Are Americans Crazy to Dislike This Economy?
If you are looking for an economic sector that has been strengthening in recent months, we suggest you look at those employed in figuring out why the American people remain so negative about their personal finances and economic prospects even though the White House and its friends have pronounced “Bidenomics” a resounding success.
A small army of establishment media types and economists have engaged themselves in the task of unraveling what they take to be the great mysteries of our time: why the public is so unhappy with the state of the economy and why the public is not more grateful to President Joe Biden for the state of the economy.
“The seeming disconnect between consumer sentiment and the state of the macroeconomy has been a defining characteristic of the post-COVID economy,” a recent research paper from the Brookings Institution begins.
The White House and the president himself have repeatedly offered up a conspiracy theory explanation. The problem, they say, is that the media is too negative about Biden’s economy. If only the news media would accentuate the positive, as the old saying had it, then the public would realize how good they really have it.
“Take a look. Start reporting it the right way,” Biden recently scolded reporters.
We have described this in the past as wishcraft rather than statecraft. It holds that public opinion is swayed not by policy or reality but by the words used to describe it. This is a form of magical thinking in which the right combination of words actually changes reality. The world is simply “will and representation,” as the philosopher Arthur Schopenhauer famously claimed in a book by that title.
Experts Say the Economy Is Sunshine and Rainbows
In fairness to the president and his advisors, this is not just a wild idea they dreamed up on their own in some dark corner of the West Wing. The very best and brightest of the American left also subscribe to the wishcraft view of the world.
That Brookings Institution paper we mentioned earlier claims that it is, at least in part, the negative tone of economic coverage—or, more strongly, “biased sources of information”—that has soured Americans on the economy:
In sum, the discrepancy between the macroeconomy and household sentiment has given rise to several competing theories to explain the apparent disconnect. Our simple econometric model adds to evidence that biased sources of information play a role, and suggests that economic news has become systemically more negative beginning in 2018, with the negative bias growing over the past three years. To be clear, this analysis shows that the conditional tone of news is becoming more negative over time, but requires assumptions about how this increased negativity affects sentiment—including in particular the role of systematic bias in driving inaccurate perceptions about U.S. economic performance. While this new relationship may not explain the entire sentiment puzzle, it presents novel explanations for why consumer sentiment appears to be divorced from the macroeconomy and why survey respondents inaccurately describe the U.S. economy to be in a recession.
Allies of the White House are using this paper in meetings with journalists at establishment news organizations to urge “better” coverage of the economy, according to reporters who spoke with Breitbart Business Digest on the condition of anonymity for obvious reasons. That is likely one of its intended uses: to shame journalists into changing the way they write about the economy.
We would not claim that public opinion cannot be swayed by biased news coverage. But it strikes us as seriously unlikely that the American establishment media is systemically biased against the Biden economy.
Maybe Try Listening to the People Instead
The question begging statement with which the Brookings analysts begin their study is telling. They assume that the state of the economy is great and that the public’s assessment is wrong. The inquiry is aimed at figuring out why so many people are wrong.
A simpler explanation would be that the economy is falling short of the public’s expectations. While it is true unemployment is very low, it was low prior to the pandemic but without the additional burdens of high inflation and higher interest rates. Three years of high inflation have dissolved savings and made many of the comforts of life less affordable. High interest rates have pushed homeownership out of reach and made major purchases—such as buying a car—nearly unaffordable for many families. People are stuck in their current homes, unable to sell because their next home would carry a much pricier mortgage.
Biden promised that he would “grow the economy from the bottom up and the middle out,” but instead people are finding they are struggling to pay for groceries, Christmas presents, and family vacations. The economy might not be in a recession as economists define it—which is, weirdly, by a declaration of the authority of an obscure committee based in Cambridge, Massachusetts. But by a plainer definition—such as, people feeling like they are falling behind and are worse off than they were—we’ve clearly been in a recession.
A recent poll from Rasmussen found that only 34 percent of the public expect the economy to improve this year. That’s probably too optimistic. The Federal Reserve and a consensus among economists say growth will slow this year and unemployment will rise. Job opportunities, as measured by employment vacancies reported in the monthly Job Openings and Labor Turnover Survey, have been contracting for months.
If the economy does keep expanding at the rate it did last year, inflation is likely to reignite, and interest rates will either stay high or go higher.
None of this is likely to lead to much improvement in consumer sentiment. No doubt the White House, the establishment media, and the sort of folks who work at places like the Brookings Institution will claim it’s all in our heads.