Paul Krugman Is Right About the Economy, and the Polls Are Wrong - New York Magazine | Canada News Media
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Paul Krugman Is Right About the Economy, and the Polls Are Wrong – New York Magazine

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5 months ago

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One of the most uncomfortable arguments to make in America is that the people are wrong. It’s especially uncomfortable when the subject is something you experience in a more comfortable, privileged way than most people. And so when liberal economic elites insist the economy, which opinion polls consistently find the public considers terrible, is actually very good, it makes liberal economic elites come off badly.

Paul Krugman is one of those dreaded liberal elitists who believes the economy is actually good. So (at a much lower level of confidence and frequency) am I. We have developed a number of explanations for why people believe an economy that The Wall Street Journal recently called “the envy of the world” is so awful.

The most generous of these accounts is that people consider higher wages something they earned and higher inflation something that happened to them. But all the explanations involve conceding some level of basic irrationality on the part of the public. And the attempts to make sense of public assessments of the economy seem deeply unconvincing.

Biden’s low economic ratings are “not hard to grasp,” argues Robert Kuttner in the left-wing American Prospect, “None of the recent improvements have altered the basic situation of most Americans, in which reliable careers are scarce, college requires the burden of debt, health coverage is more expensive and less reliable, and housing is unaffordable.” The solution, Kuttner argues, is for Biden to implement “radical” economic reforms along the lines of those promised by Bernie Sanders in 2016.

Kuttner’s hypothesis fails to explain why Americans were thrilled by economic conditions as recently as 2019, when the same basic features of the economy remained in place. Indeed, it fails to explain why Americans have ever considered the economy to be healthy, given that Bernie-style social democracy has, famously, never been tried in the United States.

Michael Powell, writing in the Atlantic, flays liberals in general, and Paul Krugman in particular, along lines similar to Kuttner’s:

The modern Democratic Party, and liberalism itself, is to a substantial extent a bastion of college-educated, upper-middle-class professionals, people for whom Biden-era inflation is unpleasant but rarely calamitous. Poor, working-class, and lower-middle-class people experience a different reality. They carry the searing memories of the Great Recession and its foreclosure crisis, when millions of American households lost their home. A large number of these Americans worked in person during the dolorous early days of the pandemic, and saw its toll up close. And since 2019, they’ve weathered 20 percent inflation and now rising interest rates—which means they’ve lost more than a fifth of their purchasing power. Tell these Americans that the economy is humming, that median wage growth has nudged ahead of the core inflation rate, and that everything’s grand, and you’re likely to see a roll of the eyes.

Powell makes several claims here, all of them deeply flawed.

He argues the working class considers the economy terrible because of “searing memories” of the Great Recession and then the pandemic. Yet, like Kuttner, he fails to explain why these same voters considered Trump’s economy to be so splendid. Memories of the Great Recession and its aftermath were fresher under Trump than they are now. And the worst and deadliest period of the pandemic actually occurred under Trump, which makes the current nostalgia for Trump’s economy all the more incompatible with Powell’s hypothesis.

It is true, as he writes, that prices have risen 20 percent since 2019. But that doesn’t mean people have “lost more than a fifth of their purchasing power.” Purchasing power is a function of the relationship between what things cost and how much you have to spend. Wages have been rising faster than inflation since last year, and the average American is better off than before the pandemic.

What’s more, contrary to Powell’s argument that the working class has suffered under Biden’s inflationary economy, wages have grown much faster at the bottom than at the top.

Powell reasons that public opinion is essentially dispositive. If the people feel the economy is bad, then it’s bad, regardless of what economists like Krugman tell them. “Working- and middle-class Americans,” he argues, “are wiser to trust their feelings and checking accounts than to rely on liberal economists.”

The trouble here is that polling finds plenty of public optimism about the economy in contexts other than asking people how the American economy is doing. An Axios poll earlier this year found 63 percent of Americans rate their personal financial situation as “good,” a figure in line with historical levels. That is also reflected in people’s spending practices — they are behaving as though the economy were booming, even if they don’t think it is.

A Wall Street Journal poll last month of seven swing states found a gigantic disconnect between the public’s view of economic conditions in their own state and in the country as a whole. Fifty-four percent of respondents believe economic conditions in their state are excellent or good. But only 36 percent of respondents said the same of economic conditions in the country.

Now this was a poll of seven swing states, not the entire country. I suppose you could imagine the swing states are in dramatically better economic shape than the rest of America, though if that were true, you’d expect Biden to be polling a little better.

What this suggests to me is that public assessment of the economy reflects something other than an objective assessment of economic conditions. People think they are doing well and their state is doing well but the country is doing horribly. Must we assume some deep wisdom underlies these seemingly irreconcilable beliefs? Sometimes people, even with the benefit of close personal experience, just believe things that aren’t true.


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Economy

B.C.’s debt and deficit forecast to rise as the provincial election nears

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2 days ago

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September 10, 2024

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VICTORIA – British Columbia is forecasting a record budget deficit and a rising debt of almost $129 billion less than two weeks before the start of a provincial election campaign where economic stability and future progress are expected to be major issues.

Finance Minister Katrine Conroy, who has announced her retirement and will not seek re-election in the Oct. 19 vote, said Tuesday her final budget update as minister predicts a deficit of $8.9 billion, up $1.1 billion from a forecast she made earlier this year.

Conroy said she acknowledges “challenges” facing B.C., including three consecutive deficit budgets, but expected improved economic growth where the province will start to “turn a corner.”

The $8.9 billion deficit forecast for 2024-2025 is followed by annual deficit projections of $6.7 billion and $6.1 billion in 2026-2027, Conroy said at a news conference outlining the government’s first quarterly financial update.

Conroy said lower corporate income tax and natural resource revenues and the increased cost of fighting wildfires have had some of the largest impacts on the budget.

“I want to acknowledge the economic uncertainties,” she said. “While global inflation is showing signs of easing and we’ve seen cuts to the Bank of Canada interest rates, we know that the challenges are not over.”

Conroy said wildfire response costs are expected to total $886 million this year, more than $650 million higher than originally forecast.

Corporate income tax revenue is forecast to be $638 million lower as a result of federal government updates and natural resource revenues are down $299 million due to lower prices for natural gas, lumber and electricity, she said.

Debt-servicing costs are also forecast to be $344 million higher due to the larger debt balance, the current interest rate and accelerated borrowing to ensure services and capital projects are maintained through the province’s election period, said Conroy.

B.C.’s economic growth is expected to strengthen over the next three years, but the timing of a return to a balanced budget will fall to another minister, said Conroy, who was addressing what likely would be her last news conference as Minister of Finance.

The election is expected to be called on Sept. 21, with the vote set for Oct. 19.

“While we are a strong province, people are facing challenges,” she said. “We have never shied away from taking those challenges head on, because we want to keep British Columbians secure and help them build good lives now and for the long term. With the investments we’re making and the actions we’re taking to support people and build a stronger economy, we’ve started to turn a corner.”

Premier David Eby said before the fiscal forecast was released Tuesday that the New Democrat government remains committed to providing services and supports for people in British Columbia and cuts are not on his agenda.

Eby said people have been hurt by high interest costs and the province is facing budget pressures connected to low resource prices, high wildfire costs and struggling global economies.

The premier said that now is not the time to reduce supports and services for people.

Last month’s year-end report for the 2023-2024 budget saw the province post a budget deficit of $5.035 billion, down from the previous forecast of $5.9 billion.

Eby said he expects government financial priorities to become a major issue during the upcoming election, with the NDP pledging to continue to fund services and the B.C. Conservatives looking to make cuts.

This report by The Canadian Press was first published Sept. 10, 2024.

Note to readers: This is a corrected story. A previous version said the debt would be going up to more than $129 billion. In fact, it will be almost $129 billion.

The Canadian Press. All rights reserved.

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Economy

Mark Carney mum on carbon-tax advice, future in politics at Liberal retreat

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3 days ago

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September 10, 2024

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NANAIMO, B.C. – Former Bank of Canada governor Mark Carney says he’ll be advising the Liberal party to flip some the challenges posed by an increasingly divided and dangerous world into an economic opportunity for Canada.

But he won’t say what his specific advice will be on economic issues that are politically divisive in Canada, like the carbon tax.

He presented his vision for the Liberals’ economic policy at the party’s caucus retreat in Nanaimo, B.C. today, after he agreed to help the party prepare for the next election as chair of a Liberal task force on economic growth.

Carney has been touted as a possible leadership contender to replace Justin Trudeau, who has said he has tried to coax Carney into politics for years.

Carney says if the prime minister asks him to do something he will do it to the best of his ability, but won’t elaborate on whether the new adviser role could lead to him adding his name to a ballot in the next election.

Finance Minister Chrystia Freeland says she has been taking advice from Carney for years, and that his new position won’t infringe on her role.

This report by The Canadian Press was first published Sept. 10, 2024.

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Nova Scotia bill would kick-start offshore wind industry without approval from Ottawa

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3 days ago

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September 10, 2024

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HALIFAX – The Nova Scotia government has introduced a bill that would kick-start the province’s offshore wind industry without federal approval.

Natural Resources Minister Tory Rushton says amendments within a new omnibus bill introduced today will help ensure Nova Scotia meets its goal of launching a first call for offshore wind bids next year.

The province wants to offer project licences by 2030 to develop a total of five gigawatts of power from offshore wind.

Rushton says normally the province would wait for the federal government to adopt legislation establishing a wind industry off Canada’s East Coast, but that process has been “progressing slowly.”

Federal legislation that would enable the development of offshore wind farms in Nova Scotia and Newfoundland and Labrador has passed through the first and second reading in the Senate, and is currently under consideration in committee.

Rushton says the Nova Scotia bill mirrors the federal legislation and would prevent the province’s offshore wind industry from being held up in Ottawa.

This report by The Canadian Press was first published Sept. 10, 2024.

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