As a part-time commentator on things economic, I’m often asked a seemingly straightforward question: If the economy is so good, why are Americans so grumpy?
By many measures — unemployment, inflation, the stock market — the economy is strong. Yet only 23 percent of Americans believe the country is headed in the right direction, a strong headwind for President Biden’s approval ratings. Meanwhile, Donald Trump’s formidable base of disgruntled voters endures.
As I’ve engaged with my many interlocutors, I’ve concluded that voters have valid reasons for their negativity. In my view, blame two culprits: one immediate and impacting everybody, and another that particularly affects young people and is coming into view like a giant iceberg. Both sit atop the leaderboard of reasons for the sour national mood.
While inflation has provided the proximate trigger for unhappy feelings, an understandable grimness about our broader economic prospects, particularly for younger Americans, is playing a major part.
Start with inflation. Until the chaos of the pandemic, there hadn’t been a year with average annual inflation above 4 percent since 1991. As a result, for more than two-thirds of voting age Americans, 2022 was by far the highest inflation of their adult lifetimes.
To them, higher prices just means less spending power. A recent Blueprint/YouGov poll on the economy found that just 7 percent of respondents were principally concerned about the availability of jobs, while 64 percent were most worried about prices.
The problem for President Biden is that by a margin of 43 percent to 23 percent, voters believe that he is more focused on jobs. By strikingly similar margins, they credit Republicans with mirroring their priorities: 54 percent said prices while 18 percent mentioned jobs.
Even as inflation has receded from its June 2022 peak, sentiment has hardly shifted. Many Americans appear to believe that it’s not enough for costs to rise more slowly and that prices should fall toward prior levels.
To economists, that’s a fantasy. Prices writ-large haven’t declined substantially since the Great Depression, and the price drops that consumers seem to want would most likely indicate the kind of troubled economy they fear.
With each disappointing poll — many of the recent ones show Mr. Trump edging out Mr. Biden — the frenzy among Democrats to revive their 2024 prospects has only grown. Efforts by the White House a few months ago to trumpet “Bidenomics” (a portmanteau of two of the Democrats’ largest liabilities in 2024: Mr. Biden and his economy) as a success have fizzled.
Maybe that shouldn’t be surprising. Voters may have internalized the fact that Mr. Biden’s initial policy agenda included substantial increases in government spending, a potential source of inflationary pressure.
The longer-term issue that bubbles up from polls and other data is deep pessimism about the future. Uncharacteristically, a stunning majority of Americans now believe that the next generation is likely to have a lower standard of living.
A Wall Street Journal-NORC poll from March found that just 21 percent of respondents felt confident that life for their children’s generation will be better, matching the record low since this question was first asked. In 1990, 50 percent of those asked felt life would be better for their kids.
The pessimism is easy to understand.
Consider one marker of generational progress: moving out. Nearly half of all Americans aged 18-29 live at home with their parents, the highest share since the Great Depression. In recent decades, rents in American cities have far outstripped income growth for young Americans, even those with college degrees.
Those seeking to buy their first home and “climb the property ladder” face the double whammy of high house prices and high mortgage rates, creating a massive affordability problem.
Even more fundamentally, voters — admittedly, not economists — may deserve credit for at least subconsciously comprehending two immense longer-term challenges: lagging productivity and a huge and fast-rising national debt.
Increasing productivity — how much output per hour an individual worker generates — is the only lasting mechanism for improving the standard of living. During the halcyon postwar era, between 1947 and 1973, productivity increased at a remarkable 2.8 percent annual rate.
Then its growth — save for the computer revolution boom from 1995 to 2005 — slowed markedly, to just 1.8 percent between 1973 and 2019 and an even worse 1.3 percent in the last decade of that period. Living better becomes more challenging.
The reasons for this slowdown are myriad and much debated. They range from less innovation and less investment to corporate consolidation, land use restrictions and, over the last 15 years, the sluggish recovery from the Great Recession.
Moreover, workers have not shared fully in even these more meager productivity gains, as they did in the past. Since 1990, worker productivity has risen by 91 percent, but compensation (adjusted for inflation) has risen by just 58 percent.
The national debt, which was a (relatively) modest $5.7 trillion when President Bill Clinton left office early in 2001, has reached $33 trillion. This constitutes a form of intergenerational theft; while it will most likely never be repaid, rising interest costs will eventually require higher taxes or cuts in federal programs or both.
Perhaps this is why younger Americans are particularly troubled. Mr. Biden has far lower support among this cohort than he enjoyed in the 2020 election, when 60 percent of those under 30 pulled the lever for him. Today, his share of that group hovers around 50 percent in polls.
And, among 2020 Biden voters in swing states surveyed in another recent poll, just 11 percent of the 18-to-29-year-olds thought positively of the current economy, the smallest share of any age group. (Economics are hardly all that is worrying these Americans; among other things, they are also perturbed by his handling of the Israel-Hamas war, which just 20 percent of young voters approve of.)
What can Mr. Biden do, with the election just 11 months away? Probably not much. While inflation is happily showing signs of ebbing, the deeply structural productivity problem, decades in the making, would require many tough choices and require many years to address, even if our deep political divisions were to end and a national consensus were to form around the need for action.
Regardless, the narrative that we are in a bad economy is clearly deeply embedded in Americans’ consciousness. And there are early signs in softening retail sales that consumers’ propensity to spend is starting to wane, suggesting weakening economic conditions ahead.
But the president is not without hope. Once he has an opponent, he can attack their record and policies. That worked for Barack Obama in 2012 and for George W. Bush in 2004.
When stacked up in polls against a “generic Republican,” Mr. Biden trails by 16 percentage points in swing states. Against the likely nominee, Mr. Trump, he trails by just four.
Given the extreme views of today’s Republicans on issues like abortion and democracy (not to mention Mr. Trump’s obvious character flaws), shifting the focus of the 2024 campaign to his opponent may work well for Mr. Biden — even if the economic mood remains cranky.
