For months, media pundits and Biden campaign operatives have been scratching their heads attempting to describe why, given all the measures that seem to indicate a strong economy, people think it’s bad. Paul Krugman has been trotting out one flummoxed opinion piece after another, bemoaning the fact that despite evidence that the economy is “in remarkably good shape,” ordinary people just don’t see it that way.
Pundits’ obsessive focus on this question was understandable. With a presidential election looming, the Harris campaign and Democratic leaders are rightly concerned about one of the “laws” of political science: presidential incumbents’ electoral performance is strongly linked to voters’ perceptions of their own economic fortunes. With a sitting vice president on the ticket, how people feel about the economy heading into November will likely impact who wins the US presidential election.
From a 30,000 foot perspective, Democrats appear to be on solid economic footing: Strong employment numbers and job creation, recent increases in real wages, high consumption levels, and a strong GDP. Yet these measures actually do little to capture the “reality” of the US economy for many Americans, particularly those in the working class. Instead, celebration of today’s economic conditions reveals more about the class biases of journalists and other experts, than it does about the realities of the economic situation for ordinary workers.
Naturally, the chattering class’s first step in figuring out what’s at the root of Americans’ pessimistic attitudes about the economy is to discount them. Economic commentators like Kyla Scanlon have coined terms like the “vibecession,” as a way of explaining how, when the economy is good, people still just feel bad about it. And although Krugman and others claim to be adopting more sophisticated analyses, their conclusions really come back to some version of the idea that the economy is actually good and the “bad vibes” are in our head.
Krugman’s most recent articulation of the paradox focuses on the idea that Americans are evaluating the national economy very differently than their personal financial situations. People feel good about their personal situation, but bad about the nation as a whole. To draw this conclusion, he points to the Federal Reserve’s October 2023 report, where 72% of survey respondents reported that they were “doing okay” (39%) or “living comfortably” (33%). Conclusion: people feel good about their individual financial situations.
But taken in another light, these data don’t paint the rosy picture Krugman sees. Most respondents said they were in “about the same” shape as last year (48%), while more people said they were worse off (31%) than better off (21%). And 28% of respondents reported that they were “finding it difficult to get by” or “just getting by.” Furthermore, it’s not at all clear what the most popular selection, “doing okay,” really means. Couldn’t those who report they are “doing okay” still be suffering from high prices and housing costs? Indeed, shouldn’t the main takeaway here be that just 33% of Americans report living comfortably?
How people experience the economy is a complicated question. By and large, analyses like Krugman and Scanlon’s are static, and don’t account for critical over-time contextual information that shapes voters’ attitudes toward the economy. In particular, they don’t account for the fact that most people are comparing their current position not to last year or the year before, but rather to the pre-pandemic economy.
Commentators’ truncated time horizon is an especially serious problem for explanations of job creation and relative wages. Despite the fact that inflation surged in 2021 and 2022, says Krugman, “wages of nonsupervisory workers, who account for more than 80 percent of private employment, are up by about 24 percent, while consumer prices are up less, around 20 percent.”
It’s true that wage growth has outpaced consumer prices, but this does not mean working Americans are experiencing meaningful improvements in their quality of life as a result. Most obviously, even by Krugman’s own estimate, average real wages have only outpaced consumer prices by 1 percent a year since 2021. That’s not nothing, but it’s not much either, especially since growth in real wages over the past four years follows forty years of stagnation in workers’ purchasing power — driven, among other reasons, by a sharp increase in benefit costs and the decline of labor unions.
In other words, a 4 percentage point increase in consumer purchasing power between 2021 and 2024 is hardly enough to make working Americans — struggling to get by after decades of spiraling income and wealth inequality, a shrinking middle class, tens of millions of lost manufacturing jobs, children earning less and less than their parents, and evaporating personal savings — feel that things are looking up.
What’s more, wage increases are not distributed evenly across workers, but instead have been concentrated among the highest earners. The Federal Reserve Bank of Atlanta tracks wage growth for individual workers, distinguishing between earners whose wages have grown the most (in the 75th percentile of growth) and the least (in the 25th percentile of growth). While median income growth was around 5% between January 2021 and March 2024, wage growth among the top 25% of income earners averaged over three times that value (16.5%) while the bottom 25% of income earners experienced negative median income growth (an average of -.7% between January 2021 and March 2024).
So it’s hardly surprising that affluent cheerleaders of Bidenomics are feeling more bullish about the post-pandemic recovery than the rest of us: their own wages have far outpaced inflation while those of ordinary workers have, at best, stayed slightly ahead of the curve, and at worst fallen farther behind.
The compound weight of decades of declining economic opportunity and the post-COVID inflation shock has generated pain among working-class Americans that’s not easy to shake. And while wage increases are met with cheers, workers are well aware that they have earned those increases — indeed, if worker productivity is any measure they deserve much greater increases. They work hard and a raise does not feel like a handout from the Biden administration — nor should it. Yet that’s exactly how pundits seem to think workers should respond.
On the other hand, inflation at the grocery store and persistently high housing prices does feel like a punishment for good behavior. And many workers blame Democrats for that. While the Biden administration has admirably focused on ways to make the economy work for working people, there are times when an over reliance on economistic thinking can make us forget the big picture.
Our economic lives are intimately wrapped up in our much more profound hopes, dreams, and aspirations. Workers who have diligently saved and maintained steady employment through these tumultuous past few years find it much more than a minor inconvenience that suddenly a home in a desirable neighborhood is completely out of reach. That feeling is not assuaged by graphs showing that their wages are actually better now than under President Donald Trump, it has to do instead with the vision one has for their whole life course. Indeed, maybe even more than a life course.
As a recent Harvard study shows, for many working-class people in “left-behind” counties, economic mobility has significantly decreased over the last two generations. That’s an understandable reason for cynicism.
Politically, there is no easy way to explain that away but denying it does nothing but add insult to injury.
Instead, the Left ought to offer a vision that can credibly tackle some of the biggest costs of contemporary life, while continuing to provide a plan for ensuring steady wage increases. For starters, big policies that can lower the cost of housing could go a long way for struggling wage-earners. Establishing a paid parental leave program could certainly help to shore up some confidence in a progressive economic agenda. Meanwhile, continuing to lower the costs of prescription drugs, and health care in general, would likely be rewarded.
But insisting that workers have never had it so good, is not only a lie, it’s a recipe for electoral disaster.
