Politico Admits Voters Were Right: The Economy Did Suck

Last October, Politico ran a piece by Michael Grunwald entitled "Everything Is Awesome (Again!)," arguing that the economy was much better than voters believed. Grunwald gushed:

The stock market just hit another all-time high. The uninsured rate is near an all-time low. Apartment construction hasn’t been this hot in half a century. Crime, inflation and illegal immigration are falling. Economic growth, job growth and wage growth are strong. The U.S. is no longer at war in Iraq, Afghanistan or, at least officially, anywhere else and its carbon emissions are declining, because its clean energy production is soaring. It’s still the richest and greatest nation on Earth, the land of opportunity that spawned the artificial intelligence boom, ultimate fighting, SpaceX and the Hawk Tuah multimedia empire. And our short national nightmare is over, because after 11 months without adorable cuddle-monsters, the National Zoo just took custody of two giant pandas.

He then explained why voters shouldn't believe their lying eyes:

    ... Half of Americans believe unemployment is at a 50-year high, when it’s actually near a 50-year low. Two of every three voters say the country is on the wrong track, even though new business applications are at a record high, teen birth rates are at record lows and America’s economy has grown more than twice as fast as Europe’s since Covid.

    This gap between perception and reality seems particularly relevant in an election year, as former President Donald Trump rips America as a crime-ridden, inflation-ravaged dystopia overrun by vicious migrants with bad genes. At the same time, current Vice President Kamala Harris has mostly declined to make the case that the state of the nation is better than people think, arguing instead that Trump would make it worse and it’s time to turn the page.

    If that sounds familiar, well, it was definitely a theme of the 2016 edition of Everything Is Awesome, when Trump first won the presidency on a promise to Make America Great Again and ended up burying this franchise for seven years. Now that things actually are awesome again, it’s worth remembering what can happen to incumbent parties when they’re unwilling to say so.

But notwithstanding the rosy picture painted above, voters remained pessimistic about the economy heading into the November election, much to the chagrin of the elites. Vox published an article on November 7, 2024, addressing this disconnect, noting:

    Enduring pessimism about the US economy has puzzled political analysts, given that most major indicators suggest it is strong and that the US has recovered better than other countries from a pandemic-induced slump. Inflation has come down significantly from its peak in June 2022, slowing price hikes for basic goods. The Federal Reserve started cutting interest rates, making borrowing money cheaper. The economy has continued to grow at a solid rate. Unemployment dipped to its lowest level in 54 years in 2023 and stayed within a desirable range.

    On paper, everything looked great. But in poll after poll ahead of the election, voters signaled concern for the economy and ranked inflation as their top issue. The rough, preliminary voting data available in exit polling showed the same trend.

    At the heart of that disconnect might be elements that broad economic indicators often struggle to capture: Despite a “strong economy,” many Americans continued to feel the burden of higher prices, struggled to find work, and took on more debt. And the Election Day results suggest they blamed Democrats — specifically President Joe Biden and Democratic nominee Vice President Kamala Harris — for those problems.

In other words, the elites were doing great so why were the peasants so unhappy?

    But, as it turns out, the voters saw the economy for what it was. Eugene Ludwig writes that "Voters Were Right About the Economy. The Data Was Wrong." He begins:

    Before the presidential election, many Democrats were puzzled by the seeming disconnect between “economic reality” as reflected in various government statistics and the public’s perceptions of the economy on the ground. Many in Washington bristled at the public’s failure to register how strong the economy really was. They charged that right-wing echo chambers were conning voters into believing entirely preposterous narratives about America’s decline.

    What they rarely considered was whether something else might be responsible for the disconnect — whether, for instance, government statistics were fundamentally flawed. What if the numbers supporting the case for broad-based prosperity were themselves misrepresentations? What if, in fact, darker assessments of the economy were more authentically tethered to reality?

Hold on to that last couple of sentences because what he goes on to describe are government statistics that track and measure items that have little bearing on how the majority of Americans live and work. Rather, the focus is on factors that might have been relevant to a middle-class family of the 1950s and '60s, but now only reflect the highest paid workers holding full time jobs.

    His first stop are unemployment figures. Ludwig explains:

... Known to experts as the U-3, the number misleads in several ways. First, it counts as employed the millions of people who are unwillingly under-employed — that is, people who, for example, work only a few hours each week while searching for a full-time job. Second, it does not take into account many Americans who have been so discouraged that they are no longer trying to get a job. Finally, the prevailing statistic does not account for the meagerness of any individual’s income. Thus you could be homeless on the streets, making an intermittent income and functionally incapable of keeping your family fed, and the government would still count you as “employed.”

That is why you will often see conservative pundits pointing to other statistics like the labor participation rate to show that the economy is essentially unhealthy and there is substantial unemployment, even when the government's official employment numbers (before they are revised downward) paint a rosy picture. Ludwig continues:

... If you filter the [U-3] statistic to include as unemployed people who can’t find anything but part-time work or who make a poverty wage (roughly $25,000), the percentage is actually 23.7 percent. In other words, nearly one of every four workers is functionally unemployed in America today — hardly something to celebrate.

    Wages is another statistic that is misleading. "The prevailing government indicator, known colloquially as 'weekly earnings,'" Ludwig explains, "tracks full-time wages to the exclusion of both the unemployed and those engaged in (typically lower-paid) part-time work." Using the standard wage data from the government, the median American wage is roughly $61,900; but, according to Ludwig, "if you track everyone in the workforce — that is, if you include part-time workers and unemployed job seekers — the results are remarkably different. Our research reveals that the median wage is actually little more than $52,300 per year." 

    Inflation statistics, based on the Consumer Price Index, suffers many of the same issues in that it does consider a balanced view of what most consumers actually buy and makes up much of their budget. The CPI tracks the prices of 80,000 products. But:

Those with modest incomes purchase only a fraction of the 80,000 goods the CPI tracks, spending a much greater share of their earnings on basics like groceries, health care and rent. And that, of course, affects the overall figure: If prices for eggs, insurance premiums and studio apartment leases rise at a faster clip than those of luxury goods and second homes, the CPI underestimates the impact of inflation on the bulk of Americans. That, of course, is exactly what has happened.

When considering a smaller basket of goods more typical of what most Americans purchase, Ludwig and his colleagues found "that, since 2001, the cost of living for Americans with modest incomes has risen 35 percent faster than the CPI. Put another way: The resources required simply to maintain the same working-class lifestyle over the last two decades have risen much more dramatically than we’ve been led to believe." In short:

When our more targeted measure of inflation is set atop our more accurate measure of weekly earnings, it immediately becomes clear that purchasing power fell at the median by 4.3 percent in 2023. Again, whatever anyone may have claimed from the prevailing statistics during the run-up to the 2024 election, reality was drastically more dire for the great majority of Americans.

    Ludwig next examines GDP and discovered that, in the case of the modern American economy, a rising tide did not, in fact, raise all boats. Rather, "for the most part, those living in more modest circumstances have endured at least 20 years of setbacks, and the last four years did not turn things around enough for the lower 60 percent of American income earners." 

    Ludwig takes the stance that the problems in the economic figures were just a matter of chance, of bad luck, that anyone could have overlooked. But I've seen arguments for decades that the statistics were inherently flawed for most of the same reasons Ludwig has outlined. The question is whether the statistics and methods were chosen to be misleading, to paper over how bad the economy has been for the little guy.