Good news, right?
This seems like good news. I wonder if people will finally start to “feel” it. So far Americans seem to believe we are in a great depression. Paul Krugman had an interesting insight into this phenomenon today:
Surveys of consumer sentiment and political polls continue to show that Americans have a very negative view of the Biden economy. There’s still no consensus about the reasons for this disconnect. But there are some new studies that shed some light on what’s going on, and I have a new way of looking at the numbers that may also clarify things.
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Americans say that things are bad; shouldn’t we take them at their word?
One answer is: Look at what they do, not at what they say. As it happens, the plunge in consumer sentiment during the Biden years has been similar in magnitude to the plunge during and after the 2008 financial crisis — which is itself a remarkable observation, given that the post-2008 slump dragged on for years, while after Covid we rapidly returned to full employment. However, consumer spending, which stalled during the last crisis, has just kept powering along this time. Here’s a table, with all variables shown as percentage changes from the start date:
So consumers may say that it’s a lousy economy, but their spending suggests that they’re feeling quite good about their personal financial situations. I guess they believe bad things are happening, but only to other people.
Anyway, the analysts at Briefing Book delved into one possible reason for this disconnect, which I speculated about right from the start — but they’ve done the math. It’s now a well-established fact that partisan orientation affects expressed views about the economy: Democrats are more positive when a Democrat holds the White House, Republicans more positive when the president is a Republican. What Briefing Book shows is that this effect isn’t symmetric: It applies to both parties, but the partisan effect on sentiment is two and a half times as large for Republicans as it is for Democrats.
And it estimates that this “asymmetric amplification,” all by itself, accounts for 30 percent of the gap between economic sentiment and economic fundamentals.
Wait, there’s more. The importance of partisanship in shaping economic perceptions tells us that a lot of what people say about the economy reflects what they hear, either from news organizations or on social media, rather than their own experiences. And it’s a running joke among economists I talk to that even mainstream news organizations apparently find it hard to say nice things about the Biden economy. When, say, a new employment report comes in, the headlines don’t usually say things like “Job growth comes in above expectations”; they’re more likely along the lines of, “Rapid job growth may slow soon, experts say, posing problems for Biden.”
You might say that such things can’t really matter, that people know what’s really happening. But the evidence on partisanship and perceptions suggests otherwise.
Now, I’m not saying that this is the whole story. Inflation may be slowing, but prices have risen a lot in recent years, and that still upsets people — although as I noted last week, that anger didn’t seem to last after previous temporary bursts of inflation. And general malaise over the social impacts of the pandemic may be bleeding into what people say about the economy.
Still, we can acknowledge that there are other factors at work without denying two clear facts about the economy: Most American workers are, in fact, better off than they were in the past, and a significant part of negative economic commentary reflects partisanship, not reality.
Oh, and one other point: Negative economic sentiment may not matter as much for the 2024 election as many think, since a lot of it is coming from people who would never vote for a Democrat under any conditions.
Again, the sense of chaos benefits the Republicans and they are very good at making people who don’t pay close attention to politics forget that the Trump administration was a train wreck and think that the current administration is the cause of the craziness that continues as long as Trump and the MAGA cult control the GOP.
So yes, Republicans are lying when they say they think the economy is worse than 1932. That’s just how they roll. But Democrats who say that are uniformed because the media ust can’t let go of the “sky is falling” narrative of the economy. Even today, when the stock market soared because of the new numbers CNN ran a report about how it’s nice that inflation came down year over year and month over month, some costs are only flat and that’s very bad news, so it’s not surprising that quite a few people who aren’t engaged may think that even though they’re doing ok the rest of the country is a miserable hellscape.
I just hope that the good news start to sink in with those people over the next year — and nothing catastrophic happens in the meantime.