If Donald Trump wins the election, a major reason will surely be that a majority of voters think the American economy is in a bad state. And no matter how much we fear a second Trump administration, an electoral defeat for a sitting president seen as presiding over a bad economy is, at least in some sense, politics as usual.
But by any normal standard, the U.S. economy is not in bad shape — in fact, it's doing extremely well, better than almost every other country in the world.
So much for official statistics, one might say: if people feel they are in a bad situation, then the customer is always right when it comes to the economy.
But the bottom line is that when asked, most Americans won't say their economy is doing badly. On the contrary, survey after survey has found that most voters feel positive about their personal financial situation, even as they claim the overall economy is terrible. Some surveys even ask a middle-ground question: “How is the economy doing in your area?” And respondents are typically much more positive about their state's economy than the nation's overall economy.
To be honest, I didn't want to write about this topic again — I've been complaining about it for over two years now, and you've been sticking with me all this time — but I felt in good conscience that I needed to say something about two new surveys that seem to further highlight the paradox that is low economic awareness.
Before I get to these surveys, I want to say that the debate about the causes of economic pessimism has, in some ways, changed a lot over time. When I first wrote about the disconnect between economic perception and economic reality, I think many people dismissed the argument. But as inflation has fallen sharply through 2023 and the economy has defied recession predictions, fewer and fewer economic commentators seem to be arguing that things are really bad, and more and more are acknowledging that something strange is happening: a recession.
But outside of the economic commentator realm, it often feels like banging your head against a wall. The conversation tends to go something like this:
Me: “People say the economy is terrible, yet they say their personal financial situation is good. That's strange.”
Critic: “You're saying people should feel better because the official statistics are good, but you're ignoring people's lived experiences. Good luck.”
Me: “No, that's not what I'm saying. Never mind the official statistics. The point is that when you ask people about themselves, about their experiences, they give quite positive answers. But they still say the economy as a whole is bad.”
Critic: So you're telling people that fancy statistics are more important than actual experience.
Hmm.
About the Recent Survey: The gold standard for assessing economic perceptions is the Federal Reserve's annual Survey of U.S. Household Economic Well-Being. The latest survey results, conducted in October, were just released, and while the report contains a lot of information (particularly that families with children appear to have been hit hardest by the end of pandemic-era financial support), the key findings haven't changed much. Most Americans continue to say they're doing okay financially, but think the national economy is doing badly. On the other hand, they've become significantly more positive about their local economy.
Hasn't it always been that way? No. As the report points out, “the gap between people's perceptions of their own financial situation and their perceptions of the national economy has nearly doubled since 2019.”
And these results are consistent with what pollsters say: The latest Quinnipiac University poll in Wisconsin, for example, found that 65 percent of Wisconsin voters say the national economy is not very good or poor, while the same percentage say their own economic situation is good or very good.
Then there's the new Harris Poll survey done for the Guardian. The headline is: 56 percent of Americans think our economy, which creates hundreds of thousands of jobs every month, is in a recession. But the word “recession” may mean different things to economists than it does to the general public. Even harder to rationalize is that about half of respondents believe the unemployment rate, near a 50-year low, is at a 50-year high, or, even more startling, that stock prices, which have broken records and are constantly in the headlines everywhere, are falling.
Now, you're probably hoping I'll explain what's going on and offer a strategy for Democrats to turn things around. But at this point, it's surprisingly hard to figure out where the negativity about the economy is coming from. I'll leave the political advice for a later column.
For now, let's just say that while negative perceptions of the economy are clearly a big problem for President Biden, it's a special kind of problem. The economy is not actually bad; in fact, it's in surprisingly good shape. Moreover, most (though certainly not all) Americans feel pretty good about their financial situations. But somehow there is a widespread sense that the economy is bad, and that feeling, not some economic reality or personal experience, is hurting Biden's campaign.
