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Why Canít the Public Lose Its Economic Pessimism?

by Ruy Teixeira

Why indeed? According to the president, things are really quite jolly with the economy. He recently cited:

....job gains, falling gasoline prices, rising consumer confidence, increasing business investment, relatively low unemployment and a strong housing market as evidence that the overall economy "is in good shape."

"Our economic horizon is as bright as it's been in a long time," he said.

And it is true that the most recent jobs report (215,000 additional jobs in November) and the most recent quarterly GDP growth rate (4.3 percent in the third quarter of this year) are pretty good figures. So why arenít those pesky voters singing Hosannas to the brilliant economic policies of the Bush administration? Why are they instead still rating the economy in the latest Gallup poll as only fair or poor (63 percent) and still taking the pessimistic view that the economy is getting worse (58 percent), rather than better (36 percent)?

Itís possible that theyíve just been duped by the media. Or that theyíve transferred their discontent with the Iraq debacle onto the economy. But I prefer a different, simpler explanation: things just arenít that good for the average American.

Thatís Paul Krugmanís point in his excellent December 5 column:

[T]he main explanation for economic discontent is that it's hard to convince people that the economy is booming when they themselves have yet to see any benefits from the supposed boom. Over the last few years G.D.P. growth has been reasonably good, and corporate profits have soared. But that growth has failed to trickle down to most Americans.....

.....Even after adjusting for inflation, profits have risen more than 50 percent since the last quarter of 2001. But real wage and salary income is up less than 7 percent.

There are some wealthy Americans who derive a large share of their income from dividends and capital gains on stocks, and therefore benefit more or less directly from soaring profits. But these people constitute a small minority. For everyone else the sluggish growth in wages is the real story. And much of the wage and salary growth that did take place happened at the high end, in the form of rising payments to executives and other elite employees. Average hourly earnings of nonsupervisory workers, adjusted for inflation, are lower now than when the recovery began.

So there you have it. Americans don't feel good about the economy because it hasn't been good for them. Never mind the G.D.P. numbers: most people are falling behind.

And if thatís trueĖand I think it isĖBushís insistence on a bright economic horizon is likely to strike most Americans as simply out of touch, thereby adding to, not mitigating, his current political problems.