Perception of bad economy hampers Biden campaign
If Donald Trump wins, the main reason will surely be that a majority of voters believe America’s economy is in bad shape. And no matter how much you may dread a second Trump administration, electoral defeat for an incumbent who is seen as presiding over a bad economy is, at least in one sense, politics as usual.
By normal measures, however, the U.S. economy isn’t in bad shape. In fact, it’s doing quite well, better than almost all its global peers.
When asked, most Americans don’t say they’re doing badly. On the contrary, survey after survey finds most voters are feeling positive about their personal financial situation, even as they insist the economy is terrible. Some surveys also ask an in-between question: What’s the state of your local economy? And respondents are typically much more positive about the economy in their own state than about the nation’s as a whole.
The debate about the causes of economic pessimism has moved substantially over time. When I first wrote about a disconnect between economic perceptions and economic reality, I think many people dismissed the argument. Over the course of 2023, however, as inflation fell rapidly while the economy defied predictions of recession, there seemed to be ever fewer economic commentators insisting things really were bad, and more acknowledging that something strange was happening — a vibecession.
Outside the economic commentariat, however, it often feels as if I’m butting my head against a wall. The dialogue tends to go something like this:
Me: “People say the economy is terrible, but that their personal financial situation is good. That’s strange.”
Critic: “You’re saying people should feel good because official statistics are good, ignoring their lived experience. Good luck with that.”
Me: “Never mind the official statistics. The point is that if you ask people about themselves — that is, their lived experience — they’re fairly positive. But they still say that the economy, big picture, is bad.”
Critic: “So you’re telling people that fancy statistics matter more than their lived experience.”
Sigh.
The gold standard for assessing economic perceptions is the Federal Reserve’s annual survey of economic well-being of American households. The results of the latest survey, taken in October, have just been released, and while there’s a lot of information in the report — notably, families with children appear to have been hit hard by the end of pandemic-era financial aid — the key finding hasn’t changed much. Most Americans continue to say they’re doing OK financially, but they think the national economy is doing badly — while they’re being considerably more positive about their local economy.
The report notes “the gap between people’s perceptions of their own financial well-being and their perception of the national economy has nearly doubled since 2019.”
And these results match what pollsters tell us. For example, according to the latest Quinnipiac University poll of Wisconsin, 65% of registered voters there say the national economy is not so good or is poor, while the same percentage say their own financial situation is good or excellent.
Then there’s the new Harris Poll survey. The headline is that 56% of Americans believe our economy — which is adding jobs in the hundreds of thousands each month — is in a recession. But “recession” may not mean the same thing to most people that it does to economists. What’s harder to rationalize is that roughly half of respondents believe unemployment, which remains close to a 50-year low, is at a 50-year high or, even more startling, that stock prices — which have been hitting records, and are reported everywhere, all the time — have been falling.
It’s hard to pin down where negative views of the economy are coming from. For now, let’s just say that while negative perceptions about the economy are obviously a major problem for President Joe Biden, it’s a peculiar sort of problem. The economy isn’t actually bad — in fact, it’s in remarkably good shape. Yet somehow there’s a pervasive sense that the economy is bad, and that sense is what’s hurting Biden’s campaign.