Why 'it’s the economy, stupid' no longer applies

I don’t buy the idea, widespread among opinion-havers, that the more the president talks up the economy, the more annoyed people are going to get with him. I don’t buy this idea because I don’t buy the reciprocal nature of it. If people are feeling like the economy is bad, they’re going to feel that way no matter what Joe Biden says about it.

But do people really feel like the economy is bad? I don’t know more about economics than you do, but let’s say yes and no. Yes, in that prices are too damn high, higher than most of us are accustomed to, especially the price of groceries and housing. These are not options. They are necessities. That’s going to make the economy feel bad.

But also no, in that people’s behavior isn’t lining up with what they say. Poll after poll suggests that most people have a dim economic outlook. At the same time, what they do suggests an outlook that’s quite rosy.

Justin Wolfers is an economist. He knows this stuff. He asked recently: “If folks were worried about their economic future, you might think they would be squirreling money away for the hard times coming. But they're spending like they expect ongoing economic strength.”

High consumer spending isn’t the only thing. “Or investment,” Wolfers added. “If our future were grim, businesses wouldn't want to invest to serve a shrinking market. But they're investing at robust rates.”

Ditto for new ventures, he said. “Think of starting a new business as the ultimate leap of faith. You're pushing your chips across the table to bet you'll be able to find willing customers. And people are starting businesses (real businesses, not just gig jobs) at near record rates.”

I think the most convincing evidence to suggest that people aren’t that down on the economy is the number of people who are quitting their jobs. That number remains “high relative to pre-pandemic norms,” Wolfers said. “When you're scared that the economy is terrible, you don't quit your job. When you think jobs are plentiful, you think that maybe it's worth taking the risk of searching for something better.”

Wolfers also said there’s evidence that people understand that inflation is returning to normal. It’s here that I have confidence to disagree with someone who knows what he’s talking about. I don’t think most people know what inflation is, or care what it is. I think most people understand prices. As long as the cost of food and housing is too damn high, people are going to feel like the economy is bad – despite all evidence to the contrary, such as today’s jobs report showing that the economy added nearly 200,000 new jobs last month.

On the strength of that, one could say that that’s why the president is in trouble. The economy might be good in fact, but people feel like it’s bad nonetheless. That’s why even some Democrats are distancing themselves from the president and efforts to talk up “Bidenomics.”

But just as there’s a disconnect between what people say about the economy and what people do economically, there’s also a disconnect between the national economy and presidential politics. What I mean is that that’s been the assumption among opinion-havers for decades. If the US economy is good, the incumbent is OK. If it’s bad, he’s in trouble. I don’t see why that’s true anymore, if it ever really was.

Some of us have forgotten, so I’ll offer this reminder. We have had this discussion before. In the run-up to the 2016 election, poll after poll suggested that most people had a dim economic outlook. And most opinion-havers gave those polls the benefit of the doubt. That was reasonable. The Great (Long) Recession was fresh in our minds. That whole parts of the country felt left out of the recovery was believable.

But then something happened. Donald Trump was elected. Within months, and by that I mean before his administration had gotten started, these same polls that had been measuring the economic mood of the electorate suddenly turned around. In short order, people were feeling better. The economy, however, hadn’t changed in that time.

What changed was the person who was going to be running the country. When it was a Black president, some people – and I’m talking about a majority of white GOP respondents to these polls – could not bring themselves to say that the economy was recovering, and that they themselves were recovering along with it. But now that there was a white president, theirpresident, well, that made them feel better.

The actual state of the economy didn’t matter. And it didn’t matter, by the way, in the run-up to the 2020. The economy was cratering under the weight of the covid pandemic. Donald Trump had mismanaged everything. Despite that, white GOP respondents to polls measuring the economic mood of the country said things were going great.

This belief among opinion-havers – that if the US economy is good, the incumbent is OK, but if it’s bad, he’s in trouble – was proven wrong long before the current election cycle. Yet we continue to look at poll after poll suggesting a dim economic outlook as if the link between the national economy and presidential politics was an actual thing.

The president should go ahead and talk up “Bidenomics.” He should remind everyone what he and the Democrats have done, why they did it, how things are getting better, but more pointedly, why none of the Republicans – and I mean none – did anything to help the recovery. It can’t hurt, because if people are really feeling like the economy is bad, they’re going to feel that way no matter what Joe Biden says about it.