Start with the facts: Job creation under Biden has been truly amazing, especially when you recall all those confident but wrong predictions of recession. Four years ago, the economy was body-slammed by the COVID-19 pandemic, but we have more than recovered. Four years after the start of 2007-09 recession, total employment was still down by more than 5 million; now it’s up by almost 6 million. The unemployment rate has been below 4% for 26 months, the longest streak since the 1960s.

Inflation did surge in 2021-22, although this surge has mostly subsided. But most workers’ earnings are up in real terms. Over the past four years, wages of nonsupervisory workers, who account for more than 80% of private employment, are up by about 24%, while consumer prices are up less, around 20%.

Why, then, are so many Americans still telling pollsters that the economy is in bad shape?

More often than not, anyone who argues that we’re in a “vibecession,” in which public perceptions are at odds with economic reality, gets tagged as an elitist, out of touch with people’s real-life experience. And there’s a whole genre of commentary to the effect that if you squint at the data hard enough, it shows that the economy really is bad, after all.

But such commentary is an attempt to explain something that isn’t happening. Without question, there are Americans who are hurting financially — sadly, this is always true to some extent, especially given the weakness of America’s social safety net. But in general, Americans are relatively optimistic about their own finances.

Someone is not OK

I wrote recently about a couple of Quinnipiac swing-state polls that asked registered voters about both the economy and their personal finances. In both Michigan and Pennsylvania — states crucial to the outcome of this year’s presidential election — more than 60% of respondents rated the economy as not so good or bad; a similar percentage said that their own situation is excellent or good.

Americans are upbeat not just about their own circumstances; they’re also upbeat about their local economies. A recent Wall Street Journal poll of swing state voters found that voters have negative views of the national economy but significantly more positive views about the economy in their state. This is consistent with the Federal Reserve’s report on economic well-being for 2022 (published in 2023), which shows a much higher percentage of Americans assessed their local economy as good or excellent than the percentage who said the same about the national economy.

Basically, Americans are saying, “I’m doing OK, people I know are doing OK, but bad things are happening somewhere out there.” As the Journal’s Greg Ip wrote, “When it comes to the economy, the vibes are at war with the facts.”

What explains this disconnect? Inflation surely contributes to bad feelings about the economy. New research by Harvard University’s Stefanie Stantcheva confirms an old insight: When both wages and prices are rising, people tend to believe that they earned their wage increases but that inflation took away their hard-won gains.

However, inflation aversion doesn’t explain why people think their state is doing well but the nation is a mess.

A partisan economy

The elephant in the room — and it is mainly an elephant, although there’s a bit of donkey too — is partisanship. These days, Americans’ views of the economy tend to be determined by political affiliation rather than the other way around.

It’s not hard to see where this asymmetry comes from. Republican politicians and media are united in trashing the Biden economy, which Donald Trump says is “collapsing into a cesspool of ruin,” in which “stores are not stocked” — something that simply isn’t true. Democrats, on the other hand, are divided, with some progressives talking down the economy because they fear that acknowledging the good news might undermine the case for strengthening that weak social safety net.

If you ask me, more progressives should celebrate the current economy, not just to help Biden get reelected, but because economic success vindicates the progressive vision. I’d argue that Biden deserves some credit for the good news, but the more important point is that policies like the expansion of Obamacare and student debt relief have not, contrary to conservative predictions, dragged the economy down — which means that it’s OK to call for more.

The truth is that the U.S. economy is a remarkable success story. Don’t let anyone tell you that it isn’t.

Paul Krugman is a New York Times columnist. 

And with the ship and pieces of the bridge blocking the harbor entry, the Port of Baltimore remains closed. How big a deal is that for the economy?

Well, it would have been quite a big deal if it had happened in late 2021 or early 2022, when global supply chains were under a lot of pressure. Remember when all those ships were steaming back and forth in front of Los Angeles, waiting for a berth?

It’s less important now: Pre-Dali Baltimore was only the 17th busiest U.S. port, and there’s apparently enough spare capacity that most of the cargoes that would normally have passed through Baltimore can be diverted to other East Coast ports. The Dali is no Ever Given, the ship that blocked the Suez Canal when it ran aground in 2021.

Still, global supply chains don’t have as much slack as they did, say, last summer, after pandemic disruptions were mostly a thing of the past, because Baltimore isn’t the only problem. The Panama Canal is operating at reduced capacity because a historic drought, probably in part a consequence of climate change, has limited the supply of water to fill the canal’s locks.

Elsewhere, the Houthis have been firing missiles at ships entering or leaving the Red Sea, that is, heading to or from the Suez Canal. Presumably as a result of these and other problems, the New York Fed’s widely cited index of global supply chain pressure, while still not flashing the red lights it was showing in the winter of 2021-22, has worsened significantly since last August.

And given what we know about the causes of the inflation surge of 2021-22, this worsening makes me a bit nervous.

Inflation’s rise and fall

I think it’s fair to say that a great majority of economists were caught flat-footed one way or another by inflation developments over the past three years. Along with many others, I failed to predict the big initial run-up in inflation. But even most economists who got that part right appear in retrospect to have been right for the wrong reasons, because they failed to anticipate the “immaculate disinflation” of 2023: Inflation plunged, even though there was no recession, and the high unemployment some claimed would be necessary to get inflation down never materialized.

A side remark: Official measures of inflation were somewhat hot in the first two months of 2024. But much of this probably reflects the so-called January effect (which is actually spread out over January and February), in which many companies raise prices with the coming of a new year. The Federal Reserve and many independent economists expect disinflation to resume in the months ahead.

So what explains the swift rise and fall of inflation? Way back in July 2021, White House economists argued that we were in a situation resembling the surge in inflation that began in 1946 — that recovery from COVID had created conditions similar to the early postwar period of pent-up demand and disrupted supply chains. The postwar inflation surge ended relatively quickly — after two years — without an extended period of high unemployment.

In retrospect, that analysis looks spot on, since pretty much the same thing seems to have happened in the latest inflation cycle.

A recent White House analysis includes the effects of supply-chain pressure, using the New York Fed measure. According to this model, supply chain pressures (plus the interaction of these pressures with demand) accounted for most of the rise in inflation above the Fed’s 2% target during the past several years.

Conversely, the model says that the easing of supply chain problems as businesses adapted to economic change accounts for most of the disinflation since 2022.

Supply chain worries

This all makes a lot of sense, and until recently made me feel rather comfortable about the prospects for a soft landing — inflation falling to an acceptable level with unemployment staying low.

Now, supply chain problems today aren’t remotely as bad as they were in 2021-22; if the Dali disaster had occurred back then, it really would have been a collapsed bridge too far. At least according to the New York Fed measure, we’ve actually been experiencing a stretch of below-normal supply pressure, and all that has happened is a return to normal. This might not have much adverse effect on inflation.

But I’m not as sure about this as I’d like. Supply chains are making me nervous again.

Paul Krugman is a New York Times columnist.

Well, in my opinion, they are people. I’d still say that even if the migrant crime wave Trump and his allies harp on were real, and not a figment of their imagination (violent crime has in fact been plummeting in many cities). And I’d say it even if there weren’t growing evidence that immigration is helping the U.S. economy — indeed, that it may be a major reason for our surprising economic success.

But as it happens, there is a lot of evidence to that effect.

Some background here: When COVID struck, there were widespread concerns that it might lead to long-term economic “scarring.” Millions of workers were laid off; how many of them would either depart the labor force permanently or lose valuable skills? Investment and new business formation fell. It seemed plausible that even after the worst of the pandemic was behind us, America would have a smaller, less productive workforce than previously expected.

None of that happened. If we compare the current state of the U.S. economy with Congressional Budget Office projections made just before the pandemic, we find that real gross domestic product has risen by about 1 percentage point more than expected, while employment exceeds its projected level by 2.9 million workers.

How did we do that? U.S. workers and businesses turned out to be more resilient and adaptable than they were given credit for. Also, our policymakers didn’t make the mistakes that followed the 2008 financial crisis, when an underpowered fiscal stimulus was followed by a premature turn to austerity that delayed a full recovery for many years. Instead, the Biden administration went big on spending, probably contributing to a temporary burst of inflation but also helping to ensure rapid recovery — and at this point the inflation has largely faded away while the recovery remains.

The immigration surge

Beyond that, the very surge in immigration that has nativists so upset has played a big role in increasing the economy’s potential.

The budget office recently upgraded its medium-term economic projections, largely because it believes that increased immigration will add to the workforce. It estimates that the immigration surge will add about 2% to real GDP by 2034.

But are immigrants taking jobs away from native-born Americans? No. A recent Goldman Sachs analysis shows no rise in native-born unemployment during the immigration surge. It does show a rise in foreign-born unemployment, which I’ll come back to. But for now let’s just note that there is no good evidence that immigrants are taking away jobs from workers born in America.

Still, doesn’t immigration put downward pressure on wages? That sounds as if it could be true — in particular, you might think that immigrants with relatively little formal education compete with less educated native-born workers. I used to believe this myself.

But many (although not all) academic studies find that immigration has little effect on the wages of native-born workers, even when those workers have similar education levels. Instead of being substitutes for native-born workers, immigrants often seem to complement them, bringing different skills and concentrating in different occupations.

In some ways the current immigration surge, probably consisting mainly of less educated workers (especially among those without legal status), is a test case. Have wages for lower-wage workers declined? On the contrary, what we’ve seen recently is a surprising move toward wage equality, with big gains at the bottom.

Overall, then, immigration appears to have been a big plus for U.S. economic growth, among other things expanding our productive capacity in a way that reduced the inflationary impact of Biden’s spending programs.

Unemployment rates

Finally, let me return to that Goldman Sachs analysis, which shows no rise in unemployment among the native-born but a significant rise among the foreign-born. Believe it or not, that’s probably good news.

Why is this probably good news? The overall U.S. unemployment rate has crept up recently — not enough to trigger the Sahm rule, which links rising unemployment to recessions, but enough to make me and others a bit nervous.

Goldman argues, however, that this time is different. All of the rise in unemployment is among foreign-born workers — and this, they suggest, means that we aren’t seeing the kind of weakening in demand for labor that presages recessions. What we’re seeing instead, they argue, is an increase in labor supply, with many of the new workers taking some time to find their feet. If so, the Sahm rule, which has been spectacularly successful as a recession indicator in the past, may currently be misleading.

I hope they’re right.

The bottom line is that while America’s immigration system is dysfunctional and really needs more resources — resources it would be getting if Republicans, pushed by Trump, hadn’t turned their backs on a bill they helped devise — the recent surge in immigration has actually been good for the economy so far, and gives us reason to be more optimistic about the future.

Paul Krugman is a New York Times columnist.

The good news is that America doesn’t have open borders, and there is no significant faction in our politics saying we should. In fact, immigrating to the United States legally is fairly difficult.

The bad news is that we’re having a hard time enforcing the rules on immigration, mainly because the relevant government agencies don’t have sufficient resources. And right now, the reason they don’t have those resources is that many Republicans in Congress, while fulminating about a border crisis, appear determined to deny the needed funding.

Their position is rooted in extraordinary political cynicism, and they aren’t even trying to hide it: Donald Trump has intervened with Republicans to block any immigration deal because he believes that chaos at the border will help his election prospects.

While blatant sabotage explains the current immigration impasse, however, there’s something else lurking behind it: Trump and those around him are profoundly hostile to immigration in general.

Partly this is xenophobia, if not outright racism. If you repeatedly declare, as Trump has, that immigrants are “poisoning the blood of our country,” you don’t really care if they came here legally, you’re all but saying that what matters is whether they’re white.

Keep the faucet flowing

But it’s not just that. People close to Trump have a zero-sum view of the economy, in which every job taken by someone born outside the United States is a job taken away from someone born here.

Back in 2020, Stephen Miller, one of the architects of Trump’s immigration policies, told Trump supporters that one of the goals was to “turn off the faucet of new immigrant labor.” Remarkably, Trump issued an executive order meant to deny visas to highly skilled foreigners, many working in the tech sector. Miller and his boss apparently believed that this would mean more plum jobs for Americans, when what it would actually do was undermine American competitiveness in advanced technology.

So this seems like a good time to point out that negative views of the economics of immigration are all wrong. Far from taking jobs away, foreign-born workers have played a key role in America’s recent success at combining fast growth with a rapid decline in inflation. And foreign-born workers will also be crucial to the effort to deal with our country’s longer-term problems.

About that recent success: It has taken a while, but many observers are finally acknowledging that the United States has done extraordinarily well at recovering from the effects of the COVID-19 pandemic. Inflation has faded away in much of the world, but the United States stands out for its ability to combine disinflation with vigorous economic growth. And one key to that performance has been rapid growth in the U.S. labor force, which has risen by 2.9 million since the eve of the pandemic four years ago.

How much of that growth was due to foreign-born workers? All of it. The native-born labor force declined slightly over the past four years, reflecting an aging population, while we added 3 million foreign-born workers.

Did those foreign-born workers take jobs away from Americans — in particular, native-born Americans? No. America in early 2024 has full employment, with consumers who say that jobs are “plentiful” outnumbering those saying jobs are “hard to get” by almost 5-1. The unemployment rate among native-born workers averaged just under 3.7% in 2023, as low as it’s been since the government began collecting the data.

Vital to our fiscal future

And immigrant workers have probably been especially important these past few years, as the economy has struggled to resolve disruptions caused by the pandemic.

Foreign-born workers are crucial to America’s fiscal future. To a first approximation, the federal government is a system that collects taxes from working-age adults and spends much of the proceeds on programs that help seniors, such as Medicare and Social Security. Cut off the flow of immigrants, who are largely working-age adults, and our system would become much less sustainable.

So while the mess at the border needs to be fixed — and could be fixed if Republicans would help solve the problem instead of exploit it for political advantage — don’t let that mess obscure the larger reality that immigration is one of America’s great sources of power and prosperity.

Paul Krugman is a New York Times columnist.

That rosy view of the Trump economy involved a lot of selective forgetting — more about that in a minute. But the Biden economy was indeed troubled for much of 2022, with the highest inflation in 40 years. Jobs were plentiful, with unemployment near a 50-year low, but many economists were predicting an imminent recession.

Since then, however, two terrible things have happened — terrible, that is, from the point of view of Republican partisans. First, the economy has healed: Inflation has plunged without any major rise in unemployment. Second, Americans finally seem to be noticing the good news.

Before I get to that, however, let’s talk for a second about Biden’s predecessor. How can people claim that Trump presided over a great economy when he was the first president since Herbert Hoover to leave the White House with fewer Americans employed than when he arrived?

The answer, mainly, is that Trumpists want us to give him a mulligan for 2020, when the economy was devastated by COVID-19. Strangely, though, they don’t want to give Biden a similar mulligan for 2021-22, when lingering disruptions from the pandemic played a large role in inflation. (Those disruptions finally eased in 2023, leading to last year’s “immaculate disinflation.”)

Yet Trumpists don’t want to forget 2020 entirely. They still talk about how gasoline cost less than $2 a gallon, which was true for only two months in 2020 — months when the unemployment rate was more than 13%. Funny how that works.

Perception vs. reality

But back to the Biden economy, real and perceived.

Inflation has come down really fast over the past year. For technical reasons related to the way it treats housing, the consumer price index is a lagging indicator; other measures suggest that we’re already close to the Federal Reserve’s target inflation rate of 2%. And as I’ve already mentioned, this plunge in inflation has taken place without any big rise in unemployment, which has been under 4% for almost two years.

Yes, the economy remains riddled with inequality and injustice. But it’s looking a lot better, with real wages rising and inequality falling.

Until recently, however, Republicans could take comfort in the fact that the most widely cited indicator of consumer sentiment, from the University of Michigan, remained stuck at levels that in the past were associated with high unemployment, inflation or both. Other indicators showed some improvement but were still depressed.

Oddly, surveys have consistently shown most Americans feeling pretty good about their own financial situation. But they insisted that bad things were happening to the economy — that is, other people. Commentator Kyla Scanlon coined the term “vibecession,” now widely used to mean a situation in which negative views about the economy don’t seem to match up with the data.

But the vibecession may be coming to an end. The Michigan index has soared over the past two months, while expected inflation has plunged. Suddenly, Americans are sounding more positive about the economy.

Not so bad after all

It’s true that overall consumer sentiment still looks weaker than it did in late 2019, when both unemployment and inflation were similar to their current levels. But much, maybe most, of this gap reflects partisanship. Supporters of both parties tend to have negative economic views when the other party holds the White House, but the effect is much stronger for Republicans. According to the Michigan survey, Republicans, on average, consider current economic conditions roughly as bad now as they were in June 1980, when inflation was more than 14% and unemployment was more than 7%.

If the vibecession is ending, why? One answer is that good news takes time to filter into public perceptions. I mean, even some professional economists haven’t caught up and are still talking about stubbornly high inflation; we shouldn’t have expected everyday people’s perceptions to turn on a dime.

Beyond that, I suspect that economic perceptions are being influenced by the stock market, which has recently reached record highs. The truth is that the market is a very bad guide to the economy’s future, but it’s highly visible. Furthermore, it influences the tone of news coverage of the economy, which has been very negative under Biden but may be improving.

Will economic perceptions actually end up being a plus for Biden? Probably not. But if Trump was counting on perceptions of a bad economy to hand him victory, reality seems disinclined to cooperate.

Paul Krugman is a New York Times columnist.

The big question in the years that followed was whether America would ever fully recover from that shock. In 2023 we got the answer: yes. Our economy and society have, in fact, healed remarkably well. The big remaining question is when, if ever, the public will be ready to accept the good news.

In the short run, of course, the pandemic had severe economic and social effects, in many ways wider and deeper than almost anyone expected. Employment fell by 25 million in a matter of weeks. Huge government aid limited families’ financial hardship, but maintaining Americans’ purchasing power in the face of a disrupted economy meant that demand often exceeded supply, and the result was overstretched supply chains and a burst of inflation.

At the same time, the pandemic reduced social interactions and left many people feeling isolated. The psychological toll is hard to measure, but the weakening of social ties contributed to a range of negative trends, including a surge in violent crime.

It was easy to imagine that the pandemic experience would leave long-term scars — that long COVID and early retirements would leave us with a permanently reduced labor force, that getting inflation down would require years of high unemployment, that the crime surge heralded a sustained breakdown in public order.

But none of that happened.

You may have heard about the good economic news. Labor force participation — the share of adults in today’s workforce — is actually slightly higher than the Congressional Budget Office predicted before the pandemic. Measures of underlying inflation have fallen more or less back to the Federal Reserve’s 2% target even though unemployment is near a 50-year low. Adjusted for inflation, most workers’ wages have gone up.

For some reason I’ve heard less about the crime news, but it’s also remarkably good. FBI data shows that violent crime has subsided: It’s already back to 2019 levels and appears to be falling further. Homicides probably aren’t quite back to 2019 levels, but they’re plummeting.

Remarkable recovery

None of this undoes the COVID death toll or the serious learning loss suffered by millions of students. But overall, both our economy and our society are in far better shape at this point than most people would have predicted in the early days of the pandemic — or than most Americans are willing to admit.

For if America’s resilience in the face of the pandemic shock has been remarkable, so has the pessimism of the public.

By now, anyone who writes about the economic situation has become accustomed to mail and social media posts (which often begin, “You moron”) insisting that the official statistics on low unemployment and inflation are misleading if not outright lies. No, the consumer price index doesn’t ignore food and energy, although some analytical measures do; no, grocery prices aren’t still soaring.

Rather than get into more arguments with people desperate to find some justification for negative economic sentiment, I find it most useful to point out that whatever American consumers say about the state of the economy, they are spending as if their finances are in pretty good shape. Most recently, holiday sales appear to have been quite good.

Polls vs. reality

What about crime? This is an area in which public perceptions have long been notoriously at odds with reality, with people telling pollsters that crime is rising even when it’s falling rapidly. Right now, according to Gallup, 63% of Americans say that crime is an “extremely” or a “very” serious problem for the United States — but only 17% say it’s that severe a problem where they live.

And Americans aren’t acting as if they’re terrified about crime. As I’ve written before, major downtowns have seen weekend foot traffic — roughly speaking, the number of people visiting the city for fun rather than work — recover to pre-pandemic levels, which isn’t what you’d expect if Americans were fleeing violent urban hellscapes.

So whatever Americans may say to pollsters, they’re behaving as if they live in a prosperous, fairly safe (by historical standards) country — the country portrayed by official statistics, although not by opinion polls. (Disclaimer: Yes, we have vast inequality and social injustice. But this is no more true now than it was in earlier years, when Americans were far more optimistic.)

The big question, of course, is whether grim narratives will prevail over relatively sunny reality in the 2024 election. There are hints in survey data that the good economic news is starting to break through, but I don’t know of any comparable hints on crime.

In any case, what you need to know is that America responded remarkably well to the economic and social challenges of a deadly pandemic. By most measures, we’re a nation on the mend. Let’s hope we don’t lose our democracy before people realize that.

Paul Krugman is a New York Times columnist.

Then the stiff leaves for a while, maybe to answer a call of nature. When he leaves, the average income of the guys still in the bar shoots up, because he’s no longer dragging that average down; when he comes back, the average drops again. But these fluctuations in the average don’t reflect changes in anyone’s income.

Why am I telling you this story? Because it’s most of the story of wages in the U.S. economy since COVID-19 struck. In 2020 the average wage of workers who still had a job shot up, because those who were laid off were disproportionately low-wage service workers. Then, as people resumed in-person shopping, started going to restaurants and so on, growth in average wages was held down because those low-wage workers were being rehired. You need to look through these “compositional effects” to figure out what was really happening to earnings as that played out.

Until recently, I thought everyone — well, everyone following economic issues — knew this. (Assuming that people know more about the numbers than they actually do is an occupational hazard for nerds who become pundits.)

But lately I’ve been seeing even mainstream news organizations publish charts accompanied by commentary to the effect that real wages generally rose under Donald Trump but have generally fallen under Joe Biden, which in turn is supposed to explain why Americans are feeling so negative about the economy.

But that’s not what the charts actually tell us. Mostly they reflect the working stiff temporarily leaving the bar, then coming back.

The spurious wage surge of 2020 is gone, as is the wage stagnation of early 2021. It’s still true that wages lagged behind inflation in 2021 and 2022, but they have run well ahead of inflation this year.

Even this view of economic performance, however, misses some of the temporary distortions caused by the pandemic. Prices of many commodities were very low in 2020 — the price of oil briefly went negative! — not because policy was good but because the world economy was flat on its back, depressing demand. These prices surged as the economy recovered, and there were also large but temporary disruptions to supply chains — remember all those ships waiting for someplace to unload their cargoes?

Oh, and Russia’s invasion of Ukraine brought war to one of the world’s major food-producing areas.

In the end, it’s basically a fool’s errand to try and compare economic performance before and after the White House changed hands; there was just too much crazy stuff going on. What we can say, with considerable certainty, is that while prices have gone up a lot since the pandemic began, most workers’ wages have risen significantly more than the consumer price index.

OK, at this point one runs into a buzz saw of criticism. I am regularly assured by correspondents that economists’ measures of inflation are meaningless, because they exclude food and energy. No, they don’t; economists often use measures of “core” inflation for analytical purposes, but the consumer price index — which is what I’m referring to here — includes everything.

Or I’m told that real people know that inflation is still running hot, whatever the government numbers may say. Actually, the American Farm Bureau Association, a private group, tells us that Thanksgiving dinner cost 4.5% less this year than last. Gasbuddy.com, another private group, tells us that prices at the pump are down more than 30% since their peak last year. Neither turkeys nor gas prices are good measures of underlying inflation, but both show that the narrative of inflation still running wild is just not true.

Sorry, folks, but “immaculate disinflation” — rapidly falling inflation without a recession or a big rise in unemployment — is actually happening. The 2021-22 inflation surge definitely rattled Americans after decades of relative price stability, and I’m not here to lecture people about their feelings. But I guess I am here to lecture journalists about using statistics. Presenting misleading numbers that seem to justify public opinion is actually an act of disrespect: Voters have a right to their feelings, but journalists have a duty to present the facts, as best we can understand them.

And while the public’s negative view of the economy is a major puzzle, acknowledging that puzzle is no reason to soft-pedal the evidence that the U.S. economy is currently doing very well — indeed, much better than even optimists expected a year ago.

Paul Krugman is a New York Times columnist. 

And I think that’s great. When I, say, take a stroll around Jackson Heights I see the essence of America as it was supposed to be, a magnet for people around the world seeking freedom and opportunity — people like my own grandparents.

And no, Queens isn’t an urban hellscape. It may not be leafy and green, but it has less serious crime per capita than the rest of New York City, and New York, although nobody will believe it, is one of the safest places in America. It’s also relatively healthy, with life expectancy around three years higher than that of the United States as a whole.

Trump’s plans

But Trump has declared that migrants are “poisoning the blood of our country” — a phrase that, to steal from the late, great Molly Ivins, might sound better in the original German. Look, I know there’s a debate over whether the MAGA movement fully meets the classic criteria for fascism, but can we at least agree that its language is increasingly fascist-adjacent?

And so are its policies.

On Saturday The New York Times reported that Trump, if returned to office, intends to pursue drastic anti-immigration policies — scouring the country for immigrants living in the country illegally and building huge camps to, um, concentrate them before deporting them by the millions. Suspected members of drug cartels and gangs would be expelled without due process. Suspected by whom, on what grounds? Good question.

If you believe that none of this should concern you, because you’re a U.S. citizen, you should know that on Veterans Day, Trump gave a speech promising to “root out” the “radical-left thugs” that, he says — echoing the likes of Adolf Hitler and Benito Mussolini — infest America “like vermin.” Who counts as “radical left”? Well, today’s Republicans — not just Trump — have a very expansive definition. After all, they routinely accuse Joe Biden of being a Marxist.

Economic disaster

Given all this anti-democratic rhetoric, it seems almost crass to point out that a Trumpian war on immigrants would also be an economic disaster. But it would.

That’s apparently not what the Trumpists believe. That Times article quotes Stephen Miller, who headed anti-immigrant operations when Trump was in the White House, as claiming that mass deportations will be “celebrated by American workers, who will now be offered higher wages with better benefits to fill these jobs.”

Very few economists would agree.

To the extent that there’s anything beyond raw xenophobia behind Trumpist hostility to foreign workers, it seems to be the view that America has a limited number of jobs to offer and that immigrants take those jobs away from the native-born. In reality, however, except during recessions, the number of jobs, and hence the economy’s growth, is limited by the available workforce rather than the other way around.

And the contribution of immigrants to America’s long-term growth is startlingly large. Since 2007, according to the Bureau of Labor Statistics, the U.S. labor force has increased by 14.6 million. Of these additional workers, 7.8 million — more than half — were foreign born.

Badly needed workers

Oh, and if these immigrants are taking away American jobs, how can the unemployment rate be near a 50-year low? In fact, we desperately need these workers, among other things because they will help us cope with the needs of an aging population.

Now, you might worry that less-educated immigrants will push down wages at the bottom, increasing income inequality. But the bottom line from decades of research on this topic is that this doesn’t seem to happen. Even less-educated immigrants bring different skills and make different job choices from their native-born counterparts, so they end up being complements to, not substitutes for, local workers.

And let’s not forget that Trump officials tried to choke off the supply of skilled foreign workers to the U.S. technology sector, apparently believing that this would reserve good jobs for Americans — when in reality it would simply undermine our technological edge.

None of this is to deny that sudden surges of migrants can place a burden on local communities and that we need policies to mitigate these impacts. But that’s very different from a sweeping rejection of immigration, which is as American as apple pie, not to mention pizza and bagels — foods brought by earlier immigrants who were, in their day, the targets of just as much prejudice and hatred as the immigrants of today.

America doesn’t need to be made great again, because it’s already great. But if you wanted to destroy that greatness, the two most important things you would do would be to reject its commitment to freedom and close its doors to people seeking a better life. Unfortunately, if Trump returns to office, he seems determined to do both of these things.

Paul Krugman is a New York Times columnist.

All three agreements involve a roughly 25% wage increase over the next 4 1/2 years, plus other significant concessions. Autoworkers are a much smaller share of the workforce than they were in Detroit’s heyday, but they’re still a significant part of the economy.

Furthermore, this apparent union victory follows on significant organized-labor wins in other industries in recent months, notably a big settlement with United Parcel Service, where the Teamsters represent more than 300,000 employees.

And maybe, just maybe, union victories in 2023 will prove to be a milestone on the way back to a less unequal nation.

Historical context

Some history you should know: Baby boomers like me grew up in a nation that was far less polarized economically than the one we live in today. We weren’t as much of a middle-class society as we liked to imagine, but in the 1960s we were a country in which many blue-collar workers had incomes they considered middle class, while extremes of wealth were far less than they have since become. For example, CEOs of major corporations were paid “only” 15 times as much as their average workers, compared with more than 200 times as much as their average workers now.

Most people, I suspect, believed — if they thought about it at all — that a relatively middle-class society had evolved gradually from the excesses of the Gilded Age, and that it was the natural end state of a mature market economy.

However, a revelatory 1991 paper by Claudia Goldin (who just won a richly deserved Nobel) and Robert Margo showed that a relatively equal America emerged not gradually but suddenly, with an abrupt narrowing of income differentials in the 1940s — what the authors called the Great Compression. The initial compression no doubt had a lot to do with wartime economic controls. But income gaps remained narrow for decades after these controls were lifted; overall income inequality didn’t really take off again until around 1980.

Why did a fairly flat income distribution persist? No doubt there were multiple reasons, but surely one important factor was that the combination of war and a favorable political environment led to a huge surge in unionization. Unions are a force for greater wage equality; they also help enforce the “outrage constraint” that used to limit executive compensation.

Conversely, the decline of unions, which now represent less than 7% of private-sector workers, must have played a role in the coming of the Second Gilded Age we live in now.

The great decline of unions wasn’t a necessary consequence of globalization and technological progress. Unions remain strong in some nations; in Scandinavia, the great majority of workers are still union members. What happened in America was that workers’ bargaining power was held back by the combination of a persistently slack labor market, with sluggish recoveries from recessions and an unfavorable political environment — let’s not forget that early in his presidency, Ronald Reagan crushed the air traffic controllers’ union, and his administration was consistently hostile to union organizing.

This time is different

But this time is different. Research by David Autor, Arindrajit Dube and Annie McGrew shows that a rapid recovery that has brought unemployment near to a 50-year low seems to have empowered lower-wage workers, producing an “unexpected compression” in wage gaps that has eliminated around a quarter of the rise in inequality over the previous four decades. The strong job market has probably encouraged unions to stake out more aggressive bargaining positions, a stance that so far seems to be working.

By the way, I constantly encounter people who believe that the recent economic recovery has disproportionately benefited the affluent. The truth is exactly the opposite.

The political ground also seems to be shifting. Public approval of unions is at its highest point since 1965, and Joe Biden, in a presidential first, joined an autoworker picket line in Michigan in September to show support.

None of what’s happening now seems remotely big enough to produce a second Great Compression. It might, however, be enough to produce a Lesser Compression — a partial reversal of the great rise in inequality since 1980.

Of course, this doesn’t have to happen. A recession could undermine workers’ bargaining power. If Donald Trump, who also visited Michigan but spoke at a nonunion shop, returns to the White House, you can be sure that his policies will be anti-union and anti-worker. And Mike Johnson, the new speaker of the House, has an almost perfect record of opposing policies supported by unions.

So the future is, as always, uncertain. But we might, just might, be seeing America finally turn back toward the kind of widely shared prosperity we used to take for granted.

Paul Krugman is a New York Times columnist.

There is, however, one piece of the economic picture that’s worrisome: Long-term interest rates have gone up a lot since early 2022, especially over the past six months.

This spike in long-term rates is problematic in a couple of ways. It’s not a crisis, at least not yet. But in a better world we’d be taking action to bring interest rates down in a sustainable way. In particular, now would be a good time to rein in budget deficits.

Why a problem

However, the chances of serious action on the deficit anytime soon are near zero. And it’s important to understand why.

First, why are high interest rates a problem? So far, there’s no indication that they’re about to cause a recession. In fact, the resilience of the economy in the face of higher rates is probably the main reason rates have gone up so much. That is, investors seem to be throwing in the towel, concluding that r-star — “the real short-term interest rate expected to prevail when an economy is at full strength and inflation is stable” — has risen sharply. If it has, the Federal Reserve will have to keep short-term interest rates, which it more or less controls, high for a long time to avoid a resurgence of inflation. And the prospect of high short-term rates as far as the eye can see is in turn causing investors to bid up longer-term rates.

There are other possible explanations for rising rates, ranging from simple supply and demand — the government is selling a lot of debt right now, and the Fed is no longer buying it — to investor psychology. But in any case, there’s no clear case that rising rates will hurt the economy in the short run.

There are, however, longer-run concerns. One is that higher borrowing costs may make federal debt less sustainable. I still don’t think we’re facing a fiscal crisis any time soon — and neither do the markets. If investors were really worried about U.S. solvency, they would probably expect higher inflation as the federal government turns to the printing press to pay some of its bills. But we can infer market expectations of inflation by looking at the breakeven rate, the spread between bonds that are protected against inflation and ordinary bonds. Expected inflation has remained stable, and doesn’t account for any of the interest rate spike.

Also, if investors were worried about U.S. solvency, we’d expect the dollar to fall in value against other currencies; in reality, it has risen.

But even if there’s no immediate crisis, high interest rates will almost surely crowd out private investment, hurting our long-term prospects.

What can be done

So it would really be nice to get interest rates down again. Unfortunately, the Federal Reserve can’t just reverse its policy of raising rates to limit inflation. While the inflation news has been extremely encouraging, the U.S. economy seems to be running quite hot, and cutting rates could still cause it to overheat, sending inflation higher again.

To make room for lower interest rates, then, we would need to take some heat out of the economy in another way — most obviously by reducing the budget deficit, which is very high for an economy close to full employment.

Now, some readers may be surprised to hear me saying that. After all, I spent a large part of the past 15 years inveighing against the deficit scolds who hijacked economic debate after the 2008 financial crisis, shifting it away from the need to restore full employment. The turn to fiscal austerity caused by this shift in focus did immense harm, leading to millions of person-years of lost employment and neglect of important public investments.

But there’s a big difference between obsessing over the budget deficit in, say, early 2013 and believing that we could use a lower deficit now. Back then, the interest rate on bonds protected against inflation risk was negative, so that investors were in effect paying the federal government to take their money. Now that rate is 2.4%. So it makes much more sense to be worried about borrowing now.

So while we needn’t panic over budget deficits, a lower deficit would really help with economic management right now.

But it isn’t going to happen.

Why not? If you listen to Republican politicians, you might think that major deficit reduction is easy: Just cut out wasteful government spending (a category that MAGA types think includes aid to Ukraine in fighting Russia’s invasion). And a majority of voters say that the government spends too much in general. But ask voters about specific spending, and there’s almost nothing they want to cut.

The other option is: Collect more taxes. America is in fact a very low-tax nation compared with Europe.

But conservatives always want to cut taxes, especially for the rich, even though polls suggest that most Americans believe the rich pay too little. Republicans are even trying to deprive the IRS of the resources it needs to go after wealthy tax cheats. And while Democrats are at least willing to tax the rich, that by itself won’t be enough (although it would help). And they aren’t willing to take the political heat for proposing tax hikes on the middle class.

The point is that the economics of deficit reduction are straightforward. It can be accomplished either by reducing social benefits or by raising taxes. Given that America has weak social spending compared with other countries, taxes are the most plausible route. But I don’t see any plausible political path to a tax increase that would make a large dent in the deficit.

So serious deficit reduction, a bad idea a decade ago, is a good idea now. But I see no way to make it happen.

Paul Krugman is a New York Times columnist.