Why Americans Hate a Good Economy

By most objective standards, especially when compared to other nations around the world, America's economy is doing well yet surveys continue to show that too many survey respondents continue to say their financial situation has gotten worse since Joe Biden entered the White House. For Biden and economists the disconnect from most objective data is a conundrum is something they continue to grapple with.  Inflation has slowed yet many Americans act as if it has remained at the peaks of last year and mortgage rates have soar as the Federal Reserve has (unduly in my view) obsessed over inflation putting homeownership either out of the reach of many or made monthly housing outlays take a much larger bite of family incomes.  On the positive side, unemployment remains low and wages have increased, especially for those at the low end of the labor market, thus somewhat reducing income inequality.  A piece in The Atlantic tries to analyze why American perceptions are so disconnected from objective data.  One reason cited, which I agree with, is that the mainstream media insists on always reporting negative economic news while ignoring good news.  Of course, the right wing "news" media only reports the negative.  Sensation and negativity may drive up viewership, pages views and clicks on articles, but they do a disservice over all and increase partisanship, something we need less of, not more. Here are article highlights: 

Earlier this month, a Financial Times poll of about 1,000 registered voters found that most Americans believe their financial situation has gotten worse since Joe Biden became president. The economist Claudia Sahm tweeted that the results were “impossible,” adding, “The vast majority of Americans are better off financially. Full stop”—before receiving so much pushback for her statement that she deleted the post. This online drama was part of a larger debate among economists, policy makers, and commentators who have different explanations for why Americans report negative assessments of the economy despite some objective positive measures.

Economists who agree with Sahm are heavily influenced by low unemployment, often considered the standard metric for how the economy is performing. Last month the unemployment rate was down to 3.9 percent. But it’s not just unemployment that’s headed in the right direction. The Consumer Price Index was unchanged. A new paper shows that wage inequality has fallen over the past three years, driven by workers leaving their old jobs for better-paying ones. The U.S. has been adding jobs at a record clip. And wages—adjusted for inflation—may have finally surpassed pre-pandemic levels.

Here are seven possible explanations for what’s going on.

1. People need a second to adjust.

COVID-19 caused an unprecedented social and economic crisis, including job loss for lots of people. In May 2020, roughly 60 million people reported that they had been unable to work in the preceding month because their employer had closed or lost business due to the pandemic. Then inflation kicked in, raising food, energy, rent, and housing prices.

Although price jumps are leveling off, it’s important to appreciate that economic conditions changed really fast in both directions, and people may need time to register what’s going on. One researcher found that although public opinion has “historically followed the business cycle” (it declines during recessions and improves during expansions), the difference now is that pay hasn’t been keeping up with inflation. That’s only just beginning to change. If job growth, wage growth, and low inflation all continue apace, people may well start to feel better about the economy.

2. Inflation is just really that bad.

People seem to be more sensitive to inflation than to unemployment. The Financial Times poll found that 60 percent think avoiding inflation is more important than keeping good-paying jobs; just 30 percent favor the latter. Economists tend to think a good economy is one with a low unemployment rate, but for the public, that’s not enough.

3. Expectations are high.

During the pandemic, the federal government provided Americans unprecedented support. It stopped evictions; it dropped thousands of dollars into personal bank accounts; it paused student-loan repayments; it gave aid to unemployed workers; it provided tax breaks to parents of young children, and billions in aid to state and local governments. In doing so, the government may have raised expectations for what a “good economy” is supposed to feel like.

Real wages are above where they were in January 2020, but they are below where they were in mid-2020. An added wrinkle is that most of the wage growth is accruing to low-income workers, which could explain why middle- and high-income workers don’t believe that the economy is doing better.

4. The rent is too damn high.

Housing affordability hit a historic low in August as high interest rates have meant that the typical family cannot afford to buy. Although inflation overall is slowing, shelter inflation is still rising.

If renters who want to own are frustrated, so are some of the so-called winners—those who have already bought their homes—because they feel locked in place by their low mortgage rate. Moving now comes with the high penalty of giving up that rate.

When asked about current conditions for buying a home, survey respondents are utterly despondent, and that could be coloring their overall perception of the economy. And of course, the main federal response to inflation has been to raise interest rates, which actually increases housing prices as mortgages and the cost of construction rise.

5. The biggest winners are at the bottom.

A new study showing declining inequality found that Americans whose incomes rank in the bottom 10 percent have seen their inflation-adjusted wages rise to new heights since the pandemic. Neither the 50th nor 90th percentile has seen similar real-wage growth.

6. The media loves bad news.

When asked last month why “most people still don’t feel positive or feel good news about the economy,” Biden responded in part:

You all are not the happiest people in the world—what you report …You get more legs when you’re reporting something that’s negative. I don’t mean, I don’t mean you’re picking on me or I’m—just the nature of things. You turn on the television, and there’s not a whole lot about “boy saves dog as he swims in the lake.” You know?

Those who blame the media tend to emphasize the apparent gap between how people discuss their own financial situation and how they describe their feelings about the broader economy. According to the progressive economist Dean Baker, this gap “must be attributable to things that [people] are hearing about the economy from places like Fox News and the New York Times.”

7. Democrats are bad cheerleaders.

A recent paper on partisanship and the economy finds that, going back to the Reagan administration, “individuals who affiliate with the party that controls the White House have systematically more optimistic economic expectations” than those who affiliate with the other party. That is, Democrats think the economy is good under Democratic presidents, Republicans under Republican presidents.

But Democrats may benefit less and suffer more from partisan cheerleading than Republicans, suggest two former Biden-administration economists. “When a Republican is in the White House, Republican survey respondents feel about 15 index points better than predicted about the economy, whereas Democrats feel around 6 index points worse,” they wrote recently. But when a Democrat is in the White House? Republicans feel 15 points worse and Democrats feel only six points better.

Needless to say, the MAGA base and the far right talking heads drive the negativity on the economy even as the real source of grievance of in MAGA world is driven by racism and Christofascist desires to return to the 1950's when those deemed "other" - blacks, gays, women and other non-whites - knew their place and either lived in the shadows or were afraid to demand better for their lives.