. And if you claim that Americans are more likely to express positive opinions about their family’s financial situation and that strong consumer spending belies claims that households are having a hard time, you will be told that you are a snob who tells how people should feel. It’s a whiting that bites its tail.
However, one group that might be willing to be swayed are progressives who refuse to acknowledge the good economic news because they believe there is still a lot going wrong in the United States. I don’t know how large this group is, but I seem to know a lot of them, and their negativity could be influencing the overall tone of the conversation.
By the way, Biden’s America is not a progressive paradise. Too much wealth and power remain concentrated in the hands of a few, while millions of citizens of this wealthy nation continue to live in poverty and lack adequate health care.
However, progress has been made. We are finally taking serious action against climate change and investing in infrastructure. Increased subsidies have helped expand health coverage, and a little-known fact is that Biden’s full-employment economy has led to a large drop in wage inequality that largely benefits the lowest-paid workers.
Things would look even better if Democrats had scored just a slightly larger victory in the 2020 election. Specifically, one or two more Democratic senators would have meant a permanent extension of the expanded child tax credit, which would have dramatically reduced poverty. childish, and still could if Democrats find a way to win big in 2024.
In recent months, the Republican political narrative has taken a sharp turn to the right, with renewed promises to repeal Obamacare – endangering the health coverage of more than 40 million Americans – and to cut Social Security.
Here’s how I see it: The results of Biden’s 2020 victory have fallen far short of progressives’ dreams, but a loss for the president next year would be a nightmare for them. Will Americans on the left be able to hold both facts in their minds and act accordingly?
Paul Krugman is a Nobel Prize winner in Economics. © The New York Times, 2023. Translation by News Clips.
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