President Biden nevertheless praised Tuesday’s figures as “more progress in curbing global inflation”, though he added that there was “more work to be done”.
How and why partisans can see the exact same economy so differently is a crucial topic as we approach the fall elections, which are less than two months away — and closer than that in many states soon to begin voting.
Masses of social science research indicate that voters mainly follow the old maxim ‘it’s the economy, stupid’ when casting their vote; some forecasters have built full forecasting models that are reasonably accurate based on macroeconomic indicators alone.
To get the facts straight, I spoke to Ben Casselman, who covers economics for The New York Times and knows the data inside out.
Here’s our conversation, edited for length and clarity:
So, is the US economy good or bad? Democrats and Republicans seem to disagree on an answer.
This is a tricky question even before you get to the political side of it. The job market is good at the moment – arguably very good. Unemployment is low. Wages are rising. If you want a job, chances are you can get one.
Other statistics are much more mixed. Corporate earnings were good, but many companies have said they are seeing signs of slowing down. Consumer spending is not growing very much at the moment, but it is not falling either. The stock market clearly had a very bad day on Monday, but the broader financial system is not showing the kind of tensions we saw during the 2008 crisis.
If that was the whole story, we’d probably be talking about how the recovery has slowed down since last year but remains solid, and frankly, you and I probably wouldn’t be having this conversation.
The state of the 2022 midterm elections
Now that the primaries have concluded, both parties are beginning to shift their focus to the November 8 general election.
But of course it’s not the whole story, because of inflation. Gas prices have risen. Food prices have risen. Those pay increases I mentioned earlier don’t keep up with the cost of living. For many people, that problem overwhelms everything else.
I noticed after the election of Donald Trump in 2016 that many Republicans suddenly told Gallup that the economy was great, even though nothing had changed but the president-elect. Did you also notice this phenomenon? If so, how do you explain that?
If you go back and look at polls from the 1980s and 1990s, there used to be very little partisan division in the way Americans looked at the economy.
That started to change in the 2000s, when Republicans rated the economy better than Democrats during George W. Bush’s presidency, and it’s broadened since then. Under Barack Obama, the Democrats thought the economy was better than the Republicans. As soon as Donald Trump took office, that changed. And now under President Biden it has been reversed.
The swings are particularly large among Republicans. As you noted, Republicans’ assessment of the economy rose the moment Trump was elected, then their outlook collapsed just after the 2020 election.
In short, the economy is like seemingly everything else in our society as it has become a much more partisan issue in recent decades.
Are there explanations other than partiality that could explain such a great disparity in views on the economy?
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I don’t think it’s surprising that people have different assessments of the economy right now, because people experience the economy differently.
If you’re a homebuilder or a real estate agent, this is probably a pretty tough time for you, given what’s going on in the housing market. If you’ve just graduated and are entering a strong job market and maybe about to get some of your student debt forgiven, it’s a different story.
But with a few exceptions—perhaps student debt is one of them—it’s pretty hard to argue that those factors can account for the biased differences we see. It’s not that Biden’s economy has been consistently better for Democrats than it has been for Republicans.
Okay, Ben, I have to ask, what about inflation?
Oof. How long do you have?
The problem with talking about inflation right now is that you can say almost anything and it’s true. “Inflation is the highest in decades.” WHERE. “Prices decline.” Also true, at least by one measure. “Inflation is a global phenomenon.” WHERE. “Democrats’ policies contributed to inflation.” That’s true, although we could argue all day about how much.
Here’s what I think we can say with confidence: Inflation soared last year, mainly for a number of pandemic reasons – snappy supply chains, shifts in consumer demand – but also at least in part because of all the stimulus money that we’ve put into the economy. Then, just as most forecasters expected inflation to fall, it took off again due to the surge in oil prices linked to the war in Ukraine.
Now inflation is falling again. Total consumer prices rose just 0.1 percent in August, and a separate measure showed prices fall in July. But much of that is due to the recent drop in gas prices, which we all know could be reversed at any time. So-called core inflation, which sets aside volatile food and energy prices, actually accelerated in August.
All of this means we don’t know how long the recent pause in inflation will last, and we certainly don’t know if Biden will get credit if it does.
What does your reading of history tell you about what we might expect from the economy between now and November, and how voters might cope with any changes?
So here’s a fun fact for you: Lehman Brothers filed for bankruptcy on September 15, 2008, kicking off the global financial crisis. Before that, it seemed at least somewhat plausible that the collapse of the housing market would be confined to one sector of the economy, and that the economy could avoid a recession.
In other words, a lot can happen in two months. Economists — and journalists for that matter — are notoriously bad at predicting recessions. But if you believe the forecasts, we are likely to see a gradual slowdown in both inflation and the labor market between now and Election Day. So inflation will probably still be uncomfortably high, but fall, and the labor market will probably still be pretty strong, but getting weaker.
Voters tend to form their view of the economy several months before the election, so as long as we don’t see huge shifts, I imagine people who think the economy is bad today will still be thinking that two months from now.
That said, if gas prices skyrocket again or if we get a wave of layoffs or something else fundamentally changes in the economy, it’s not hard to imagine that making a difference in a close election.
What to read tonight?
New Hampshire, Rhode Island and Delaware held elections today in the last primaries of this year’s midterm elections. Here’s what you can watch and you can follow our live updates and see the results as they come in.
A New York Times analysis by Kate Kelly, Adam Playford and Alicia Parlapiano found that 97 lawmakers or their family members bought or sold financial assets over a three-year period in sectors that could be affected by their legislative committee work.
South Carolina Senator Lindsey Graham passed legislation Tuesday that would impose a federal ban on abortions after 15 weeks of pregnancy, rekindling the debate on an issue that divided Republicans and energized Democrats ahead of the midterm elections. Annie Karni has more.
Russia has covertly given at least $300 million to political parties, officials and politicians in more than two dozen countries since 2014, Ed Wong reports, and has plans to transfer hundreds of millions of dollars more — all with the aim of exploiting covert political influence. practice and swinging elections.
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