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paul krugman
Latest GDP Figures Show Rich Reaping Rewards as Working Class Continues to Suffer Under Trump
"People at the top are doing fine, people in the middle and lower income brackets are struggling a bit, to say the least."
Dec 24, 2025
President Donald Trump's allies this week hyped up newly released data showing that the US economy grew by more than 4% in the third quarter of 2025, but economists and journalists who dove into the report's finer details found some troubling signs.
Ron Insana, a finance reporter and a former hedge fund manager, told MS Now's Stephanie Ruhle on Tuesday night that there is a "split economy" in which growth is being driven primarily by spending from the top 20% of income earners, whom he noted accounted for 63% of all spending in the economy.
On the other side, Insana pointed to retail sales data that painted a very different picture for those on the lower end of the income scale.
"When you look at lower income individuals, nearly half of them are using 'buy-now-pay-later' for their holiday shopping," he said. "So we have this real split... People at the top are doing fine, people in the middle and lower income brackets are struggling a bit, to say the least."
Dean Baker, co-founder and senior economist of the Center for Economic and Policy Research, also took note of this split in the US economy, and he cited the latest data showing that real gross domestic income, which more directly measures worker compensation over total economic output, grew at just 2.4% during the third quarter.
Baker also said that most of the gains in gross domestic income showed up at the top of the income ladder, while workers' income growth remained stagnant.
The theme of a split economy also showed up in an analysis from Politico financial services reporter Sam Sutton published on Wednesday, which cited recent data from Bank of America showing that the bank's "top account holders saw take-home pay climb 4% over the last year, while income growth for poorer households grew just 1.4%."
Sutton said that this divergence in fortunes between America's wealthy and everyone else was showing up in polling that shows US voters sour on the state of the economy.
"In survey after survey, a majority of Americans say they’re straining under the pressure of rising living expenses and a softening job market," Sutton said. "The Federal Reserve Bank of Boston says low-income consumers have 'substantially' higher levels of credit card debt than they did before the pandemic. Even as growth and asset prices soar, Trump’s approval ratings are sagging."
Economist Paul Krugman on Tuesday argued in his Substack newsletter that one reason for this large disparity in economic outcomes has to do with the US labor market, which has ground to a halt in recent months, lowering workers' options for employment and thus lowering their ability to push prospective employers for higher wages.
"Trump may claim that we are economically 'the hottest country in the world,' but the truth is that we last had a hot labor market back in 2023-4," Krugman explained. "At this point, by contrast, we have a 'frozen' job market in which workers who aren’t already employed are having a very hard time finding new jobs, a sharp contrast with the Biden years during which workers said it was very easy to find a new job."
None of these caveats about the latest gross domestic product (GDP) data stopped US Commerce Secretary Howard Lutnick from going on Fox News on Tuesday night and falsely claiming that a 4.3% rise in GDP meant that "Americans overall—all of us—are going to earn 4.3% more money."
Lutnick: The US economy grew 4.3%. What that means is that Americans overall—all of us—are going to earn 4.3% more money. pic.twitter.com/SIFi99NRBX
— Acyn (@Acyn) December 24, 2025
In reality, GDP is a sum of a nation's consumer spending, government spending, net exports, and total investments, and is not directly correlated with individuals' personal income.
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'An Abject Failure': Economists Trash Trump's Disastrous Job Creation Record in Year-End Reviews
"The jobs aren’t coming back, the wages aren’t rising," one economist said.
Dec 22, 2025
President Donald Trump has justified his historically high tariffs on foreign goods by promising that they would lead to a boom in domestic manufacturing jobs in the US.
However, in year-end reviews of the US job market, three economists make the case that Trump's record on creating manufacturing jobs has been a massive bust.
Mike Konczal, senior director of policy and research at the Economic Security Project and a former member of President Joe Biden’s National Economic Council, argued in his personal newsletter on Friday that the Trump administration's efforts to reorganize the US labor market away from service sector jobs have completely failed.
In particular, he found that jobs in manufacturing, mining, and logging have all declined throughout the first year of Trump's second term, while jobs in construction have remained mostly flat after years of steady growth during former President Joe Biden's administration.
What's more, the administration's stated goal of opening up more jobs for native-born US workers by conducting mass deportations of immigrant workers has also flopped, as native-born unemployment has been higher in 2025 than in either of the last two years.
"The bleak irony is that even after sacrificing real prosperity to chase this 4chan-level political economy, they still won’t achieve their goal," Konczal concluded. "The jobs aren’t coming back, the wages aren’t rising, and family formation won’t be rescued by trying to rewind the labor market to a world that never existed in the first place."
Nobel Prize-winning economist Paul Krugman concurred with Konczal's assessment of the US labor market in an analysis published Monday in which he described Trump's record on jobs as "an abject failure."
Krugman argued that Trump's war on clean energy projects is almost certainly making the situation even worse by killing blue-collar manufacturing and construction jobs in the wind and solar industries.
"Trump has scrapped Biden’s green energy policies in favor of tariffs and fossil fuels," Krugman noted. "But it isn’t working. Instead, employment in 'manly' sectors has fallen since Trump took office."
Additionally, said Krugman, Trump's plan to use tariffs to bring back manufacturing jobs to the US was always destined to fail given the realities of how modern economies work.
"In the modern world nations mostly don’t sell each other completed consumer goods," he explained. "Instead, the majority of trade involves sales of goods that are used to produce other goods... What this means in practice is that tariffs, which raise the prices of those capital goods and inputs, raise the production costs of US manufacturers, in many cases making them less competitive with foreign producers."
Ball State University economist Michael J. Hicks, in a column published Monday by the Indianapolis Star, also pointed the finger at Trump's tariffs when explaining his failure to revive US manufacturing.
Hicks argued that the damage the president's policies have done to manufacturing won't be undone any time soon.
"The US is in the early days of a manufacturing contraction that will run through most of 2026, even if the tariffs are lifted today," he warned. "We should call it the deindustrialization of America. All of this flies in the face of the nonsensical claims of a manufacturing renaissance or onshoring that would bring factory jobs back to the US."
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Economists Warn Trump Attack on Fed Will Further Jack Prices for Working Families
"Confidence that the Fed will respond wisely to future periods of macroeconomic stress... will evaporate," warned one economist.
Aug 29, 2025
Economists are warning that US President Donald Trump's efforts to meddle with the Federal Reserve are going to wind up raising prices even further on working families.
Michael Madowitz, principal economist at the Roosevelt Institute, said on Wednesday that the president's efforts to strong-arm the US central bank into lowering interest rates by firing Federal Reserve Gov. Lisa Cook would backfire by accelerating inflation.
"The administration's efforts to politicize interest rates—an authoritarian tactic—will ultimately hurt American families by driving up costs," he said. "That helps explain why Fed independence has helped keep inflation under 3%, while, after years of political interference in their central bank, Turkey's inflation rate is over 33%."
Heidi Shierholz, the president of the Economic Policy Institute, said that the president's move to fire Cook "radically undermines what Trump says his own goal is: lowering U.S. interest rates to spur faster economic growth."
She then gave a detailed explanation for why Trump imposing his will on the Federal Reserve would likely bring economic pain.
"Presidential capture of the Fed would signal to decision-makers throughout the economy that interest rates will no longer be set on the basis of sound data or economic conditions—but instead on the whims of the president," she argued. "Confidence that the Fed will respond wisely to future periods of macroeconomic stress—either excess inflation or unemployment—will evaporate."
This lack of confidence, she continued, would manifest in investors in US Treasury bonds demanding higher premiums due to the higher risks they will feel they are taking when buying US debt, which would only further drive up the nation's borrowing costs.
"These higher long-term rates will ripple through the economy—making mortgages, auto loans, and credit card payments higher for working people—and require that rates be held higher for longer to tamp down any future outbreak of inflation," she said. "In the first hours after Trump's announcement, all of these worries seemed to be coming to pass."
Economist Paul Krugman, a former columnist for The New York Times, wrote on his personal Substack page Thursday that Trump's moves to take control of the Federal Reserve were "shocking and terrifying."
"Trump's campaign to take over monetary policy has shifted from a public pressure to personal intimidation of Fed officials: the attack on Cook signals that Trump and his people will try to ruin the life of anyone who stands in his way," he argued. "There is now a substantial chance that the Fed's independence, its ability to manage the nation's monetary policy on an objective, technocratic basis rather than as an instrument of the president's political interests and personal whims, will soon be gone."
The economists' warnings come as economic data released on Friday revealed that core inflation rose to 2.9% in August, which is the highest annual rate recorded since this past February. Earlier this month, the Producer Price Index, which is considered a leading indicator of future inflation, came in at 3.3%, which was significantly higher than economists' consensus estimate of 2.5%.
Data aggregated by polling analyst G. Elliott Morris shows that inflation is far and away Trump's biggest vulnerability, as American voters give him a net approval of -23% on that issue.
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