By James K. Galbraith / The Nation
Check out the Scheer Intelligence podcast episode with James Galbraith here.
Unemployment is low. Inflation has fallen. Real earnings are rising. GDP growth has held up—so far. The economists are happy, but for some reason the voters are not! It must be their own ignorance and obtuseness—so says Paul Krugman, house economist of The New York Times.
The other possibility—however horrible to contemplate—is that perhaps the voters are sensible and the economists are obtuse. And perhaps the indicators on which economists rely no longer mean what economists suppose them to mean.
Take the unemployment rate. It is a ratio of those seeking work to the whole active labor force. In past times, most households depended on a single earner, for whom holding a job was a make-or-break proposition. If unemployment was rising or high—say 7 percent, typical in recessions—then, even though 93 percent of the labor force was still working, fear of unemployment amplified the woes of those actually out of work. Conversely, if unemployment was low or falling, most workers felt reasonably secure. The unemployment rate, back then, was a reasonable indicator of distress or well-being.
Those days are long gone. Today’s typical American working household has several earners, sometimes in multiple jobs. If one earner loses a job while the others keep theirs, she may leave the workforce for a time; there is the option of making do with less, and for some there is early retirement. She will not, in that case, count as unemployed—however difficult her life. A low jobless rate can mask a great deal of stress in such households. The employment-to-population ratio is still a bit below where it was in 2020, and far below where it was in 2000; average weekly hours are still falling.
Next, consider inflation, which is the rate of price change measured month-to-month or year-to-year. But what matters to consumers is prices in relation to household incomes over several years. In 1980 Ronald Reagan famously asked, “Are you better off than you were four years ago?” Today, millions of American households are worse off than they were in 2020. Basic living costs, such as gasoline, utilities, food, and housing, have risen more than their incomes have. Real median household income peaked in 2019 and fell at least through 2022.
Yes, but didn’t real wages go up sharply in 2023? According to the Biden-friendly Center for American Progress, real wages (for those continuously employed) have indeed now recovered roughly to where they would have been had no pandemic occurred. But there is a great distinction between steady progress and a sawtooth down-and-up. The former breeds confidence; the latter does not.
Then there is the ending of Covid-19 relief. Pandemic programs gave millions of Americans a financial cushion for a time; early on, the payments were often larger than previous paychecks and, while they lasted, poverty and food insecurity went down. (By 2021 Covid tax credits and relief payments brought child poverty down to a record low of 5.2 percent.) Most Americans were prudent with the support, but they often used it, not unwisely, to achieve a touch of independence from dreary jobs. With that support gone, the cushions erode, savings decline, debt rises–and families feel the pressure to go back to work on whatever terms that employers offer. They don’t like that very much.
As people return to work, how secure are their jobs? In the golden years during which today’s older generation of economists learned their textbook tools, a worker’s job was often a lifetime affair. Autoworkers (and their associates in rubber and glass) might suffer periodic layoffs, but they could expect to be called back; their skills and experience remained useful. That was all over by the 1980s.
Since then, factories close and do not return, and practically all new jobs have been in routine services, with mediocre wages and high turnover. The pandemic drove home the fragility of these jobs to everyone—even those who had never lost a job before.
Interest rates are another problem. Long ago, Joe Biden kicked the can of “fighting inflation” over to the Federal Reserve. The Federal Reserve then did the only thing it knows how to do: It hiked interest rates. Mortgage rates were around 3 percent in 2021; today they are at least twice that. High interest rates hit young families looking for their first house, and they hit established households, often older, looking to sell their homes. And high interest on consumer debt eats away at disposable incomes. The capital wealth of the middle class falls, to the benefit of those with cash to spare. The second group is much smaller and far richer than the first.
For the politically and economically alert, high interest rates bring other anxieties. They hit construction, and long-term investment projects—including in renewable energy. Although conditions may have changed, the “inverted yield curve” is a traditional harbinger of financial crisis and recession. For banks with heavy exposure to commercial real estate, they foretell trouble when existing loans come due.
The Federal Reserve knows that the inflation it supposedly set out to fight was already fading almost two years ago. It knows that the economy is in at least the early stages of stagnation. Yet it cannot bring itself to bring rates back down. And in the peculiar world of budget projections, high interest rates blow up forecasts of future federal budget deficits and debt, provoking scare stories and stoking campaigns to cut Social Security, Medicare, and Medicaid—the bulwarks of middle-American social insurance.
The growth of GDP, another once-reliable icon of prosperity, has also lost much of its meaning. The concentration of gains in the small, ultra-rich sectors of finance and technology is one reason. Another has to do with the nature of government-supported investments in chips, in renewable energy and in military hardware, all of which have been contributing to growth and to massive corporate profits. Such investments do create jobs. But they add nothing visible to living standards.
Also, the politics of electricity are asymmetric: Consumers expect the grid to work, and they react only when the power goes off or the bills go up. Although there were good things in it, even Biden’s infrastructure bill was largely a conventional roads program, notoriously likely to foster suburban sprawl and to enrich developers, rather than to visibly repair the decaying core of most American cities and towns.
Finally, what are Biden’s priorities these days? They are to get money for Ukraine, Israel, and Taiwan—that is, for (respectively) distant, dishonorable, and prospective wars. The belligerence with which he opened his State of the Union address was astonishing. Yet looming failure in Ukraine and mass murders committed with American bombs in Gaza add to the war-weariness that many Americans feel, after 23 years of brutal and fruitless fighting. The notion that the United States could fight and win a war against China over Taiwan—150 miles from the mainland but more than 5,000 from Hawaii—is too ludicrous for words. When foreign policy is delusional, it’s not unreasonable to lose confidence in economic policy as well.
In short, Biden’s economists and their acolytes in the press appear locked into a statistical and cognitive paradigm that is old and irrelevant—a metaphor, if you like, for our political class. The voters appear to know this. Dire consequences may follow, come November.
By Zehra Imam / Mondoweiss
As Palestinians are slaughtered by the thousands in Gaza and violently attacked during night prayers in the al-Aqsa Mosque by Israel, the West Bank endures massacres that at times go unnoticed during this holy month. I have spent my Ramadan in conversation with a friend from Jenin.
Much has changed since I visited Aseel (not her real name) in August 2023. There are things I saw in Jenin that no longer exist. One of them is my friend’s smile and her spark.
Usually, they say Jenin is a small Gaza. During Ramadan, because the attacks generally happen at night, people are an easy target because they are on the streets late at night. In the past, it was rare for the IOF to enter during the day. Now, they attack during the day; their special forces enter, and after people discover them, their soldiers come within minutes.
Every 2-3 days, there is a new attack in Jenin. In our minds, there is a constant ringing that the IOF may come. We don’t know at what time we will be targeted or when they will enter. There is no stability in our lives.
Even when we plan for something, we hedge it with our inshallahs and laugh. There are a lot of ifs. If they don’t enter the camp. If there are no martyrs. If there is no strike.
On the second day of Ramadan, they attacked my neighborhood again. We thought it was a bombing because it started with an explosion, but the house was shaking. We were praying fajr, and everyone was screaming outside. The sound of the drone was in our ears. “No, these are missiles,” we realized.
There was panic in the streets. Women fainted. People had been walking back from praying at the mosque, and some were still in the street. Alhamdulillah, no one was hurt, we say.
The balcony to the room at my uncle’s house where we slept had fallen. It no longer had any glass, and a bullet entered my uncle’s bedroom and reached the kitchen. The drone hit the trees in front of our house. The missiles destroyed the ceiling, and the rockets reached my neighbor’s house on the first floor, exactly in front of our house.
Since October 7, Jenin has become a target. There is a clear escalation in the camp and the city. The IOF has used many different weapons to kill us here. They have even been aggressive toward the infrastructure, as though every inch of our city was resisting them.
They destroyed much of the camp, and there is no entrance now. The arch is gone, and there is no sign reminding us that Jenin refugee camp is a temporary place. There is no horse. Only the street is left. You have the photographs. You were lucky. They changed the shape of the camp, and everything has been destroyed.”Aseel
The first time Aseel and I met in person was in Nablus at the Martyrs Roundabout. As we caught up, we ate a delicious concoction of ice cream, milk, nuts, and fresh fruit that was a perfect balm to the heat. She took me to some of her favorite places nestled within the old city of Nablus. A 150-year-old barber’s shop that felt like you had entered an antique store where plants reached the ceiling and where the barber was a massive fan of Angelina Jolie. A centuries-old house now called Tree House Cafe looked like a hobbit home from Lord of the Rings, where we hid away as she sipped her coffee and I drank a mint lemonade. We visited one of the oldest soap factories in the world with ingredients such as goat’s milk and olive oil, jasmine and pomegranates, even dates and Dead Sea mud.
We happened to chance upon a Sufi zawiya as we walked through a beautiful archway decorated with lanterns, light bulbs, and an assortment of potted plants, after which we saw a cobalt blue door on our left and an azul blue door with symmetrical red designs, and Quranic ayat like incantations on our right as doors upon doors greeted us.
The air was welcoming yet mingled with the memory of martyrs whose memorials took over the landscape, sometimes in the form of larger-than-life portraits surrounded by complex four-leafed magenta-white flowers; posters above a water spout next to a heart-shaped leaf; a melted motorcycle that, too, was targeted in the neighborhood that hosted the Lions’ Den. We stopped to pray at a masjid, quiet and carpeted.
After a bus ride from Nablus to Jenin, on our walk before entering Jenin camp, Aseel showed me the hospital right outside the camp. She pointed out the barricades created to keep the occupation forces from entering specific streets. This is the same hospital that the occupation forces blocked during the July 2023 attack, which now seems like a lifetime ago.
What caught my eyes again and again were the two Keys of Return on top of the entrance of Jenin Camp that symbolized so much for Palestinians.
“This is a temporary station,” Aseel read out loud to me. “That’s what it says. We are supposed to return to our homes.”
“Netanyahu said he is planning another big attack, so the resistance fighters are preparing because it can happen any day,” she had told me that evening as we shared Jenin-style knafeh, baked to perfection. Then she stopped, looked at the sky, and said humorously, “Ya Allah, hopefully not today!” And we both laughed because of its potential reality.
Dinner on the terrace at her uncle’s home was a delicious spread of hummus, laban, fries, cucumbers pickled by her aunt, and arayes — fried bread stuffed with meat. Then we moved the furniture to sleep on mattresses in a room that extended to the rooftop terrace with a breeze, overlooking Jenin Camp and the rest of Jenin City. We could hear gunshots in the distance. The drones were commonplace, and the heat did not relent. Temperatures soared, and the electricity was out when we woke up at 5 a.m. I heard her pray, and later, as we sipped on coffee and had wafters in the early morning at her home, my eyes went to a piece of tatreez, or embroidery, of a bird in flight framed on the wall. Her eyes followed mine and when I said I loved it.
“It used to be my grandfather’s,” she told me. “Of course it’s beautiful — the bird is free.”
Unexpectedly, Aseel’s mother gifted me a Sprite bottle full of olive oil beholding the sweet hues of its intact health, which I would later ship secretly from Bethlehem all the way to Boston. And then Aseel came to me with a gift, too: a necklace that spoke succinctly about the right to return and live on this earth. Mahmoud Darwish’s poetry was held together with intricate calligraphy carved in the shape of Palestine’s landscape, and I was completely overwhelmed.
“You are in Palestine, my dear,” she had smiled. “And you are now my family. This is your country, this is your second home, really.”
When I ask her about what brings her hope these days, Aseel tells me about her eight-year-old nephew.
He wanted to eat two meals. I told him that in Gaza they don’t have food. He was complaining about the food, and I told him, they don’t have water. And he heard me because he said, “today, we will only have one meal.”
I’m amazed at how mature he is. He even said, “We won’t make a special cake on Eid because of the Gazans.” For me, this is a lesson to be learned. He is only eight years old, but he knows.
We have lost a lot of people in Gaza, but here in the West Bank, we are succeeding because our new generation knows a lot. Ben Gurion would not be happy. He said of Palestinians, “the old will die and the young will forget.” No, the young ask even more questions. The new generation brings us hope. Hope is the new generation.
/sp
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James K. Galbraith
James K. Galbraith holds the Lloyd M. Bentsen Jr. Chair in Government/Business Relations at the Lyndon B. Johnson School of Public Affairs and a professorship in Government at The University of Texas at Austin.
Galbraith holds degrees from Harvard University (BA) and in economics from Yale University (MA, M.Phil, PhD). He was Executive Director of the Joint Economic Committee of the United States Congress in the early 1980s. He chaired the board of Economists for Peace and Security from 1996 to 2016 (www.epsusa.org) and directs the University of Texas Inequality Project (http://utip.lbj.utexas.edu). He is a managing editor of Structural Change and Economic Dynamics.
In 2010, he was elected to the Accademia Nazionale dei Lincei. In 2014 he was co-winner with Angus Deaton of the Leontief Prize for Advancing the Frontiers of Economics. In 2020 he received the Veblen-Commons Award of the Association for Evolutionary Economics.