“Winter of Our Discontent” – Krugman 11/26/07

On Monday, Krugman delivered an insightful piece concerning public opinion on the economy featuring information from a recent Gallup poll. I won’t delve into the public opinion stuff too much here, but a table that might interest you follows:

I think it is obvious there is a problem when two out of three self identified Republicans think the economy is getting worse. This isn’t nearly as partisan as the Bush administration would love to make it. The fact is that inequality is growing and wage gains are not keeping up with inflation. This combined with the current mortgage crisis, is yielding a significant portion of the population facing a significantly reduced purchasing power. Krugman alludes to this big issue of inequitable distribution of wealth generation - when he points out that the unemployment numbers are not that much different now than the late ‘90’s, yet the views of the average American are exceptionally different.

“Today by contrast, wage gains for most workers are being swallowed by inflation. In fact, the reality for lower- and middle-income workers may be worse than the official statistics say, because the prices of necessities like food, transportation, and medical care are rising considerably faster than the [CPI] as a whole.”

I can speak from personal experience in confirming that transportation and food are definitely rising faster than my CPI adjusted wage increase. I am fortunate enough to be less reliant on the box grocery stores (which I still use) and thus, the petroleum driven price increases in them. These increases have taken less of a hit on my wallet, but I am sure the increases are more than 3% over last year. Krugman goes on to directly state that just getting another Democrat as president will not solve all the problems. We still must address this continual income rift between the upper and lower class. We must also recognize the importance of some form of health care reform. Perhaps the golden nugget of the entire editorial, however, is a hint of one of the big potholes ahead for the Democrats in 2008.

“And there are good reasons to think that the negative effects of globalization on the wages of some Americans are larger than they were in the ‘90’s. That’s a hugely contentious issue within the progressive movement, with no easy resolution. I’ll write more about it in the months to come.”

I am sure this will be a contentious issue and will likely change the structure of the Democratic Party in the future. I look forward to seeing what Mr. Krugman has to say.