Is Negative Economic Sentiment All About MAGA?

As previous posts have addressed, the American economy continues to purr along at a good clip and the December jobs report once again exceeded expectations, yet the media continues to report that voters are supposedly pessimistic about the economy notwithstanding the objective economic data. Some of the same pessimism plagues some economist who have repeatedly and wrongly predicted a recession.   A column in the New York Times looks at the disconnect between perception and reality and blames it largely on two factors: (i) the reality that today's Republicans will never be happy if a Democrat occupies the White House, and (ii) today's mainstream media which always prefers to report negative news and to stir controversy in the hope of boosting page views and clicks on links.  Throw in Fox News and other right wing propaganda outlets and the negativity is near nonstop.  Interestingly, Democrats do not suffer from the same always negative mindset that plagues todays MAGA Republican Party.   The take away is that we can expect more economic naysaying no matter what the economy actually does while Trump and congressional Republicans are actively hoping for bad economic news with no regard for the harm done to average Americans. Here are column excerpts:

The economy is good, but Americans feel bad about it. Or do they?  The more I look into it, the more I’m convinced that much of what looks like poor public perception about the economy is actually just Republicans angry that Donald Trump isn’t still president.

Last year was a very good one for the U.S. economy. Job growth was strong, unemployment remained near a 50-year low and inflation plunged. Some reports I’ve seen suggest that this favorable combination was somehow paradoxical and contrary to economic theory. In fact, however, it’s exactly what textbook economics says to expect in an economy experiencing an improvement in its productive capacity. And I do mean textbook economics. . . . . on the effects of adverse and favorable “supply shocks”.

[T]he source of the positive supply shock is obvious: The economy finally got past the disruptions caused by the Covid-19 pandemic. Working out those disruptions took longer than almost anyone expected, then happened faster than almost anyone expected, but there’s no great mystery here. If some prominent economists denied that such a thing was possible, well, that’s their problem.

What is a mystery is why the improving economy hasn’t been reflected in public perceptions. There have been some fairly elaborate analyses of the divergence between economic fundamentals and consumer sentiment, . . . . consumer sentiment remains at levels that in the past were associated with severe recessions, very high inflation or both.

As I and many others have pointed out, consumers’ behavior doesn’t match the grim answers they give pollsters: Actual consumer spending remains strong. Still, where is that negative assessment coming from?

[O]ne of the factors everyone knows is affecting consumer sentiment — partisanship — may be even more important than most economists realize. Indeed, weak consumer sentiment may be almost entirely about MAGA.

It has been obvious for a while that views of the economy have become increasingly partisan. It’s also clear that this partisanship is asymmetric: Republicans are much more likely than Democrats to say that the economy is good when their party holds the White House and bad when it doesn’t.

Republican assessments of the economy soared when Donald Trump took office. Even during the pandemic recession, when unemployment rose to almost 15 percent, Republicans had a more favorable view of the economy than they did in the Obama years. And when Joe Biden came in, almost all Republicans declared that the economy was bad — a view that has barely budged in the face of good macroeconomic news.

Democrats are not Republicans’ mirror image. . . . . Democrats did feel better about the economy after Biden won, but the economy actually was improving as we recovered from the Covid shutdown. And Democrats’ economic sentiment thereafter followed economic fundamentals, declining as inflation rose, then improving as inflation came down.

What I find most interesting about Democrats’ numbers is what we don’t see: a clear drag on sentiment from the level of prices. There’s a lot of anecdotal evidence — and innumerable posts on social media — to the effect that Americans are upset about how much things cost rather than the inflation rate over the past year. But that’s not obvious from the Civiqs chart on Democrats, who are roughly as positive about the economy now as they were in Biden’s early months, before the big price increases of 2021-22.

So maybe we should at least entertain the hypothesis that the historically anomalous behavior of consumer sentiment reflects the historically anomalous nature of the modern G.O.P., two-thirds of whose supporters believe — based on no evidence — that the 2020 election was stolen. Maybe economic polling, like everything else with this crowd, is all about MAGA.

If that’s really true, the political implications are somewhat ambiguous. Poor economic sentiment may not weigh on Biden because it’s being driven by people who would never vote for him anyway. On the other hand, this interpretation suggests that most of the political upside of an improving economy may already be baked in, since Democrats have already accepted the good news, while Republicans never will.

In any case, the general point is that you just can’t interpret surveys of economic sentiment, or for that matter anything else, without taking into account the fact that the modern G.O.P. bears no resemblance to the Republican Party of past years, or for that matter any political party in modern U.S. history.