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 TheWall StreetJournal 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 Journalpoll 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.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
