Friday, July 14, 2006


Krugman Speaks Out Against Economic Gaslighting In The Media

Paul Krugman, working to clear away the fog and "gaslight", had this to say today about the US economy (and why most Americans know it's crappy even as the well-paid TV talking heads keep saying it isn't):

I'd like to say that there's a real dialogue taking place about the state of the U.S. economy, but the discussion leaves a lot to be desired. In general, the conversation sounds like this: Bush supporter: ''Why doesn't President Bush get credit for a great economy? I blame liberal media bias.'' Informed economist: ''But it's not a great economy for most Americans. Many families are actually losing ground, and only a very few affluent people are doing really well.'' Bush supporter: ''Why doesn't President Bush get credit for a great economy? I blame liberal media bias.”
That's a pretty accurate summation, to judge from the performance of the various Bush supporters who've posted in our comments threads. Now, the Bushies like to tout the economy's 2004 growth as evidence that things are just peachy in America. But there's one small problem with that, as Krugman notes:
Here's what happened in 2004. The U.S. economy grew 4.2 percent, a very good number. Yet last August the Census Bureau reported that real median family income—the purchasing power of the typical family—actually fell. Meanwhile, poverty increased, as did the number of Americans without health insurance. So where did the growth go? The answer comes from the economists Thomas Piketty and Emmanuel Saez, whose long-term estimates of income equality have become the gold standard for research on this topic, and who have recently updated their estimates to include 2004.
So what did Piketty and Saez find upon analyzing the newly-available data from 2004? They found that for most Americans, the economic news wasn’t all that good. Only the people at the very tip-top of the economic pyramid got the bennies. Oh, and a college education isn't a ticket out of poverty any more, either:
There's a persistent myth, perpetuated by economists who should know better...that rising inequality in the United States is mainly a matter of a rising gap between those with a lot of education and those without. But census data show that the real earnings of the typical college graduate actually fell in 2004.
This reminds me: Bush and his fellow Republicans are banging the let's-privatize-and-destroy-Social-Security drum yet again -- just as it's becoming apparent that most Americans are going to need Social Security more than ever. Now, if you recall from the last time they tried this in late 2004/early 2005, they tried to claim that Social Security would be bankrupt in a few decades. However, as Kevin Drum and others have pointed out, the figures they used for their estimates assumed an average annual economic growth rate of around 1.8% (which is abysmally low) for the next three decades. That would be the equivalent of a thirty-year-long Great Depression. Granted, I find it all too feasible that Bush could throw America into a thirty-year-long Great Depression, but even he might find that a difficult task. And if the economy grows for the next thirty years at even slightly subpar rates -- say, 2.6% or so per year -- that's enough to keep Social Security fully funded forever.

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