Peter Coy: So, Binya, Americans seem very grumpy about the economy lately, despite what looks like some pretty good news. I bet a lot of people will be talking over Thanksgiving dinner about why that is. I think I have some ideas to chew on.
Let me throw out one thing to start. One problem is that economists and the general public talk past each other. Inflation is a good example. To an economist, inflation is the change in prices. So if prices go up sharply but then level off for a few months, the monthly inflation rate at that point is zero. There’s no more change in prices, right? But to most people, inflation is high prices. So they look at high prices in the supermarket or wherever and say, “That’s inflation!” Woe unto the politician or economist who tells them otherwise.
Another thing bugging people is housing. Home prices and mortgage rates are up, and affordability is way down. Rents are also up. This is no problem if you already own, but it’s awful if you’re a young person trying to buy your first place. That’s why you see TikTok talking about a Silent Depression; that might also explain why 93 percent of people 18 to 29 in a recent New York Times/Siena College poll said the economy was poor or only fair.
Binyamin Appelbaum: I find that people are not always as excited as I am to talk about economic policy at the dinner table. But maybe you’re hanging out with a better crowd.
Anyway, it seems to me there are basically two flavors of answers to this question. The first looks at the economic data and sees good reason for America’s bad mood. I would put your answer in that category. The second concludes that people are mad despite the economic data. Our colleague Paul Krugman is on that side of the debate.
I want to introduce a third kind of explanation, or perhaps it’s just a twist on the other two: When Americans answer questions like these, I think they are generally talking about the future. So when people say they’re unhappy about the economy, we should understand that primarily as a statement of concern about where we’re headed.
Coy: Binya, you used the word “policy.” Most people I know really like talking about the economy — jobs, prices and so on — but their eyes glaze over like a honey-roasted bird when you bring up economic policy. That’s geek territory.
Which brings me to Bidenomics. To an economist, Bidenomics is a set of policies that you and I have written a lot about. More public investment. Empowering workers. More competition. The White House likes to point out that it has made a lot of progress on those priorities. But when most people hear “Bidenomics,” they just think “Biden’s economy” — the state of the economy while President Biden is in office. And they aren’t happy about it.
Appelbaum: In an NBC News poll released last weekend, only 19 percent of respondents said that they were confident the next generation would have better lives than their own generation. NBC said it was the smallest share of optimists dating back to the question’s introduction in 1990.
For me, this is the great failure of the Biden administration and its economic policies: Americans simply aren’t convinced that the future is bright.
That kind of pessimism might be easier to understand if the economy were in the tank. But in the latest edition of the University of Michigan Survey of Consumers, a widely cited gauge of consumer sentiment, respondents reported an improvement in their personal finances. At the same time, their views of the long-run economic outlook fell sharply.
Coy: Yeah, pessimism is a tough problem to fix. We need someone like Franklin Roosevelt, who lifted the spirits of the nation when things were much worse than they are now. Actually, Mr. Biden has modeled himself a bit on Roosevelt. He’s inveighing against crony capitalists, saying the government is here to help and so on. For whatever reason, it’s not clicking for him the way it did for Roosevelt.
I do think changing perceptions of inflation would help a lot. The reality is pretty good if you look at the data. Prices have gone up a lot, of course, but according to a careful analysis by Joseph Politano, an economics writer who looked at the data in multiple ways, since the pandemic, average wages have gone up slightly more than prices. That’s a raise. Interestingly, the percentage gains have been bigger for lower-wage workers.
That’s not the perception, of course.
Binya, what would you do to lighten the national mood, aside from pardoning some turkeys?
Appelbaum: I’m skeptical that prices are the problem. Yes, to quote the Federal Reserve chair, Jerome Powell, people “hate inflation, hate it.” I ask pretty much everyone I meet these days how they’re feeling about the economy, and that’s a common theme.
But Americans aren’t behaving like people crushed by inflation. Consumer spending has been a lot stronger this year than pretty much anyone predicted. And the pace of price increases has slowed down to something close to normal, even as people continue to say that they’re unhappy about the economy.
In an interesting book published a few years ago, “Narrative Economics,” the Nobel laureate Robert Shiller observed: “Trying to understand major economic events by looking only at data on changes in economic aggregates such as gross domestic product, wage rates, interest rates and tax rates runs the risk of missing the underlying motivations for change. Doing so is like trying to understand a religious awakening by looking at the cost of printing religious tracts.”
Professor Shiller is right about the importance of narratives in driving economic events, and I think what we’re experiencing is a crisis of faith in the narrative of capitalism — at least as practiced in the United States in 2023 — as an engine of shared prosperity. Americans are dying sooner. They can’t afford to own a home. The cost of college is crushing. Global warming looms. And the world seems a lot less safe and stable than it did a few years ago.
As for what we do about that …
Coy: Love the Shiller quote. Along those lines, I just reread Jimmy Carter’s so-called malaise speech from 1979 — which, by the way, never uses the word “malaise.” That was another time when people were grumpy about the economy, particularly energy prices. Mr. Carter called for “a little sacrifice from everyone,” for energy conservation and so on. We forget now, but the speech actually went over well, even though he ended up losing to Ronald Reagan the next year. But I don’t think Mr. Biden could get away with a speech like that. Americans are so deeply divided that they don’t want to hear about shared sacrifice. Just not in the mood for it.
Appelbaum: Yeah, sacrifice is for turkeys. But you know what people might want to hear? Less talk about making life better for factory workers and more focus on making life better for retail workers and health care workers and warehouse workers — the jobs that many more Americans actually do.
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