KRUGMAN (7/14/06): 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:This conversation differs slightly from the one weve recorded. In Krugmans variant, Bush supporters blame the publics weird negativity on that ol debbil, media bias. By way of contrast, we have described Bush supporters (Jack Welch) and millionaire pundits (Chris Matthews) blaming the publics negativity on something a little bit different. Why do voters rate the economy low? They have the economy confused with Iraq, Welch and Matthews told us on Wednesday (see THE DAILY HOWLER, 7/13/06). Meanwhile, mainstream reporter (for example, Sheryl Gay Stolberg of Krugmans own Times) have also seemed completely puzzled by the publics negative outlook. Why doesnt Bush get credit for a great economy? Stolberg pretty much couldnt guess (see THE DAILY HOWLER, 7/12/06).
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.
Why doesnt the public like this economy? As we noted, the likely answer is fairly obvious. On Tuesday, David Gergen explained it to Matthews—and Krugman provides the data today. Why dont people like this economy? Heres the start of Krugmans rap:
KRUGMAN: 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?Piketty and Saez have analyzed newly-available data from 2004. And guess what? For most people, the economic news wasnt all that good. By the way, should well-educated people like this economy? Heres part of what those new data show:
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.
KRUGMAN: 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.In a rational world, data like these would start to explain why many people dont like this economy. Yet all around the media world, we keep seeing people—like Matthews and Stolberg—who seem to be completely bollixed by this strange turn of affairs.
Lets draw two lessons from these presentations.
First, an analytical point: Never settle for economic statistics like the ones Stolberg used on Wednesday. You cant judge how good an economy is without some measure of average incomes. Always remember: Unemployment was low under Pharaoh, too. That doesnt mean that, for most people, it was a good economy.
Second lesson, concerning the press: As Upton Sinclair said, it's hard to get people to understand something when their salary (or their professional standing) depends on their not understanding it. Are Matthews and Stolberg really that clueless? As Krugman notes, informed economists have explained, again and again, that average incomes have tended to stagnate. But its weird! All across the mainstream press, big scribes still dont seem to have heard.
IT JUST DOESNT SEEM TO SINK IN: Even when you hand them the answer, it just doesnt seem to sink in! On Tuesdays Hardball, David Gergen explained, two separate times, that most people find that their incomes are stagnant. But for the rest of the four-member pundit panel, this simple fact didnt seem to compute. Why dont people like this economy? Like Matthews and Stolberg, Howard Fineman couldnt seem to internalize Gergens explanation:
FINEMAN (7/11/06): The key thing here is peoples confidence in the future, and as a political reporter, what interests me is that people are not confident about the future.Gergen had just finished saying, for the second time, that most peoples incomes are stagnant (text below). But to Fineman, it just didnt seem to register. To him, people are negative on the economy because terrorism seems out of control!
MATTHEWS: One in six is confident the economy will get better, according to the Wall Street Journal poll.
FINEMAN: And the question is why. And I think it`s a combination of a war that they dont like, a leadership they dont really trust anymore right now, and circumstances that seem out of control. Whether it`s terrorism, gas prices, Iraq, you name it.
As Welch showed on Wednesdays Hardball, the power elite just isnt inclined to discuss those stagnant incomes. And uh-oh! All around the media scrums, pundits and reporters have acted as if theyre tribunes of Welchs high class.
GERGENS ANSWERS: On Tuesdays Hardball, Gergen explained it two separate times. Here was the first exchange:
MATTHEWS: The economy. David, you`re up in Harvard. Is this economy doing great or not?In case that wasnt clear enough, Gergen explained it again, a bit later:
GERGEN: Depends on whether you`re in the investor class or not, and you know, what you own.
This is a great economy in terms of growth....If you look at the numbers on the growth side, it looks great. But in terms of my actual life, most people find that their incomes are stagnant and they cannot afford the higher cost of health care and many other—and gasoline and many other things that are coming their way, and that`s why theyre very unhappy.
MATTHEWS: Why are we getting sour answers, David, to the question of how is the economy doing?At this point, Matthews cut Gergen off. But read that entire Hardball transcript and see if you can find anyone else citing this obvious explanation for those sour answers about the economy. One night later, Welch appeared, live from Nantucket—and he and Matthews explained the whole thing. Of course! Dear Lord! Its perfectly clear! People are down on this great economy because they dont like the war in Iraq!
GERGEN: Because a lot of people are hurting. You know, its a great economy for some people at the top half of the scale. All of us here on this program doing pretty darn well. I think were all happy.
MATTHEWS: Is that because the Bush tax cuts are helping people with more income, is that what you`re talking about?
GERGEN: No, I just think its if youre part of the investor class—
Final note: Gergen was wrong on one key point. As Krugman explains, you have to be very high in the top half of the scale for this to be a great economy.