For an alternate viewpoint, see “Point: Critics are Missing the Forest for the Trees.”
By many indicators that matter to a lot of brilliant economists, industrialists, financial analysts and Democratic Party politicians, “Bidenomics” is delivering the goods. But for rank-and-file voters, something is missing. Public sentiment about the economy has been rising lately, but it remains well below the pre-COVID years in respected measures like the University of Michigan Consumer Sentiment Index. The mood, it appears, fails to match the latest 2023 real GDP growth estimates, which came in at 2.5 percent.
Clearly, there is a disconnect, and we shouldn’t brush off the understanding of consumers who are more bothered by their job prospects or the prices of Snickers candy bars, ground beef, or a tank of gas than they are impressed by Consumer Price Index trends. In fact, a closer look at the data reveals a picture more murky than rosy.
The good news appeared in a December White House report replete with 10 charts documenting how economic growth has far exceeded expectations, manufacturing investment has shot skyward, job growth has hit a healthy pace, and wages are now increasing faster than inflation. While this may be accurate, there is far more to the story.
After all, the inflation surge that had to be addressed was rooted in COVID-stimulus deficit spending by the Trump and Biden administrations.
Manufacturing’s pickup has much to do with huge Biden-era subsidies, also financed through deficits, along with lasting Trump-Biden tariffs, which increase the prices of internationally traded goods. It’s as though the doctor is taking credit for lessening the side effects of a treatment he prescribed.
Still, we can be glad much of the economy is strong. As for understanding why so many Americans see things differently, it’s not that difficult.
Inflation and a changing labor market remain sources of anxiety. Uncertainty about next month’s paycheck by millions of federal employees and military personnel rises when politicians argue earnestly about shutting down the government.
Constantly streaming news of millions of refugees crossing the nation’s southern border, some of whom will face deportation or become a welfare burden borne by local taxpayers, can cause frowns to replace smiles no matter which side of the issue you’re on. Raging wars in the Middle East and Ukraine affect American families.
Psychologist Carl Jung explained the difference between data, averages that may not apply accurately to any family or person, and understanding, which, while not always scientific, matters more to real people living in real homes and buying groceries in real neighborhoods. Yes, much of Biden’s economic data looks wonderful, but believing that a low unemployment rate means any American can get more than one good-paying job offer is like believing that a river with an average depth of three feet should be safe to cross at any point. Yes, the data are helpful, but so is the view from the bank.
As shown by the most recent state economic indicators maintained by the Federal Reserve Bank of Philadelphia, significant differences in prosperity were reported across the states. What’s true in the Sun Belt isn’t necessarily true in the Midwest. And since June, state economies have generally gotten worse, not better.
Writing recently on the disconnect in economic perceptions, economist Paul Donovan argued that we need a “Snickers Bar index.” If politicians want to know how consumers really feel, they need to shop regularly at a typical grocery store, keeping an eye on the changing prices of Snickers (candy went up about 13 percent last year), ground beef and a pound of coffee. People buy and consume these things frequently; few scan or even care about Department of Commerce reports.
In the real world, costs hit home in different ways. According to the Bureau of Labor Statistics, the prices of electronic appliances have fallen dramatically. Still, as Donovan pointed out, people may buy new TVs every five or 10 years. They might buy a Snickers every day or so.
In fairness, any strong economy will have its weak points. The question today is: strong for whom? For politicians who want to brag about their record, or for typical consumers who still wonder when the prices paid for their shopping basket or the size of their paycheck will register meaningful improvement?
There’s a big difference between data and understanding. Right now, we need more of the latter.