U.S. President Joe Biden delivers remarks on the U.S. economy, at Auburn Manufacturing, in Auburn, Maine, on July 28, 2023.JONATHAN ERNST/Reuters
U.S. President Joe Biden can point to no shortage of good economic news. Inflation is down 60 per cent from its peak. For many workers, wages are growing faster than prices. Jobs are plentiful, in what economists have called the strongest labour market since the 1950s. Stocks are flirting with record highs. Meanwhile, gas prices are down more than a quarter from their 2022 high.
It all sounds like an optimistic message for Mr. Biden as he seeks re-election.
But when the White House tries to make that case to voters, Kerry O’Neal Costanzo hears something different.
“They’re telling me that I’m not hurting. And I don’t like that,” she said. For Ms. O’Neal Costanzo and her husband, Arizonans who own an online shop that sells Irish and Celtic-themed goods, business has not been good. Family and friends, too, talk about their struggles.
“Our economy is lousy and it has been for three-and-a-half years,” she said.
The gap between the country’s sunny economic statistics and the way voters such as Ms. O’Neal Costanzo perceive their own situations forms one of the most consequential contradictions in American politics today.
By most measures, the U.S. is doing well. But, according to recent opinion polls, a majority of Americans believe the economy is shrinking and has fallen into recession (it has not). And nearly half think unemployment is at a 50-year high (it is near its lowest point in decades).
Last month, a poll of six battleground states by The New York Times, The Philadelphia Inquirer and Siena College found that in all six of them – Arizona, Michigan, Wisconsin, Georgia, Nevada and Pennsylvania – the economy is the single most decisive issue for registered voters; in all but Wisconsin, a majority ranked the state of the economy as “poor.”
The legions of economic doubters have made fertile ground for Donald Trump, who has sought to harvest support from discontent. When he was president, “we had no inflation,” he told a rally in Phoenix this week. “And now you’re suffering with numbers that nobody has ever seen before.”
In 2022, U.S. inflation spiked to 8 per cent. Annual inflation has exceeded that tally seven times in Mr. Trump’s lifetime alone, including the year of his birth.
But the distress of the past few years has made for potent politics. More than half of Americans say they were better economically under Mr. Trump than Mr. Biden. Opinion polls show the former president also enjoys a higher level of faith among U.S. adults in his ability to do the right thing for the economy.
“The Democrats have some really serious work to do on how we message some of those issues,” said Stacy Pearson, a Democratic strategist in Arizona.
Part of the problem, she said, is that for many people the pandemic provided a financial lift that has made subsequent years feel even worse. Families took in cash transfers from the federal government. Working from home diminished spending on commuting and other expenses. In 2020 and 2021, the U.S. personal savings rate leaped to highs unseen in decades.
“There’s an entire group of people that for the first time in their adult lives had breathing room,” Ms. Pearson said. “We insult people when we tell them they’re better off today.” Her advice: remind voters that it was Democratic leaders in Congress who advocated for the unprecedented spending packages that underpinned those feelings of financial security.
“We just need to own some of the policies that led to people being better off four years ago financially,” she said.
That may not be an easy message to communicate. The Coronavirus Aid, Relief, and Economic Security Act, which authorized sending US$300-billion in transfers to many individual Americans, was signed by Mr. Trump, and much of its cash was distributed while he was president.
Any such message is also likely to be overshadowed by the way people are experiencing the economy today – a matter of psychology as much as politics.
“In general, people respond more strongly to losses than to gains,” said Yoel Inbar, director of the Morality, Affect, and Politics Lab at the University of Toronto. That means a more expensive grocery bill is likely to be more keenly felt than a wage hike.
“Think about inflation as feeling like a loss. You are going to be more reactive to that than you are to the financially equivalent gain,” he added.
It doesn’t help that inflation is merely a measure of a rate of change. Even if it slows, previous increases remain in place. Prices may now be rising at a far more modest pace, but those small increases come on top of increases from the past few years that, in aggregate, exceed 17 per cent.
People’s perspectives also tend to be shaped most strongly by what scholars call “salience.”
“It’s how much people notice stuff. And inflation is so noticeable. It’s every time you go to the grocery store,” Prof. Inbar said.
That feeling of malaise is driving political change in many ways. For Ms. O’Neal Costanzo, it has propelled her family further into politics. Her husband, Andrew Costanzo, is running as a Republican for the state House of Representatives. “It’s just ridiculous, the state that our country is in,” he said.
Economic unhappiness is also driving changes in self-perception. Texans, for instance, long thought of themselves as economically exceptional – the so-called Texas miracle. No longer. Research conducted by the University of Texas at Austin’s Texas Politics Project shows a majority of people in the state now think of themselves as worse off than others.
In fact, Texas, which Mr. Trump won handily in the past two elections, is one of just five states enjoying better-than-average performance in jobs, income, overall economic growth and gas prices, a recent ABC analysis found.
But in politics, how Texans – and many other Americans – perceive their own well-being matters.
“Sentiment toward the economy is one of the fundamental features of every presidential election,” said Joshua Blank, director of research for the Texas Politics Project.
“When people repeatedly tell you that the economy is not great, you’ve just got to believe them at some point,” he said. And at the moment, “this economy doesn’t feel good to a lot of people.”