President Joe Biden goes into next year’s election with a vexing challenge: Just as the U.S. economy is getting stronger, people are still feeling horrible about it.
Pollsters and economists say there has never been as wide a gap between the underlying health of the economy and public perception. The divergence could be a decisive factor in whether the Democrat secures a second term next year. Republicans are seizing on the dissatisfaction to skewer Biden, while the White House is finding less success as it tries to highlight economic progress.
“Things are getting better and people think things are going to get worse — and that’s the most dangerous piece of this," said Democratic pollster Celinda Lake, who has worked with Biden. Lake said voters no longer want to just see inflation rates fall — rather, they want an outright decline in prices, something that last happened on a large scale during the Great Depression.
“Honestly, I’m kind of mystified by it,” she said.
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An element to this is that there are a lot of different statistics that can tell a lot of different stories depending on what bits of data you pick.
For instance, most people would probably say that the average person had less purchasing power in October of this year compared to October of 2022. They would actually be wrong, as inflation-adjusted hourly wages have actually increased slightly in that time period (by ten cents, admittedly, but the fact remains that wage growth has been outpacing inflation).
This does not mean that every person has seen a growth in purchasing power, and my loose understanding is that most of the growth has been occurring at the bottom of the labor market (which is arguably a good thing from an equity standpoint).
https://www.bls.gov/news.release/pdf/realer.pdf
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I completely agree that it’s not going to win votes. I think the takeaway is that the average consumer is not a particularly rational actor (much to the chagrin of economists), and your messaging needs to address the actual source of their frustrations, which may very well be the mere fact that the numbers got higher even though their purchasing power hasn’t actually decreased.
I’d emphasize how you said that the average Americas is clearly not feeling the benefit, because I think that holds a really key part of this. Consumer sentiment does not necessarily track actual data, whether they’re high level metrics like GDP or more individual ones like inflation-adjusted wages.
Any field of study that depends on people acting rationally should not be considered a science, nor used to drive policy decisions.
The models economics uses fail pretty much all the time so it definitely shouldn’t be considered science in the same way as physics or chemistry. If they were held to similar standards every economic ‘model’ would be tossed out after any rigorous testing (where success for the model would be accurate predictions). Instead they treat their models as ideal types and continue to base them on massive assumptions.
The popular conception of economics feels quite a bit like a religion. There’s the god of The Invisible Hand™, there’s a priesthood of economists, there’s the creation myth of barter, there’s people’s vehement insistence that they’re capitalists.
David Graeber’s books “Debt: The First 5,000 Years” and “The Dawn of Everything” do a really good job of showing different economic and political systems, and that ours isn’t some ideal end goal but one of many possible choices.
Graeber isn’t an economist and doesn’t present his books as a part of economics in any way, though. In fact he criticizes how economists have essentially made up fairy tales to explain things rather than to look at history and understand how the modern world came about in a factual manner.
He lays out the history of various economic systems in a well researched, extremely detailed, and anthropological manner. Just because it doesn’t agree with your conception of reality doesn’t make it non-factual.
Given that I find the economists roughly on par with weather forecasters, I really think we have to treat it that way. Like Climate change has thrown a huge wrench in existing weather models causing the forecasts to be much worse - I think if the models ever worked(and that’s a big if), things have sufficiently changed to break them pretty badly now.
A lot of our systems, both physical and governmental, were developed for a world that no longer exists.
Good thing modern macroeconomics doesn’t depend on that. People only have to be semi-rational. I. e. they may not examine all possible options in a market, just a few, and pick the best one. The results are almost the same.
It’s wrong to say that “consumers are not rational”. That implies that their choices are potentially random. We know that they’re not, because people are complaining about not having enough money. Which is rational.
It’s only rational if you accept that what they want is actually money. They don’t want money, they want a safe place to live, good food to eat, health care when they feel sick, someone to teach their kids, free time to pursue the things they love, and security that these things will be available for the rest of their lives.
The only reason they want money is because that’s how you get those things in our economic system. People don’t want money for the sake of money, at least for the most part.
No part of economics assumes that people “want money”. If that were true, there would be a lot more printed paper money in circulation.
Utility curves use prices for goods to find the maximum value of “happiness” or “satisfaction”. Rationality, in Economics, mean that people’s actions conform to their utility curves based on current prices.
Basically, if you like apples (or whatever) you should pay more for them than other goods, comparatively. That’s rational because your actions follow your preferences. Nothing to do with “liking money”.
I just don’t think this happens that much necessarily though. Mostly because of necessities taking up such a huge percentage of peoples budgets.
I also find myself and see others kind of have a “I Like X more, but not enough to spend Y for it”. This doesn’t necessarily imply it’s a utility curve, I often find myself thinking it’s more of an anchoring psychology effect. I.e. you at age X get used to a Combo meal at the local fast food place costing $10. If it “frog boils” over say 20 years to $20, you’ll bitch about how “back in my day”… If it doubles in a year, like many things have - it just seems way more like overcharging and the utility curve is all out of whack.
I’ll tell you one thing, the service at fast food places has fallen so much where I live that if I can’t get their app to work to pre-order so I can waltz in and just grab it, I’ll go somewhere else. And the cost has gone up so much that I’ve been actively comparing to fast casual app based pick ups or hell, sit downs because the food is usually somewhat better and they’re often no longer massively more expensive or slower.
Ah, okay. It’s not “rational” it’s “Rational™” which is an economic term. Kind of like how Magnetic Attraction™ isn’t them wanting to fuck.
So (excepting that the alternative is Trump for a minute) you’re thinking a rational actor should vote for the guy improving the economy for lower wage workers even if it didn’t benefit them individually?
I don’t hate that take.
I do think the formula we american kids were taught in school was more like
Individuals vote in their selfish interests
Selfish votes are tallied and hopefully if you average out people’s self-interested votes they elect a guy who is acting in the interests of a decent subset.
Americans don’t generally think in golden rule terms like “Whatever benefits the most workers is best for the country.”
I’d personally have to be shown evidence that a sizable portion of all these excessive (compared to manufacturing costs) profits are NOT lining the pockets of the rich before I would give out any economics gold stars.
Honestly, if people were rational actors about economics, they’d stop thinking the President can do much about how they feel about the economy. And using Gas prices as the measure is one of the most asinine things I’ve ever seen.
And this story makes a claim that purchasing power is greater in October '23 than October '22 while omitting the 6.5% rate for '22 and the 7% rate the year prior. Inflation is down this year, but that doesn’t dig us out of hole created during the two prior years.