Paul Krugman: The US continues to suffer a ‘vibracession’ | Business

Paul Krugman: The US continues to suffer a ‘vibracession’ | Business
Paul Krugman: The US continues to suffer a ‘vibracession’ | Business

If Donald Trump wins the election, the main reason will surely be that the majority of voters believe that the US economy is doing poorly. And as much as there are fears of a second Trump administration, the electoral defeat of a sitting president who is seen as presiding over a bad economy is, in at least one sense, par for the course in politics. However, by normal indicators, the US economy is not doing badly. In fact, it is doing quite well, better than almost all the world’s economies. It doesn’t matter what the official statistics say, you will think; If people think they are doing poorly, when it comes to the economy, the customer is always right.

But here’s the kicker: When asked, most Americans don’t say they’re doing badly. On the contrary, poll after poll reveals that the majority of voters feel optimistic about their personal economic situation, even though they insist that the economy in general is terrible. Some surveys also ask a middle question: What state is the local economy in? And those interviewed tend to be much more optimistic about the state of their economy than about that of the country as a whole. Let me be frank: I did not want to write about this topic again. I have been insisting on it for more than two years and you have put up with me. But, in conscience, I think I should say something about two new surveys that seem to make the paradox of economic misperceptions even more evident.

Before we get to those surveys, let me tell you that, in some ways, the debate about the causes of economic pessimism has evolved substantially over time. When I first wrote that there was a disconnect between perceptions and economic reality, I think a lot of people rejected the argument. However, over the course of 2023, as inflation fell rapidly while the economy defied recession predictions, there seemed to be fewer and fewer economic analysts insisting that things were really bad, and more acknowledging that something strange was going on. : a vibracession.

However, outside the world of economic commentators, I often feel like I’m banging my head against the wall. The dialogues usually go more or less like this:

Me: “People say the economy is terrible, but their personal financial situation is good. It’s a bit strange”.

Detractor: “You are saying that people should feel good because the official statistics are good, ignoring their lived experience. Good luck with that”.

Me: “No, that’s not what I’m saying at all. Forget official statistics. The point is that if you ask people about their own situation – that is, their lived experience – they are quite optimistic. But he continues to affirm that the economy, in general, is doing poorly.”

Detractor: “So what you are telling people is that technical statistics matter more than your lived experience.”


About those recent surveys: The gold standard for assessing economic perceptions is the Federal Reserve’s annual survey of the economic well-being of American households. The results of the last one, carried out in October, have just been published and, although there is a lot of information in the document – in particular, families with children seem to have been greatly affected by the end of pandemic-era financial aid —, the main conclusion has not changed much. Most Americans continue to say they are doing well financially, but believe the national economy is doing poorly, while they are considerably more optimistic about the local economy.

Hasn’t it always been like this? No. As the report notes, “the gap between people’s perceptions of their economic well-being and their perception of the national economy has almost doubled since 2019.” And these results coincide with what the interviewers tell us. For example, according to the latest Quinnipiac University poll carried out in Wisconsin, 65% of registered voters there say that the national economy is not doing very well or is doing poorly, while the same percentage responds that their personal economic situation is good or excellent.

And then there’s the new Harris Poll conducted for Guardian. The headline is that 56% of Americans believe our economy—which creates hundreds of thousands of jobs each month—is in a recession. But “recession” may not mean the same thing to most people as it does to economists. What is more difficult to rationalize is that about half of those interviewed believe that unemployment, which is still near its lowest level in 50 years, is at its highest level in 50 years or, even more surprising , that record-breaking stock prices have been falling. Surely they will expect from me an explanation of what is happening and a strategy for the Democrats to turn the situation around. However, right now, it is incredibly difficult to pinpoint where negative opinions about the economy are coming from. And I’ll save the political advice for another column.

For now, let’s just say that while negative perceptions about the economy are a major problem for President Biden, it’s a very peculiar kind of problem. In reality, the economy is not bad; In fact, it is going extremely well. What’s more, most Americans (though, of course, not all) are fairly satisfied with their personal finances. But for some reason, the general feeling is that the economy is bad, and that feeling — not economic reality, not even personal experience — is what is hurting the Biden campaign.

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