It Was the Best of Times, It Was the Worst of Times?

Liberal economist Paul Krugman has been fretting for a while about the disconnect between the public’s negative perception of the economy and the positive reality of stunningly low unemployment rates, rising wages, and significant economic growth. In describing the U.S. economy, he recently wrote, “But one thing is clear: We have been remarkably successful, even if nobody will believe it.”

Why won’t anyone believe it?

For starters, is it true that most people don’t believe what Krugman considers terrific economic news? That certainly seems to be the case according to a September 2023 Harris Poll:

• Two-thirds of Americans (65%) believe that the economy is worse than the media makes it out to be rather than better (35%).
  
• In August the unemployment rate was 3.8%, close to a 50-year low. But the poll found that a majority of Americans (51%) wrongly believe that unemployment is nearing a 50-year high, while fewer believe it’s actually low (49%).

A significant part of this disconnect stems from an ever-declining public trust in government. The American National Election Survey has been asking the following question since 1958: “Do you trust the government to do what is right?”

In 1958, 74% answered “always” or “most of the time.” A peak of 77% was reached in 1964. Public trust crashed over the next 15 years, falling to 26% by 1980. Today it sits at an all-time low of 16%.

It’s not that difficult to identify some of the causes of this decline.

• From the mid-1960s to 1970, government lies about the Vietnam War undermined its trustworthy image and faith in government crashed nearly 20 percentage points. Much of the 1960s generation felt betrayed after being asked to serve in a bloody war that had been justified by a nonstop series of fabrications. The widespread prosecution of recreational drug use only added to alienation from government. The youth rebellion of the 1960s was also, for many, a libertarian revolt against not only big government, but also big corporations, big labor, and big everything (except big rock concerts).
• Then came Watergate, the constellation of crimes perpetrated by President Richard Nixon to secure his reelection in 1972. Within two years he became the first president to resign from office, with his own tape recordings revealing the extent of his crimes. His vice president, Gerald Ford, took office and soon pardoned Nixon, which further lowered trust in government. After Jimmy Carter was elected in 1976 and failed to revive the economy during his only term, trust in government fell to a new new low. In 1980 it stood at only 25%
• The congressional hearings led by Senator Frank Church in 1975 further eroded faith in government. Those hearings revealed political dirty tricks conducted by U.S. government agencies, including assassination attempts on foreign leaders and the illegal monitoring of American citizens in the United States. Among the targets were Supreme Court justices, reporters, government officials, and political activists. Also revealed was the FBI wiretapping of Martin Luther King Jr. This was not a government to be proud of.
• Then came the incessant anti-government liturgy from the Reagan administration (“The nine most terrifying words in the English language are: I’m from the Government, and I’m here to help.”), later amplified by the Roger Ailes/Fox News/right wing ecosystem during Clinton and Obama presidential administrations. The lame deceptions used to justify the Iraq War also didn’t enhance trust in government either.
• Today we not only still have Fox News, but we also can point to the fracturing and polarization of the news media via the internet, which makes it more and more difficult to discern what is and what is not true about the economy.

Although these explanations seem to justify Krugman’s puzzlement, the Harris Poll points to one other highly significant factor that does not reflect any polarization at all:

Two-thirds of respondents (68%) reported it’s difficult to be happy about positive economic news when they feel financially squeezed each month (Republicans: 69%, Democrats: 68%).

Krugman’s disconnect is not between public perception of the economy and economic reality. It’s between those who are economically secure and free from job-loss fears and the millions upon millions who live and breathe economic insecurity each and every day.

For Krugman and others who are quite prosperous it is hard, if not impossible, to relate to one key economic fact reported by the Federal Reserve: More than one-third of U.S. adults (37%) lack enough money to cover a $400 emergency in 2022, up from 32% in 2021. That means approximately 96.5 million American adults are living pay check to pay check.

Financial insecurity is further exacerbated as tens of thousands of workers suffer through mass layoffs. Layoffs are even ripping through the highly profitable tech sector. In 2023 so far, 245,809 employees have lost their jobs at tech companies. It’s doubtful that these working people are feeling chipper about the state of the economy.

Krugman’s disconnect is not between public perception of the economy and economic reality. It’s between those who are economically secure and free from job-loss fears and the millions upon millions who live and breathe economic insecurity each and every day.

When Krugman writes, “We have been remarkably successful,” much of the country is asking, “Who is this we he’s talking about?”