The Big Uneasy - New York Times

September 23, 2005
The Big Uneasy
By PAUL KRUGMAN
Although Hurricane Katrina drowned much of New Orleans, the damage to America's economic infrastructure actually fell short of early predictions. Of course, Rita may make up for that.

But Katrina did more than physical damage; it was a blow to our self-image as a nation. Maybe people will quickly forget the horrible scenes from the Superdome, and the frustration of wondering why no help had arrived, once cable TV returns to nonstop coverage of missing white women. But my guess is that Katrina's shock to our sense of ourselves will persist for years.

America's current state of mind reminds me of the demoralized mood of late 1979, when a confluence of events - double-digit inflation, gas lines and the Iranian hostage crisis - led to a national crisis of confidence.

Start with economic confidence. The available measures say that consumer confidence, which was already declining before Katrina hit, has now fallen off a cliff. One well-respected survey, from the University of Michigan, says that consumer sentiment is at its lowest level since George Bush the elder was president and "America: What Went Wrong?" was a national best seller.

It's true that gasoline prices have receded from their post-Katrina peaks. But even if Rita spares the refineries, a full recovery of economic confidence seems unlikely. For one thing, it looks as if we're in for a long, cold winter: natural gas and fuel oil are still near their price peaks. And most families were already struggling even before Katrina. A few weeks ago, the Census Bureau reported that in 2004, while Washington and Wall Street were hailing a "Bush boom," poverty increased, and median family income failed to keep up with inflation. It's safe to assume that most families did even worse this year.

Then there's the war in Iraq, which is rapidly becoming impossible to spin positively: the purple fingers have come and gone, and there are no more corners to turn. As a result, views that people like Howard Dean were once derided for are becoming the majority opinion. Most Americans say the war was a mistake; a majority say the administration deliberately misled the country into war; almost 4 in 10 say Iraq will turn into another Vietnam.

And many people are outraged by the war's cost. The general public doesn't closely follow economists' arguments about the risks of budget deficits, or try to decide between competing budget projections. But people do know that there's a big deficit, that politicians keep calling for cuts in spending and that rebuilding after Katrina will cost a lot of money. They resent the idea that large sums are being spent in a faraway country, where we're waging a war whose purpose seems increasingly obscure.

Finally, fragmentary evidence - like a sharp drop in the fraction of Americans who approve of President Bush's performance in handling terrorism and the failure of large crowds to show up for the Pentagon's "America Supports You" march and country music concert - suggests that the confluence of Katrina and the fourth anniversary of 9/11 has caused something to snap in public perceptions about the "war on terror."

In the early months after 9/11, America's self-confidence actually seemed to have been bolstered by the attack: the Taliban were quickly overthrown, and President Bush looked like an effective leader. The positive perception of what happened after 9/11 has, needless to say, been a mainstay of Mr. Bush's political stature.

But now that more time has elapsed since 9/11 than the whole stretch from Pearl Harbor to V-J Day, people are losing faith. Osama, it turns out, could both run and hide. It's obvious from the evening news that Al Qaeda and violent Islamic extremism in general are flourishing.

And the hapless response to Katrina, which should have been easier to deal with than a terrorist attack, has shown that our leaders have done virtually nothing to make us safer.

And here's the important point: these blows to our national self-image are mutually reinforcing. The sense that we're caught in an unwinnable war reinforces the sense that the economy is getting worse, and vice versa. So we're having a crisis of confidence.

It's the kind of crisis that opens the door for dramatic political changes - possibly, but not necessarily, in a good direction. But who will provide leadership, now that Mr. Bush is damaged goods?


Copyright 2005 The New York Times Company