Here’s a curious paradox: Even economically fine Americans are increasingly convinced the U.S. economy overall is circling the drain.
Nobel economics laureate Paul Krugman in his New York Times newsletter published Nov. 15 (it’s only available by subscription), noted with some alarm but resignation that new survey data shows “a huge divergence between what people say about the state of the economy, which is quite negative on average, and what they say about their own personal finances, which is fairly positive.”
Why is that?
Krugman believe the reason is that people’s opinions are more influenced by the media information they ingest than what they personally experience in life. Partisan politics is the bogeyman here, since most Americans consume media that caters to their existing biases, not which provides accurate info.
“You might be tempted to assume that in a world in which getting and spending occupies a large part of everyone’s life, people would have a pretty good sense of how the economy is doing, even if they aren’t familiar with national income accounting,” Krugman writes. “In reality, however, economic perceptions are largely shaped by media coverage — and, increasingly, by partisanship.
“Indeed, the role of partisan skew has gotten so large recently that the Michigan Survey of Consumers, probably the most influential gauge of economic perceptions, highlighted it in its most recent data release.”
Krugman laments that Americans seem to have but a gauzy grasp of what the policies their political leaders are promoting are actually accomplishing, not least economic policy.
“In fact, Republicans now have a more negative assessment of economic conditions than they had in March 2009, the depths of the financial crisis, when the unemployment rate was 8.7 percent and the economy was losing 800,000 jobs a month,” Krugman writes.
It’s way better now.
Indeed, many Republicans are doing fine economically, with a still-robust stock market and, particularly, the business class’s continuing outsized ability to profit far more than others from said economy. Of course, undereducated and underfunded other Trump supporters, especially since the pandemic began, have had a much tougher time making ends meet.
For instance, since Donald Trump was thumped in the 2020 election and lost the presidency to Joe Biden, the former president’s supporters have embraced a nearly apocalyptic view of the U.S. economy, while Democrats have developed a somewhat rosier tone.
A recent Univeresity of Washington study illustrates how unhinged from reality Republican stances remain on virtually every major political questions, including our nation’s economic health.
“This divergence suggests that people’s views on the economy reflect what they’re seeing on often partisan news media and what their politics say should be happening, rather than what they themselves are experiencing,” Krugman writes.
“So many voters seem to have skewed perceptions of economic reality. Furthermore, to the extend that they see genuine problems, they may not be clear about which problem politicians can solve and which they can’t.”
For instance, most Americans don’t understand that politicians, even presidents, have precious little influence over the price of gasoline at the pump, which, in fact, simply reflects fluctuations in the supply and demand of a globally traded commodity (crude oil).
Still, for Republicans, it’s all Joe Biden’s fault that it now costs more to fuel-up their vehicles.
It isn’t. It’s globalization.
But that hasn’t stopped the president from trying to deflect blame, as noted in this September CBS report on the causes of the recent gas price surge.
Krugman laments the toxic disconnect between citizens’ sub-par understanding of political realities and its damaging effect on governance:
“So we’re living in a nation with many voters who seem to have both a distorted view of the state of the economy and false beliefs about what aspects of the economy politicians can affect. How is democracy supposed to function well under these conditions?”
Even Nobel laureates in economics are stumped about what to do.
“It’s a real conundrum,” Krugman points out. “And if you’re waiting for me to propose solutions, well, not today.”
Or even next year or the decade after, if we don’t wise up in a hurry. And by the it might be too late.