Uneasy, Unstable and Expensive – Economic Perception vs Reality

“I feel like no matter what they tell me about the economy, they don’t really know, because they don’t have a coherent plan.” 

White collar professional Theresa Foster in Albany, NY

“Even though I’m OK right now, there’s a sense it could all go away in a second.” 

 Ohio nurse, Kristine Funck

“You could argue unemployment is 3.7%, but who cares with this level of uncertainty?... Because that’s what people are feeling. They’re not feeling hope. They’re not feeling one country. They’re feeling a divisive, divided United States of America… What people are sensing is not whether the inflation is becoming moderate; it’s that the dark clouds remain.” 

Nashville restaurant owner, Alfredo Arguello

“There’s some justification for some negativity about the economy, but nothing resembling the amount of negativity seen in some of the survey data.” 

Jason Furman, a top economic adviser to President Barack Obama.

“I don’t think the American dream still exists… I don’t think it’s attainable anymore. Because you need money to make money, and I think you either start out ahead or you’re constantly playing catch-up now.” 

A college student aspiring to be a teacher.

“We find that Republicans cheer louder when their party is in control and boo louder when their party is out of control,’’ 

Stanford University economics professor and Obama/Biden advisor Neale Mahoney, and Ryan Cummings, a Ph.D. student, in a November Substack posting.

The above quotes – gathered by Aaron Zitner, Amara Omeokwe, Rachel Wolfe and Rachel Louise Ensign in a February 7th article in The Wall Street Journal – are a very good summary of the mood of the nation. Major company CEOs have never seen compensation increases and top corporations have never experienced soaring profits at this level since WWII. Income inequality has never been so pronounced. Yet Americans are finding college is no longer a guaranteed path to higher pay, especially when the cost of student loans is out of control. While housing has stopped its super-price rise, rent and mortgages have accelerated forced downsizing and homelessness across the land. Faith in governments’ ability to right this ship is plunging.

As I have said before, upward mobility in the US has been relegated to the history books. “Interviews with Americans across the country—some affluent, some just scraping by; some with advanced degrees and others with blue-collar jobs; some Republican, some Democrat—show they are weighed down by fears of an unpredictable world in which no one in government or business is competent to steer the nation through precarious times… Some 78% of Americans said they aren’t confident their children’s lives will be better than their own, a Journal-NORC survey found last year. That’s a record in surveys dating to 1990. Only 36% said the American dream—the idea that anyone can get ahead with hard work—still holds true, down from 53% who had said so about a decade earlier, another Journal-NORC poll found.” WSJ

In hard numbers, and most certainly by comparison with most of the rest of the world, the US economy is far and away the most successful. The political disconnect, exacerbated by people only listening to and watching news sources that are consistent with their views, has created a self-fulfilling push-pull where the very solutions that many voters demand are causing precisely the horribles they rail against the most. Exactly how does cutting immigration lower prices? Clearly it doesn’t. While there are reasonable immigration solutions on both sides of the aisle – see my recent Some GOP Ideas on Immigration Make a Lot of Sense blog – there is a strong MAGA incentive to make certain there is no successful immigration reform; they do not want to lose a major campaign advantage against Joe Biden on the single issue they believe will galvanize their own political support.

It's hard to ignore the price increases in… almost everything… but food, fuel and housing reside in the world of instability and/or sticker shock. “There’s a striking disconnect between the widely shared pessimism among Americans and measures that show the economy is actually robust. Consumers are spending briskly—behavior that suggests optimism, not retrenchment. Inflation has tempered. Unemployment has been below 4% for 24 straight months, the longest such stretch since the 1960s…

“While many groups of Americans have made gains during the pandemic recovery, some cracks have emerged… Americans in lower-paying industries saw some of the strongest pay raises in recent years, but wage growth is now slowing overall, and more so for these workers. Research from the Federal Reserve Bank of Dallas found that low-income households disproportionately bear the brunt of inflation, in part because of the high share of their income that goes toward food, gas and rent… While inflation has cooled substantially from its peak in 2022, wage growth only began to outpace price increases in mid-2023, meaning many Americans are still reeling from a long stretch in which it felt like their earnings couldn’t go far enough…

“The unemployment rate remains at near-record lows, but layoffs have hit some sectors of the economy with force, including technology and some other white-collar fields, such as accounting and media… [Also many] Americans point to structural changes in the economy that have left them anxious about the future. The decline of company pensions has shifted more of the risk of funding retirement from employers to workers.” WSJ. Social Security seems teetering.

Several red states, particularly Texas, tout a constitutionally impossibility of secession. Texas Gov. Gregg Abbott is openly defying a US Supreme Court ruling negating his claim to Texas’ controlling its international border with Mexico, excluding federal authorities’ access. Feelings of stability now follow the political bent of the relevant voters. “One factor in the downbeat outlook is that many Americans view the economy through a political lens. Their opinion is more optimistic when the party of their choice holds the White House.

“In the weeks before the 2016 election, only 11% of Republicans rated the economy as excellent or good, CNBC polling found. That jumped to 26% right after the election, even before Donald Trump was sworn in as president, and rose to 73% within a year. By contrast, Democratic views of the economy turned more negative over the same period…Some analysts find signs that the partisan skew in views of the economy is particularly powerful now, with Biden in the White House, because Republicans are more likely than Democrats to adopt a negative view when their party is out of power.” WSJ.

Each of the blue and red constituencies is constantly hammered with political messages slamming or praising the state of the nation, each filtering out the opposite party’s message. Clearly, MAGA GOP voters have been subject to the most consistent negativity, much of it mired in slogans without factual support, but a battle between two geriatric candidates, one seemingly feeble and the other hopelessly corrupt and narcissistic, is easy prey for foreign powers using AI-driven mis- and dis-information to disrupt our election… with relative ease. We seem to be content killing ourselves with no desire to rebuild the nation… together.

I’m Peter Dekom, and we are so politically motivated by misshapen political messages that many are willing to vote for autocracy and policies that further destabilize our economic values, an exercise in mega-self-destruction.