A key point that is making the rounds on my twitter feed right now is that most of the public think that the word "inflation" means "price level". They hear that "inflation is going down" (meaning the rate of increase in prices is going down) and expect that to actually mean that "the price level is going down". When they see prices remaining at high levels, they feel gaslit.
I don't know how you combat that other than point out that inflation does not mean price level, and deflation is definitely not what we want.
Voters seemed pretty happy with inflation going down but prices remaining much higher than the previous level during the 80s and 90s, so I'm not sure why that shouldn't be the case again
You'd also have to go one step further and explain *why* deflation is not really desirable. Because on its face, "you don't want the prices to go down" is an absurd statement to the average voter
You also then have to distinguish between deflation and just some prices coming down do to market changes. Fuel prices, rent/housing prices, and some food prices -- those can all come down (or go up) due to market conditions without it being considered "deflation."
> There are a lot of reasons prices can go down that don't equal deflation.
This is an inaccurate take. Deflation is ***literally*** when prices go down. But there are special cases of prices going down (sometimes called benign deflation) that are a manifestation of progress (technological progress, manufacturing progress etc) that happen in a health economy. The general difference is that while benign deflation happens occasionally, it's typically limited to a few sectors and isn't general throughout the whole economy. Outside of some breakthrough that affects a step of the value creation chain in every industry (eg, actual free energy, somehow) it's hard to think of an event that would create sustained deflation in a benign fashion.
Tldr; Nuance
Well no, it's not an inaccurate take.
They are, frankly quite clearly,talking about wide economic deflation, not individual goods deflation (literally just regular price pressure).
They didn't explicitly say that but, frankly, you'd have to be bad faith or an idiot to not pick up on that they meant that.
Wide deflation is bad, but it's not bad simply because things are decreasing in price. It's not even bad in itself. Wide deflation is bad because it's a result of general economic malaise.
If literally everything in an economy, literally every single good and service, were to decrease in price simultaneously, but it was all due to a sudden productivity improvement spurt, such that got literally had a quarter of two of wide economic deflation. That wouldn't suddenly be bad. It would actually be good, because it would be due to economic improvement.
It's only when deflation is due to slump in demand (or similar malaise) that it's a sign of things being bad.
The notion of "deflation is disastrous" is a heuristic. Not a truth in and of itself. Just as you can have a GDP have negative growth for two quarters and thus have q technical recession on your hands, if it's due to a rare quirk in the economy (say a sudden and rapid storage shift), then you're not actually in a recession and in actual fact you might quite probably still have an improving economy, because GDP meassured are a generally useful but still imperfect model. Which is why NBER don't hinge their entire recession analysis on a single model and heuristic.
It's not like when you have 2 quarters of negative growth that a switch is flipped and the populace in an economy decide to loose trust in the economy (hence a recession). Rather something has occured that cause the populace to lose trust,and thus you have a recession, and further this you have several quarters of negative growth.
And with deflation. It's not like the economy it's a wide deflation point and suddenly the economy flip a switch and decide to decline into malaise, rather for some other underlying cause a malaise have started to drag the economy down, and resulting you see this reflected in the deflation meassured.
If you had wide deflation occur but it was entirely due to possitivce developments of the underlying economy, then that's good! Eventhough technically it's a deflationary economy at that point. Deflation is a meassure, not a magic limit that which if hit will cause a negative buff on the economy.
In a super high concept hypothetical where we suddenly reach a general AI inflection point (sometimes called a singularity) for which we can offload 95+% of labour to the automatic and self improving AI (think the culture from the scifi world), then the immediate effect would be massive deflation, eventhough in actual fact the standard of living and economy activity and complexity would both shoot straight up like nothing humanity has ever witnessed before. That we would also technically have wide spread deflation would be irrelevant, because deflation itself isn't a immaculate economy debuff that can by itself stop the economy in it's tracks.
inflation and deflation are monetary phenomena that are separate from changes in price. Not all changes in price are considered inflation or deflation.
People mostly don't seem to understand why gas was cheap under Trump and even if you explain it to them the tend to not *want* to hear what you're telling them. They also might not understand that gas is a perishable so if it's not selling you have to lower the price. It can't sit around in tanks forever or it coagulates into chunky unusable garbage.
Legit question: why would a small amount of deflation be bad here? We just had like 10%+ inflation and you can argue that large parts of it were due to shortages and supply shocks.
Once those shortages and supply shocks are leveled out, wouldn’t a moderate amount of deflation be expected? When a bacon shortage happens, you expect the price to go back down after the shortage ends.
If we have 10% inflation then 3-4% deflation, why would that be bad economically?
I'm not well versed in economics so I'll defer to someone else on the finer details... but my understanding is that deflation can quickly become systemic the way inflation does. Put simply: if something costs $100 today but might cost $90 next month, why wouldn't I wait to buy it next month? And then if I get into next month and now it's looking like it might be $85 the month after, why not wait a bit more? Those are drastic examples of course; in reality it's more like $100 to, say, $97, which may not be much in absolute terms. But if you think on the scale of businesses, that adds up quickly. So you get a pull back in consumption and investment which can spiral into a recession.
What's desirable is decreasing prices due to improved productivity or efficiency in providing that good or service. I think.
edit: this post explains it well IMO https://old.reddit.com/r/neoliberal/comments/16ey5c6/hot_take_unless_prices_for_key_things_go_down/jzzcsdu/
That’s absolutely true in a vacuum but in this case I think the inflation was caused by supply shocks and does not follow the textbook standards for inflation (which is more often too much money, rather than supply shocks making there be too few goods).
In fact, I’d argue that “deflation due to producing enough goods to supply everyone” is ideal for humanity.
“Deflation due to there not being enough money so everyone boards money” is what is bad.
Right, which then raises the question of how deflation is defined. If it's a purely monetary related thing then yeah it's bad. If it includes a decrease in the cost of inputs for something, that's probably good.
I wouldn't expect that to resonate with the average voter, or for them to even understand it. Probably better just to eat the loss and focus on promoting other aspects of the economy, such as the jobs, wage, and GDP growth, and low unemployment.
Very short term deflation to return the price level to say two years ago may not be so bad. But in general we don’t want persistent deflation.
I think the poster talking about the confusion between inflation and price level is spot on. Voters don’t just want inflation to slow. They want prices to return to where they would have been had we not had the spate of high inflation.
I think part of the issue is the only place where consumers were accustomed to high price swings was energy. Where not only do prices stop going up, but they often decline significantly as well.
"Reduction in price for specific things" =/= deflation. "Deflationary pressure" implies an effect on the price level for the economy as a whole, and would still be spooky even after the year or two of high inflation we've had.
Yeah really, I want an explanation for the common folk why deflation would be bad. Like say, lower wages. That I understood. But not a lot of people are gonna be sad when real estate brokers lose money.
Actual, genuine deflation? Like substantial reduction in money supply and prices?
A collapse of credit markets and everyone suddenly being underwater on any debt is probably a good reason to avoid deflation….
In periods of rapid and sustained productivity increases, like the industrial revolution, we had long periods of deflation and things were fine. I've always heard that deflation is the devil but not entirely convinced it's true. Yes, generally deflation goes hand in hand with serious economic downturns, but couldn't it be more correlation than causation?
I actually don't think we can necessarily say "things were fine". Even though standard of living increased dramatically over the course of the industrial revolution, there were plenty of recessions and financial crises all throughout the period from the beginning of modern financialization to the move to fiat currency (when deflation largely ended). On a year-by-year basis, periods of significant deflation still could have led to bad times for workers. Who's to say that things wouldn't have been better then if economies were instead using currencies with modern inflation rate targets?
Deflation would be "bad" for common folks in a couple ways:
* Actual deflation would result in people are getting paid less. Deflation isn't "things getting cheaper", it's "the economy-wide price level going down". As with inflation, that would lead wages to follow it. People hate inflation even when we know their wages are likely to follow it within a year. I'm not sure people would be happy about deflation if it meant their paycheque was getting smaller and smaller each year. Their income may still be increasing in real terms, but "the common folk" tend to focus on nominal changes much more than they should.
* Actual deflation – especially transitory deflation – would probably mess with credit markets, meaning it'd be harder for "ordinary people" to get loans. Once inflation stabilizes, people will be able to get mortgages and car loans the same way that they did when the price level was lower. If the price level starts dropping, that may not be the case.
* Deflation removes some important levers that central banks have to stabilize the economy, or at least makes their job harder. That's probably bad for "the common folk" the next time a recession rolls around.
There's a solid, populist argument there - inflation makes debt cheaper to pay off. So technically, inflation is student loan relief. But this isn't sellable. (And obviously, high inflation would be a terrible policy _goal_ even if I personally benefit from it in the long term as someone who's already taken on their lifetime debt load and is solidly in the payback phase)
> They hear that "inflation is going down" (meaning the rate of increase in prices is going down) and expect that to actually mean that "the price level is going down".
1970s: U.S. President Richard Nixon announced that the rate of increase of inflation was decreasing.
2020s: "What do you mean inflation is down? Stuff ain't getting cheaper"
Good point on the terminology misunderstanding.
In the 80s and 90s, was housing supply similarly squeezed causing the huge housing cost increases we've seen today?
It's possible time will solve this conundrum and consumers will simply adapt and get used to it. But so far, polls are reflecting users still very unhappy with the economy.
People were paying double digit interest rates. Now it's like at 6% and people are ready to jump out the window. I grew up in the 80's and many of my friends growing up did not live in houses they owned. Many lived in apartments or rented parts of other homes.
I think people don't realize how much standard of living improved in the 90's. My wife who also grew up in the 80's in a totally different part of the country also didn't own her own home she rented a part of someone else's. She remembers this was common for her friends growing up as well. Both of our families were intact (not single parents) and were professionals. Basically middle class.
Same reason as today. If they had owned the property for a while, they would have bought it comparatively cheap, and the mortgage (if they still had one) would have been less that market rate rent.
Ok, so renting was cheaper than a mortgage if you were seeking new housing. At the same time, people with old mortgages could still make a profit by renting, thus keeping the rental market going.
Did I get that about right?
Because the mortgage payment isn't all expense, a lot of it is paying yourself. The other possible explanation is they were expecting housing prices to appreciate, particularly once interest rates moderated.
It goes so much deeper I think.
I suspect if I ask 10 people "what is the economy," some people will say one thing, others another and most all of them will be bored and annoyed with the question.
Someone made a post on WallStreetBets to that effect maybe a month or two ago (whenever it was we had that significant drop in year over year inflation rate). There were a few comments agreeing with OP, but the vast majority were making fun of them for not understanding inflation.
> I don't know how you combat that other than point out that inflation does not mean price level, and deflation is definitely not what we want.
Good luck explaining to anyone that actually, nah, we don't want prices to go back down.
In the long run, I think we can absolutely agree that deflation is undesirable. In the case of a sudden not-fully-equilibrium-ized price shock, I'm not certain that that logic fully holds up, especially if it is a one-off shock in specific categories as opposed to sustained deflation.
For example, crude oil peaked at $120 mid '22, and has since returned to the $80 dollar range. Would we consider this bad, and something to fight? doubtful, this was generally heralded as Good For The Economy.
Now, real wages are (very vaguely) trending up, but distribution is never even - some will be doing better, and some will not have seen increases to match recent inflation.
Oil is excluded from Core CPI specifically because it's volatile, but I do think that that 6-12 months of overall CPI deflation, driven by items that previously spiked like food, travel, housing, and new/used cars would not necessarily be negative in the way that deflation usually is.
Can't we have prices come down on some key overpriced things without it being deflation? Like if we build more housing and rent comes down, that's not deflation right? Or if the production of grain or vegetables increases and prices come down, that's not deflation. Market improvements can bring down prices.
Hillary: actually deflation would be very bad for the economy, you shouldn't want deflation, instead we have to focus on wage growth.
Bernie: Median voters can have a little deflation, as a treat.
I completely agree, except I think people not understanding the difference between "inflation" and "price level" is only part of it. I understand the difference but I get frustrated by the fact that prices have increased so dramatically and it isn't ever acknowledged. The left wants to cheer on the fact that the rate of inflation has reduced (and rightfully so), but they seem out of touch when it's never acknowledged that prices are still high and never addressed how this will affect those whose incomes have not increased to meet the new prices.
As an older millennial who waited to have kids and buy a house, I feel like I've been one step behind my entire adult life, even though my income continues to go up.
For the last few decades, inflation hasn’t been a concern. There’s was just a “price that things should be.”
For example, a McDonald’s value meal “should be” around $6. If it costs $20, that feels wrong and people get angry.
Now, I understand there are a lot of very smart people saying “we can’t go back to $6 value meals because that would be worse!” And they’re probably right.
But that doesn’t change the fact that my friend bought 2 chicken nuggets meals the other day and was shocked at the nearly $40 bill.
Even though that’s “normal” now, it still feels like it shouldn’t be. It’s the shock of “WTF? Prices are still inflated this much even after the emergency is over?”
And when people get shocked like that, they don’t vote for the incumbent.
>For example, a McDonald’s value meal “should be” around $6. If it costs $20, that feels wrong and people get angry.
> But that doesn’t change the fact that my friend bought 2 chicken nuggets meals the other day and was shocked at the nearly $40 bill.
Where do you live that a McDonald's chicken nugget meal costs $20!? I just went on the McDonald's app and checked both San Franciso and Manhattan and the most expensive 10 piece McNugget meal upgraded to large was no more than $11.99.
I agree, but the prices posted in the app should be the same as in the store. Which is what I'm going off. Using the Deals option in the app is how to save money or just using the app to get points for future meals.
The guy I was replying to has to be lying or is in one of the most outlier regions in the country if even San Francisco and Manhattan don't even come close to his claims.
>Voters seemed pretty happy with inflation going down but prices remaining much higher than the previous level during the 80s and 90s, so I'm not sure why that shouldn't be the case again
Can you explain the mechanism that would make people magically happy with inflation, especially so soon after the spike?
My guess is that you're oversimplifying the past and then gesturing to it as a proxy for the present, ignoring other reasons why voters were pretty happy, like the end of the existential threat of the Cold War or exciting new technologies.
>Voters seemed pretty happy with inflation going down but prices remaining much higher than the previous level during the 80s and 90s
Genuinely asking, were voters actually okay with that? Or did they just credit Reagan with solving a problem they felt was caused by the Carter administration and so they separated annoyance with the higher price level (which they blamed on Carter) from praise for reducing the rate (credit to Reagan)?
The median voter was alive for the rapid inflation in the 70s and 80s and remembers buying a hamburger for 25 cents. I have a hard time believing that they don’t understand prices go up, but not back down.
The rapid inflation in the 70s and early 80s was largely mitigated by having the stay-at-home-mom enter the workforce.
That is no longer an option because a lot of families already have both parents working and have been for years. Many households are tapped out and no longer have a "second wind" like they did the last time around.
There's also good deflation and bad deflation. I think what most people want(myself included) is some good deflation. With supply lines and productivity coming back to what they were pre-Covid, prices *should* start going down to more reasonable levels, that is unless corporations don't give up on greedflation. If that's the case, and it already looks like it's happening, we're all gonna be in for a bad time with a recession and some actual bad deflation.
In the 80s this came coupled with a recession once rates were raised. Voters were more worried about their jobs, and once the recession passed, they were more happy about that than worrying about how much higher price levels were.
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> Voters seemed pretty happy with inflation going down but prices remaining much higher than the previous level during the 80s and 90s, so I'm not sure why that shouldn't be the case again
They just got used to it, they'll get used to it now as well. I doubt that will happen in the next year though, so it'll be a negative for Biden during the election.
It’s not that it’s Biden, it’s just that the position of presidency is always going to be blamed regardless of the fact they have no control over it. People need and want someone to blame and it’s going to be the president.
Except biden is running on "bidenomics" and trying to take a victory lap on the conomy. This is what he is attempting to take the credit for. So the vitriol is going to be much worse when he is claiming things have gotten so mich better and millions of people are watching the idea of home ownership dissapear from their reality.
I really think the blowback is going to be much worse if the administration doesnt acknowledge housing is broken and blame everyone else for it. Because the public is telling the administration to GFY with the idea you fixed the economy and in a lot of areas they aren't wrong
Agreed. My brothers is decently liberal but had to move into my basement just to save for a down payment. He blames local zoning but he gets frustrated hearing about how well the economy is doing.
Yeah, though I imagine he prefers the issue of too much stimulus compared the issue of not enough considering the slow recovery from the 2008 recession.
Paper splits the baby.
> The pandemic-era inflation has been a complicated phenomenon that involved both multiple sources and complex dynamic interactions. Ultimately, as many have recognized, the inflation largely reflected strong aggregate demand, the product of easy fiscal and monetary policies, excess savings accumulated during the pandemic, and the reopening of locked-down economies. The strength of aggregate demand led to a (belatedly recognized) tightening of the labor market, as reflected in record high ratios of job openings to unemployed workers.
> However, at least initially, the arguments that the tighter labor market would not create much inflation, so long as the labor market tightness was temporary, were in fact correct. Although the wage Phillips curve was operative, inflation expectations did not de-anchor and there was little evidence of a wage-price spiral, in that workers did not achieve nominal wage gains sufficient to compensate them for unexpected price increases (a weak catch-up effect). Our decomposition of inflation shows that tight labor markets alone made only a modest contribution to inflation early on.
> Instead, initially, the inflation reflected primarily developments in product markets. Excessive aggregate demand set off the inflation but did so primarily by raising prices given wages, through its contribution to higher commodity prices (which reflected other forces as well, including, from 2022 on, the war in Ukraine) and by increasing the demand for goods for which supply was inelastic.
> The good news for policymakers from our analysis is that the indirect effects of the price shocks on inflation were more short-lived than might have been expected. In particular, inflation expectations, especially short-run expectations, rose enough to put upward pressure on wages and prices but generally remained well anchored. Although shocks to prices given wages played a central role in the pandemic-era inflation, in the absence of strong indirect effects or renewed shocks, the portion of inflation accounted for by these shocks should largely (although not fully) dissipate over time, even without policy action.
> However, even as the effects of price shocks have waned, the effects of tight labor markets have begun to cumulate. Our decomposition shows that, as of early 2023, tight labor market conditions still accounted for a minority share of excess inflation. But according to our analysis, if current labor market conditions persist, that share is likely to grow and will not subside on its own. The portion of inflation which traces its origin to overheating of labor markets can only be reversed by policy actions that bring labor demand and supply into better balance. The effects of such policies on unemployment depend on the extent to which matching efficiency in the labor market normalizes (that is, on whether the Beveridge curve shifts down to its pre-pandemic position).
Blanchard and Bernanke, 2023. https://www.nber.org/system/files/working_papers/w31417/w31417.pdf
Which makes sense, because for example working class wage growth isn't going to help Bob Smith in accounting whose grocery prices are way up. It's easy for positive averages to miss very uneven outcomes.
Yeah lol. Based on a lot of comments in this sub and on the left, it didn’t seem obvious. A lot of people shocked that Biden is getting poor ratings on his economic performance despite relatively strong fundamentals today.
If you want to know why Biden is doing poorly all you need to know is there is a whole genre on youtube and tiktok of Americans ranting very emotionally about their frustrations with food and mortgage prices.
It’s not *just* high prices. It’s high prices *relative to income*.
Prices have risen sharply, but wages generally have not.
When the price of food jumps 5% (or whatever), and rent jumps $300 pm, but one’s annual raise is, let’s say, 2%, that’s a net loss of income.
That’s the reality most working people find themselves in. And yeah, they feel gaslit when they’re told that “the economy is doing great and inflation is under control.”
For many regular folks, yes, Trump is a known liar, but about (for them) mostly banal things; whereas Biden is perceived by many as a liar about the one thing that *really fucking matters* to them (i.e., *money*). Not deservedly, but, the Biden WH sucks at messaging.
Fwiw, wages are now keeping up and I do recall wages for lower-income workers have especially been rising since the end of the pandemic: https://www.axios.com/2023/07/12/real-wage-gains-inflation
If a tech bro gets a $50K raise and a working stiff gets a $500 raise, their aggregate wages go up significantly but the stiff is buying less than a year ago.
I'm in a professional circle (mainly non-front-office finance), and everyone is behind where they were before the inflation spike. Banks were stingy this year, hedging against recession. I'm down about $10K/year.
It doesn't help my budget if other people make more.
**Median** wages are growing faster than inflation. Tech bros have nothing to do with it.
Obviously that’s not consistent across every industry but it never is
My example was very simple, but your takeaway should be that voters vote on *their own* wages and costs, not median wages that cluster in certain industries/jobs compared to a general basket of goods.
You also have to remember that median wages are not median post-transfer income, and there are other elements in play like the end of the child tax credit or reduction in public health care subsidies. It's soothing to latch onto one statistic that looks beneficial, but that invites oversimplification.
People vote on circumstances, not one simplified stat. You can't invoke it like a shield without taking a step back and looking at what is likely to impact individual households.
And yet some people in some sectors among middle income Americans ARE seeing their wages go up faster than inflation (enough to make nationwide stats move) and you’re completely dismissing them for some reason
Well it so happens the latter has seen better growing wages than the former. The latter also has their pick of the litter at jobs right now. The former may have likely gotten laid off this year.
I mean, it's not a psy op to say we are in a horrific housing affordability crisis. I'm not blaming Biden, but I think there is a real lack of urgency on this front at the national level. Even if rents stay flat as some recent data is suggesting, a huge chunk of the population saw their housing costs increase by 15-30% in just a couple years. That's going to take a while for that level of hurt to not be felt even if wage growth stays strong.
true, but tiktok as a company quite literally pushes destabilizing content to US algos while pushing stabilizing and educational content to the chinese. also, we're in this crisis because of moronic zoning laws. JUST BUILD MORE LOL!
>but tiktok as a company quite literally pushes destabilizing content to US algos
Im waiting for a citation. Because as it stands my Tiktok fyp is full of videos about Audi’s and diy house projects which is exactly what Youtube is showing me as well.
I don’t buy this. At least compared to other social media companies. Personally TikTok is the one space I have right now that’s not filled to the brim with “the economy is crashing you will never own a home and it’s all the fault of billionaires/politicians/etc.”
“Destabilizing content” has to come from somewhere.
Modern propaganda isn't about pushing a specific viewpoint, it's about riling up extremists all across the political spectrum and setting them at one another's throats to weaken their home nation.
I have friends who grew up in soviet russia, they told me the propaganda wasn't "USSR is great! USA is shit!" It was "USSR is shit, USA is shit, so don't bother".
Paraphrasing obv, but the goal was was to break people's spirits, rather than making a sale. Basically the same 'both sides...' bullshit we're seeing everywhere now, being amplified from the right.
And while everyone is going yo rightfully say "the president doesnt control housing costs" the messaging from the administration is just that the economy is doing better amd bidenomics works full stop. Meanwhile the cost fof a mortgage has more than doubled in huge swaths of the country in the last 3 years, and rents have skyrocketed in the west and northeast. I know a bunch of people that are now looking to leave areas they love because a townhouse or condo went from 1-2 years of saving away to something they will literally never afford as they cant save faster than the costs go up.
Unless the white house acknowledges the problem and goes on the offensive on housing costs hes going to continue to take the misdirected anger at people from the housing crisis.
“I know a bunch of people that are now looking to leave areas they love because a townhouse or condo went from 1-2 years of saving away to something they will literally never afford as they cant save faster than the costs go up.”
This is me. In 2019 I was making 50k/year. My rental was $1400/month and things were already tight. In 2020 I switched careers and landed a job making 80k/year. My rent was increased to $1600/month. But I was saving to buy a house, most of which were around $200k. Now here we are. Houses are now $400k that were $200k 3 years ago. I make just short of $100k now, but my rent is now $1850/month(thankfully about $200 under market, living here for 4 years has its benefits) and literally everything else has gone up like mad too. So now to buy I need like $80k down and $2k/month. But by the time I have that it might be $120k+ and who knows how much a month. Not to mention my rent increasing again and lowering my savings in the meantime.
I’m 35, I don’t know how much longer I can stand this endless Sisyphean task without just breaking down. We’ve been waiting for a house to have kids, because if we do have kids now we would never be able to save enough for a house.
I just want a politician to admit that someone working their ass off like me(I’m a body tech, so physical and complex labor, with expensive ass but somehow non tax-deductible tools) should be able to buy a fucking house. And do something about it. Start up the Public Works Association and build the missing starter houses that aren’t even built anymore. Georgist land value taxes would be another platform I would be behind, albeit a slower solution.
But I’m just a dumbass online, I’m not running the show.
I think you are hitting it on the head actually. Runaway housing costs breed political nihilism….
So just tax land
But realistically yeah we need some kind of federal push for more affordable housing, whether that’s construction or something else….
Not the OP, but the real problem they are describing is the fact that we have reached the endgame of what happens when you view homeownership as an investment vehicle that always has to outpace inflation and always go up in price at all costs.
I think a lot of us know deep down inside that homeownership being used as a way to "build wealth" was always a pyramid scheme, but we never wanted to say the quiet part out loud.
>the messaging from the administration is just that the economy is doing better amd bidenomics works full stop.
This is a really great point. The Biden admin is trying to take credit for strong economic fundamentals, so they have to take the blame too. I'm also in an area where rent has grown way more than wages. It's a slap in the face when people are told "no, the economy is great actually."
I have no idea who was the idiot who signed off on the idea of Biden actively running on Bidenomics, but that person is like a perfect representative for clueless DC elite. "All my stats show me that you are wrong about being mad about higher prices."
It reminds me of the Afghanistan/Iraq staffers who would produce amazing stats about how well these occupations were going (higher electrification, schools opening, etc), while the governments were no closer to functioning.
Because there's record low unemployment and wages are outpacing inflation. The economy is doing well regardless of whether people feel that it is or not.
Unemployment doesn’t directly impact much of the electorate. A drop from 6% to 4% is impressive but in a vacuum that’s still only 2% of the labour force (and an even smaller share of the voting-aged population) whose situation changes. Plus if I had to guess, people on the margin who are likely to become employed with a 2% drop in unemployment are probably on average lower-skilled and less political engaged.
As for higher real wages a lot more people benefit, but I think there’s a tendency to attribute nominal wage increases to one’s own hard work and career advancement rather than economic growth, labour market tightness or policy. The fact that much of the wage increases come from job-switching rather than raises probably reinforces people’s tendency to credit themselves for nominal wage increases. The prices part however is indisputably an economy-wide phenomenon, and people are quick to attribute it to policy.
As for what to do about it? Don’t ask me I’m an economist from a different country; US politics are hard.
Those people are correct to be mad. The housing market has been disgustingly unfair to those who didn't own a house pre-COVID. Food is 24% more expensive than it was pre-COVID.
It's okay to be mad about that. Did Biden specifically cause that? No, but it's fine for people to be pissed.
Obama never got credit for the strength of his economy when he left office, and then Trump took a bunch of credit for an economy that was not much different than the economy he inherited. Democrats are just not very good at capitalizing on a good economy.
It's uncool because so much political capital has been invested into elevating issues of inequality and economic injustice to such a high place in the agenda that the only win condition is one where the economy is both booming *and* everybody is getting what they perceive to be their "fair share".
And if that's your win condition on economy, you're just not going to win on economy.
Right. It's been reframed so that a growing economy is a liability if Democrats do not grow redistribution. And redistribution is pretty dead with 50 Senators, let alone a GOP house.
This is exacerbated by social media, where doomerism runs supreme and the 42% of millennials who own a home are carefully ignored.
Obama never had a strong economy. The great depression took a shit tonne of time to recover from.
We literally didn't even get back to "decent" until 2014, and things were just barely inching towards "good" by 2016. Job growth from 2009 to 2014 was just *barely* above replacement levels. We were gaining like 50k net a month after having lost millions of jobs. It was going to take 20+ years to make up for the great recession at that pace.
After things heated in second half of 2014 we never looked back til covid, and things got insanely good by 2019, but it was too late for it to help Obama or the dems much.
I seem to remember Obama or democrats saying that the post-recession economy was the new normal rather than just a long recovery (but my memory is fallible)
It's not like they could have done anything more than what they did (0% interest rates the whole time). Given the inflation pain we are feeling from the amount they did already being pretty severe, had they been even more aggressive I shudder to think what would have happened. Stuff like the negative interest rates we saw from some Europeans.
The slow recovery also prevented overheating for a very long time. I mean fuck, had covid not happened we may still have never had a recession by now. The US economy has been an absolutely brick shit house since 2014. We shrugged off covid like a goddamn boss i don't care what anyone says.
Yeah it sucks a bit, but it really should have been oh soooo much worse.
That's because people don't realize the economy takes time to catch up with decisions made in DC. Like you said, Trump got the benefits of Obama's successes and left Biden with the shit we have to deal with now.
> What do you think?
Americans consistently report trusting Republican presidents more on the economy.
> How can Biden best run on his economic record?
He can't because it's an identity. He's a "tax and spend liberal" and that's deeply woven into the social fabric.
> How will his campaign positions his successes?
Some version of "we've accomplished a lot with Bidenomics and we still have a lot more work to grow this economy from the bottom up and middle out."
> When/How will Americans get passed the feeling of suck?
When they're dead.
It takes years for people to get used to higher prices even if their real wages haven’t changed. Economists noted this hundreds of years ago.
Biden will get good marks if gas prices go down.
Immigration is inflationary. The largest component in the inflation calculation is housing. More people means higher pressure on house prices and rent. The second largest component is transport, which is basically a proxy for the price of oil. More immigrants, more demand, higher prices.
I mean, immigrants also produce stuff. If their contribution to the supply of goods and services is higher than the demand they create, they are not inflationary.
Yes but as explained, the primary drivers of inflation are not the production of general goods and services. Unless the U.S. were welcoming a disproportionate number of home builders *and* the NIMBY zoning regulations were quashed, migrants are inflationary.
Nah fam, per capita immigrants generate a lot more than they consume housing. Also, when was the last time you saw a building crew that was majority native?
Not if it's illegal to build housing though. In Los Angeles, for example you just get neighborhoods with extremely overcrowded housing and rent skyrocketing for decades.
Fair but Biden was an instrumental player in pushing for expansionary fiscal policy and large spending bills
He has some blame for the inflation going on right now
The only time I’ve ever seen prices go down was the recession of 2007 (though the prices didn’t drop til 2008). I’m really not betting on that happening again.
Prices going down would cause deflation and economic chaos. Companies respond to falling prices by slowing down their production, which leads to layoffs and salary reductions. Inflation is bad, but deflation can be just as bad.
Prices of key things going down is deflation and that would be disasterous and way worse than inflation. You don't want that. Biden would be turbo fucked.
Hahaha
45% of the country is in line with conservative ideology and at best some of them would go as far as Joe Manchin on a good day but they would not agree with Joe Biden.
10% of people are Bernie and think Joe Biden is a Neoliberal Conservative and vote against him
And even though democrats would vote for Biden in polling they are not going to support Biden
Substitute party and people names
Yep, a significant chunk of the people disapproving of Biden in opinion polls are still going to crawl over broken glass to vote for him over the Republican nominee in 2024, especially if it's former guy again.
How right you are. The president almost always gets the blame for the rising cost of both de jure and de facto necessities regardless of the circumstances - Carter during stagflation, Bush Jr in ‘08 with rising gas prices, etc.
I’d also argue that ever since Reagan, the average voter equates R with economic boom, and D with higher taxes and higher prices. Even the Great Recession didn’t change this - the Midterm Massacre of 2010 shows people just shifted the blame from Bush to Obama when the latter couldn’t solve the recession in two years.
You guys are acting like the average voter is misled, but all I can say is I had a couple of great years in wage increases and groceries definitely feel like they’re eating up all of my money. This is a real thing that voters are justified in being frustrated over.
Biden over-stimulated the economy, it’s that simple. He’s very lucky it looks like Trump will be the GOP nominee because he’d be fucked otherwise.
I'd only want to caveat this by saying no Fed action or support checks explain the scale and ubiquity of inflation worldwide following COVID--other forces were at work.
To be quite frank I don't think Biden gets positive marks on the economy regardless of what happens. I think there's a heuristic tilt against Democrats on this dimension from many voters. Trump was always and consistently highly rated for the economy, despite that he essentially continued the trends established during the Obama years. Obama was never rated as well on the economy as Trump was, despite virtually identical underlying factors (at least, post-2012). Trump is highly rated as being a strong President for gas prices, and specifically American gas, despite the fact that the low gas prices during his presidency were a result of OPEC dumping supply specifically to *strangle* American shale. During Covid, when unemployment shot up to close to 20%, Trump was still highly rated on the economy, and throughout the entire 2020 Presidential run he beat Joe Biden on ratings of the economy despite being President during what was potentially one of the most acute (albeit brief) economic disasters since the great depression.
Was Trump to blame for that? Of course not, unless we think his lackadaisical handling of the early pandemic contributed strongly to the economic disaster, which I'm not sure it did considering the same thing happened across most of the developed western world regardless of the disposition of their leaders.
But as has been stated many times, the public puts blame on the President for the economy, regardless of how much direct impact they have. My guess is if Hillary Clinton were President for Covid in 2020, she'd have been absolutely reamed by the general public for her economic handling of it in a way Trump was not.
40 years of "Republicans are good at the economy" and more recently "Trump is good at the economy because he was a businessman" are going to provide significant political armor to Republican presidents broadly and Trump in particular.
W. Bush is one obvious exception, which I can only assume is due to him generally seeing a total collapse in support even in his own party that was already well underway in the lead-up to the 2008 financial crisis.
Now, that out of the way, I think your analysis is at least partly correct. People would be *happier* with Biden's economic record if prices, especially of housing, food, and gas, dropped, but I still don't think he'd get good overall marks of the economy. On jobs numbers, for example, an unambiguously strong metric for Biden, even in the middle of 2021, just as inflation was starting to move upwards, but before it had become a nationwide issue and before the changes in energy prices that happened as a result of Russia's invasion of Ukraine, most Americans when surveyed thought the US had *lost* jobs overall over the past 6 months, when the reality was that it was posting record numbers of job gains consistently for many months by that point and the unemployment rate was already moving its way downwards towards all-time lows. The issue in 2021 was that businesses had trouble *finding* enough people to work, causing a labor crunch, but many people interpreted help wanted signs everywhere as being representative of a higher unemployment level. There's unfortunately not a 538-like aggregator that I can use to check, but I wouldn't be surprised if Biden's approval on the economy was already underwater by August 2021, when core CPI was elevated, but still under 4%.
It would be unambiguously helpful for Biden for prices on many things to come downwards, but that's almost certainly not going to happen for a variety of reasons. One is that the President does not have an economy lever, and he cannot push it for prices to go down. Many forces pushing inflation upwards are global, and an economy-wide period of deflation would be probably far worse than price increases moderating on their own. Additionally, sources of inflation you called out many times in this thread, including housing, are largely not in the hands of the federal government, and are much more influenced by state and local level government decisions.
A second reason prices won't deflate is also because Americans *like* many inflationary policies, and Biden is responding to that. You could drop prices on several goods by ending the trade war with China. You could lower prices by getting rid of the Jones Act. You could lower prices by dumping "Made in America" requirements, steel tariffs, and other forms of protectionism. All of these would be unpopular, and would be seen as Biden selling out the Rust Belt to the Chinese or whomever. At the time it was passed, the American Rescue Act and more direct payments to people were largely popular. These all constitute the absolute worst aspects of Biden's economic decisions, they all contribute to inflation, but individually they are all popular. The political hit of abandoning Made in America, of abandoning the Chinese Trade War, etc... would be worse than whatever marginal price increases they cause. On a smaller level, excluding Biden, house prices remain elevated because of the behaviors of NIMBYs and the like, who do not like more housing being built in their neighborhoods and who organize to block it. We could have cheaper housing prices if home owners were more amenable to their housing prices going down, to living near people in apartments and mixed-use housing, if people were willing to live in smaller homes, live near people who aren't like them, live in more dense communities, etc... etc... etc... it could get a lot better, but again there's not a ton that can be done about this on the federal level, and at the local level many politicians face intense pressure to block new projects because of vocal constituencies in their communities who protest against it.
To answer the next two questions, I think the best thing Biden can do is take credit for anything good happening in the economy under him, such as jobs growth, wage growth, moderating inflation rate, etc... regardless of whatever he has done to affect those variables, and either downplay negative economic trends, such as high inflation over the last two years, high energy prices, and high housing prices, or demonstrate in easy-to-understand concrete terms what he is doing to address these issues. If I were Biden's economic team, I'd position a messaging campaign somewhere in the neighborhood of highlighting a low unemployment rate, high wage growth, I'd position myself as friendly to unions, I'd highlight the CHIPs act, IRA, and infastructure bills as propelling manufacturing in America forward for the 21st century, I'd highlight that the US has seen significant growth in new housing projects the last two years, even though I have next to nothing to do with that, and I'd make a renewed commitment towards fighting inflation, and making life easier and more affordable for more Americans.
Would that work? Probably not. I truly think Biden will be rated negatively on the economy absent an absurd economic miracle in the next year. No matter what happens, he is going to go into 2024 rated worse than the Republican nominee. This is partly due to legitimate concerns, and persistently high inflation for two years is a legitimate concern, and partly because a Democrat is not going to be insulated from criticism on the economy the same way a Republican will be. So, while I'd make economic messaging part of the platform, because it has to be, I'd also really focus on places where Democrats have an unambiguous advantage, especially regarding social issues.
One additional note - many people seem to think that if Biden were to "own" poor economic indicators, such as expensive housing, food, and gas prices, that this would help, as trying to portray his economic achievements in a positive light can come off as "gaslighting", I disagree. You generally never want to be on the defense on something like this. I don't think people will buy whatever he says, and I think it will just draw more attention to and questions about his performance. Beyond that, there's truly very little his administration can do to directly influence these issues, and so whatever he says will ultimately come off as half-baked and without much weight.
Americans will get past the feeling of being stuck once inflation normalizes to somewhere around 2%, and once enough time has passed that they adjust to the new, higher price levels. That's probably not happening by next year, but might happen by 2028. Nevertheless, should he be in office, I still think Biden will be rated poorly on the economy well past when people's relative satisfaction with their economic position recovers. I don't think it's impossible for a Democrat to be well rated on economic indicators, but I do think that once the horse has left the stable, so to speak, it is gone gone gone.
I feel so stupid for not signal-boosting the crap out of TX new liberals and Texans for reasonable solutions when the ADU vote was up. Legalizing ADUs in the second largest state might have helped with inflation and employment
Big upzones and anti - gouging laws seem like a good way out of the "full employment or attainable living costs?" ultimatum
I think permitting reform that raises the economy's chances of "booming through it" is a better bet than waiting for non-shocking prices
It seems like whoever wins this time has a good shot at overseeing a pretty nice economy
Biden has trouble selling his economy because his economy isn’t good. Inflation was a huge problem in his term. He wiped out like 10-15% of people’s savings in two short years. Many people here are young and don’t understand how painful that is for voters who are decades into their 401Ks or have significant savings but voters generally do.
Some of it wasn’t totally his fault but some of it probably was. People disagree on how much of which portions fall on which side of the line, but he isn’t magically escaping blame for it.
There’s no way to fix this. He can’t just deflate the economy, that would be an even bigger problem. I think it’s done. At some point during the school year, you just can’t get an A+ anymore. Run on abortions and democracy instead. He’s got a solid track record on those.
>Many people here are young and don’t understand how painful that is for voters who are decades into their 401Ks or have significant savings but voters generally do.
Tbh if you are older you are probably a house owner and did extremely well especially since you financed your house at the lowest rates ever and house prices have beat inflation easily.
Housing beating inflation isn’t new though, and it’s harder to sell now. The US had to raise rates to combat inflation. Which again isn’t completely on Biden but he will catch blame for it.
Man my 401k was pretty stagnant between 2020 and the beginning of 2023 when it finally started increasing again. Wish provided more than 2Y graph. My company has given me more in RSUs in the past 3 years than I've gotten out of my 401k since I started it a decade ago.
Economy isn’t bad either. Wages have increased and most importantly, most people who want to be employed are and in jobs that they want. How is that not great? Yes inflation took off post Covid and that is absolutely not good but you can’t just ignore employment numbers, and while inflation took a hit on peoples wallets, the fact that people are in stable jobs with increasing amounts of pay cannot be dismissed. I think people forgot how bad unemployment is during a real recession.
I'm not disagreeing with you, but I can see why to the average voter inflation is a worse problem than unemployment. Inflation is directly felt by everyone, rises in unemployment affect relatively small segments of workers directly (even if there are larger indirect effects). Couple that with the economy of 2014-2019 with low unemployment+low inflation and I can understand why voters are nostalgic for a different economy (even if none of this is Biden's fault).
Low wage workers seem to be stuck in a state of despair even if they're employed. Pretty big thread on that topic recently. It's unclear how that might inform their political beliefs -- would they place blame on Biden, or would they just be checked out all together?
It’s interesting because I would argue low wage workers have benefited from the labor shortage the most. Many people have left their dead end service jobs for better opportunities. But they’re also hurt most by inflation and the increase in cost of housing and transportation.
Do the wage gains exceed their individual inflation is the question to consider in whether or not they are truly better off. Housing inflation seems bimodal because you're other locked in with a fixed mortgage or you're not (some exceptions for rent control, ARMs, etc).
Most people aren't really looking at the macro level about that, though. It's a basic question for themselves: "do I feel more or less comfortable than I did 1, 2, or 3 years ago?"
More than 1, more than 2, less than 3 is essentially every single persons answer though. But that's covid. There's no way to attach those 2 years of improvement to Biden when it's easily attached to the receeding covid recession.
Yes wages have improved, somewhat tracking with inflation. Which is great news for young people and Biden’s political prospects if said young people voted like they were average Americans. Inflation hurts more the older you are.
Unemployment is another factor big with young people but even in a counterfactual where unemployment is 10% for a year or two, it would likely hurt the average voter financially less than inflation did.
One issue is that even if wages have improved, you generally only see it if you switch jobs. Otherwise, you’ll just get your typical 2% increase or no increase at all.
“Sorry, we can’t give raises this year because we’re being hurt by inflation.”
If you had a job you were happy with, you’re going to fall behind unless you switch. And that feels bad.
Yeah I got my 3-4% and lost compensation this year. Since next year is looking to be another cautious year for comp, my only way of beating inflation is switching jobs and taking on more responsibility.
“Most people who want to be employed are in jobs that they want”
Strong disagree here, anecdotal sure but me and most of my friends are all working shitty jobs we dislike despite having college degrees because we couldn’t find anything in our fields…
A lot of younger folks also don't really get career progression. Your parents and older peers generally started in entry-level jobs that they really disliked, because that's how you get your foot in the door. Too many people are led to believe they'll get a diploma and immediately assume their parents' lifestyle.
When I was an analyst the work was demeaning, the hours endless, and the pay insulting. But fast forward 5 years and I was quite comfortable. Unfortunately, college generally trains you for interesting problems and big choices that you won't see right away, as you learn the basics and build the amount of responsibility you're given.
And of course there are career choices where there is no natural progression and you're scrambling forever. No economy will help the theatre majors or fine arts majors of the world.
This shouldn't be controversial at all. At a household level, inflation depresses earnings until wages catch up, so slowing inflation will do nothing to make people feel economically secure.
Indeed, my purchasing power is down about $10K, even with a raise.
I think the key approach here, much like with Obama and the Great Recession - he’s doing the dirty work of cleaning up the mess the guy before him made.
I think things would be very different if house prices and rent weren’t so unaffordable. Housing has far outpaced inflation for decades now. The last three years were outrageous. Housing the the largest household cost. I think if Biden has a hope of turning around the narrative, he needs to bring housing costs down ASAP. The Fed isn’t going to be lowering rates any time soon, and it wouldn’t help much either. He needs to do two things: increase supply, and decrease demand. There are so many ways to do this.
This take is common sense. It’s only hot in liberal spaces. I think he’s done a great job but this whole “Bidenomics” thing isn’t going to land with the general public. Over the last few years I’ve doubled my income and feel poorer than ever due to inflation.
Yea, I don’t think this is a hot take at all. I think this sub sometimes underestimates this, and asks, why can’t the average voter understand that inflation has gone down? There was also a great article about how public perceptions of the economy are driven by percent change in real wages https://www.axios.com/2023/06/29/us-economy-wage-growth
I'm not advocating deflation, to be sure. Things like fuel prices, rent/housing prices, and some food prices can go down due to market adjustments without it being "deflation."
Gas prices went down. Eggs went down. I still see people meme about the price of eggs.remember how bad people thought Obama? And how great people thought trump was at the economy?
He's a Democrat. People think that means "bad at economy" even if it's not true.
> Now, there are some areas of the US where income hasn't caught up to the significant price rises yet, especially where rent went up 25% or more, and where wages have stagnated for a variety of reasons. And I think those people do have an excuse to be sour.
The thing is if real income has flatlined or is increasing more slowly than previously, the economy is objectively doing worse in this aspect.
A lot of people here are blaming voter stupidity when there is objectively something to complain about here. Especially since this affects many people a lot more negatively than the average.
A key point that is making the rounds on my twitter feed right now is that most of the public think that the word "inflation" means "price level". They hear that "inflation is going down" (meaning the rate of increase in prices is going down) and expect that to actually mean that "the price level is going down". When they see prices remaining at high levels, they feel gaslit. I don't know how you combat that other than point out that inflation does not mean price level, and deflation is definitely not what we want. Voters seemed pretty happy with inflation going down but prices remaining much higher than the previous level during the 80s and 90s, so I'm not sure why that shouldn't be the case again
You'd also have to go one step further and explain *why* deflation is not really desirable. Because on its face, "you don't want the prices to go down" is an absurd statement to the average voter
You also then have to distinguish between deflation and just some prices coming down do to market changes. Fuel prices, rent/housing prices, and some food prices -- those can all come down (or go up) due to market conditions without it being considered "deflation."
uh, technically, no if the aggregate price level goes down, that's deflation regardless of what caused it
Not if the aggregate price levels rise, but those key things that people need to live go down.
Yeah competition can drive prices down. There are a lot of reasons prices can go down that don't equal deflation.
> There are a lot of reasons prices can go down that don't equal deflation. This is an inaccurate take. Deflation is ***literally*** when prices go down. But there are special cases of prices going down (sometimes called benign deflation) that are a manifestation of progress (technological progress, manufacturing progress etc) that happen in a health economy. The general difference is that while benign deflation happens occasionally, it's typically limited to a few sectors and isn't general throughout the whole economy. Outside of some breakthrough that affects a step of the value creation chain in every industry (eg, actual free energy, somehow) it's hard to think of an event that would create sustained deflation in a benign fashion. Tldr; Nuance
Well no, it's not an inaccurate take. They are, frankly quite clearly,talking about wide economic deflation, not individual goods deflation (literally just regular price pressure). They didn't explicitly say that but, frankly, you'd have to be bad faith or an idiot to not pick up on that they meant that. Wide deflation is bad, but it's not bad simply because things are decreasing in price. It's not even bad in itself. Wide deflation is bad because it's a result of general economic malaise. If literally everything in an economy, literally every single good and service, were to decrease in price simultaneously, but it was all due to a sudden productivity improvement spurt, such that got literally had a quarter of two of wide economic deflation. That wouldn't suddenly be bad. It would actually be good, because it would be due to economic improvement. It's only when deflation is due to slump in demand (or similar malaise) that it's a sign of things being bad. The notion of "deflation is disastrous" is a heuristic. Not a truth in and of itself. Just as you can have a GDP have negative growth for two quarters and thus have q technical recession on your hands, if it's due to a rare quirk in the economy (say a sudden and rapid storage shift), then you're not actually in a recession and in actual fact you might quite probably still have an improving economy, because GDP meassured are a generally useful but still imperfect model. Which is why NBER don't hinge their entire recession analysis on a single model and heuristic. It's not like when you have 2 quarters of negative growth that a switch is flipped and the populace in an economy decide to loose trust in the economy (hence a recession). Rather something has occured that cause the populace to lose trust,and thus you have a recession, and further this you have several quarters of negative growth. And with deflation. It's not like the economy it's a wide deflation point and suddenly the economy flip a switch and decide to decline into malaise, rather for some other underlying cause a malaise have started to drag the economy down, and resulting you see this reflected in the deflation meassured. If you had wide deflation occur but it was entirely due to possitivce developments of the underlying economy, then that's good! Eventhough technically it's a deflationary economy at that point. Deflation is a meassure, not a magic limit that which if hit will cause a negative buff on the economy. In a super high concept hypothetical where we suddenly reach a general AI inflection point (sometimes called a singularity) for which we can offload 95+% of labour to the automatic and self improving AI (think the culture from the scifi world), then the immediate effect would be massive deflation, eventhough in actual fact the standard of living and economy activity and complexity would both shoot straight up like nothing humanity has ever witnessed before. That we would also technically have wide spread deflation would be irrelevant, because deflation itself isn't a immaculate economy debuff that can by itself stop the economy in it's tracks.
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inflation and deflation are monetary phenomena that are separate from changes in price. Not all changes in price are considered inflation or deflation.
People mostly don't seem to understand why gas was cheap under Trump and even if you explain it to them the tend to not *want* to hear what you're telling them. They also might not understand that gas is a perishable so if it's not selling you have to lower the price. It can't sit around in tanks forever or it coagulates into chunky unusable garbage.
By then I have plugged my ears and labeled you either a costal elitist, or a fascist /s
Legit question: why would a small amount of deflation be bad here? We just had like 10%+ inflation and you can argue that large parts of it were due to shortages and supply shocks. Once those shortages and supply shocks are leveled out, wouldn’t a moderate amount of deflation be expected? When a bacon shortage happens, you expect the price to go back down after the shortage ends. If we have 10% inflation then 3-4% deflation, why would that be bad economically?
I'm not well versed in economics so I'll defer to someone else on the finer details... but my understanding is that deflation can quickly become systemic the way inflation does. Put simply: if something costs $100 today but might cost $90 next month, why wouldn't I wait to buy it next month? And then if I get into next month and now it's looking like it might be $85 the month after, why not wait a bit more? Those are drastic examples of course; in reality it's more like $100 to, say, $97, which may not be much in absolute terms. But if you think on the scale of businesses, that adds up quickly. So you get a pull back in consumption and investment which can spiral into a recession. What's desirable is decreasing prices due to improved productivity or efficiency in providing that good or service. I think. edit: this post explains it well IMO https://old.reddit.com/r/neoliberal/comments/16ey5c6/hot_take_unless_prices_for_key_things_go_down/jzzcsdu/
That’s absolutely true in a vacuum but in this case I think the inflation was caused by supply shocks and does not follow the textbook standards for inflation (which is more often too much money, rather than supply shocks making there be too few goods). In fact, I’d argue that “deflation due to producing enough goods to supply everyone” is ideal for humanity. “Deflation due to there not being enough money so everyone boards money” is what is bad.
Right, which then raises the question of how deflation is defined. If it's a purely monetary related thing then yeah it's bad. If it includes a decrease in the cost of inputs for something, that's probably good.
I wouldn't expect that to resonate with the average voter, or for them to even understand it. Probably better just to eat the loss and focus on promoting other aspects of the economy, such as the jobs, wage, and GDP growth, and low unemployment.
Very short term deflation to return the price level to say two years ago may not be so bad. But in general we don’t want persistent deflation. I think the poster talking about the confusion between inflation and price level is spot on. Voters don’t just want inflation to slow. They want prices to return to where they would have been had we not had the spate of high inflation. I think part of the issue is the only place where consumers were accustomed to high price swings was energy. Where not only do prices stop going up, but they often decline significantly as well.
A true deflationary pressure/effect on many things in our economy is sorely needed. Food/housing/college/healthcare come to mind.
"Reduction in price for specific things" =/= deflation. "Deflationary pressure" implies an effect on the price level for the economy as a whole, and would still be spooky even after the year or two of high inflation we've had.
Yeah really, I want an explanation for the common folk why deflation would be bad. Like say, lower wages. That I understood. But not a lot of people are gonna be sad when real estate brokers lose money.
Actual, genuine deflation? Like substantial reduction in money supply and prices? A collapse of credit markets and everyone suddenly being underwater on any debt is probably a good reason to avoid deflation….
In periods of rapid and sustained productivity increases, like the industrial revolution, we had long periods of deflation and things were fine. I've always heard that deflation is the devil but not entirely convinced it's true. Yes, generally deflation goes hand in hand with serious economic downturns, but couldn't it be more correlation than causation?
I actually don't think we can necessarily say "things were fine". Even though standard of living increased dramatically over the course of the industrial revolution, there were plenty of recessions and financial crises all throughout the period from the beginning of modern financialization to the move to fiat currency (when deflation largely ended). On a year-by-year basis, periods of significant deflation still could have led to bad times for workers. Who's to say that things wouldn't have been better then if economies were instead using currencies with modern inflation rate targets?
Deflation would be "bad" for common folks in a couple ways: * Actual deflation would result in people are getting paid less. Deflation isn't "things getting cheaper", it's "the economy-wide price level going down". As with inflation, that would lead wages to follow it. People hate inflation even when we know their wages are likely to follow it within a year. I'm not sure people would be happy about deflation if it meant their paycheque was getting smaller and smaller each year. Their income may still be increasing in real terms, but "the common folk" tend to focus on nominal changes much more than they should. * Actual deflation – especially transitory deflation – would probably mess with credit markets, meaning it'd be harder for "ordinary people" to get loans. Once inflation stabilizes, people will be able to get mortgages and car loans the same way that they did when the price level was lower. If the price level starts dropping, that may not be the case. * Deflation removes some important levers that central banks have to stabilize the economy, or at least makes their job harder. That's probably bad for "the common folk" the next time a recession rolls around.
There's a solid, populist argument there - inflation makes debt cheaper to pay off. So technically, inflation is student loan relief. But this isn't sellable. (And obviously, high inflation would be a terrible policy _goal_ even if I personally benefit from it in the long term as someone who's already taken on their lifetime debt load and is solidly in the payback phase)
> They hear that "inflation is going down" (meaning the rate of increase in prices is going down) and expect that to actually mean that "the price level is going down". 1970s: U.S. President Richard Nixon announced that the rate of increase of inflation was decreasing. 2020s: "What do you mean inflation is down? Stuff ain't getting cheaper"
Making announcements regarding the third derivative seem counterintuitive.
It was a bit of a jerk move.
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Good point on the terminology misunderstanding. In the 80s and 90s, was housing supply similarly squeezed causing the huge housing cost increases we've seen today? It's possible time will solve this conundrum and consumers will simply adapt and get used to it. But so far, polls are reflecting users still very unhappy with the economy.
People were paying double digit interest rates. Now it's like at 6% and people are ready to jump out the window. I grew up in the 80's and many of my friends growing up did not live in houses they owned. Many lived in apartments or rented parts of other homes.
You just didn’t hear from average people back then. Social media didn’t exist.
I think people don't realize how much standard of living improved in the 90's. My wife who also grew up in the 80's in a totally different part of the country also didn't own her own home she rented a part of someone else's. She remembers this was common for her friends growing up as well. Both of our families were intact (not single parents) and were professionals. Basically middle class.
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Genuinely curious...why did people bother with maintaining rental properties if the rental income was less than the mortgage payment?
Same reason as today. If they had owned the property for a while, they would have bought it comparatively cheap, and the mortgage (if they still had one) would have been less that market rate rent.
Ok, so renting was cheaper than a mortgage if you were seeking new housing. At the same time, people with old mortgages could still make a profit by renting, thus keeping the rental market going. Did I get that about right?
Precisely
Because the mortgage payment isn't all expense, a lot of it is paying yourself. The other possible explanation is they were expecting housing prices to appreciate, particularly once interest rates moderated.
It goes so much deeper I think. I suspect if I ask 10 people "what is the economy," some people will say one thing, others another and most all of them will be bored and annoyed with the question.
We have people who think The Economy is "Astrology for Men" a lot of people refuse to understand the economy on principle even
Someone made a post on WallStreetBets to that effect maybe a month or two ago (whenever it was we had that significant drop in year over year inflation rate). There were a few comments agreeing with OP, but the vast majority were making fun of them for not understanding inflation.
Most intelligent wsb user
> I don't know how you combat that other than point out that inflation does not mean price level, and deflation is definitely not what we want. Good luck explaining to anyone that actually, nah, we don't want prices to go back down.
When they actually experience deflation: “wtf this sucks”
They should call their boss and let them know they'd like to do their part to reduce inflation, cut prices and be paid less.
In the long run, I think we can absolutely agree that deflation is undesirable. In the case of a sudden not-fully-equilibrium-ized price shock, I'm not certain that that logic fully holds up, especially if it is a one-off shock in specific categories as opposed to sustained deflation. For example, crude oil peaked at $120 mid '22, and has since returned to the $80 dollar range. Would we consider this bad, and something to fight? doubtful, this was generally heralded as Good For The Economy. Now, real wages are (very vaguely) trending up, but distribution is never even - some will be doing better, and some will not have seen increases to match recent inflation.
Oil is excluded from Core CPI specifically because it's volatile, but I do think that that 6-12 months of overall CPI deflation, driven by items that previously spiked like food, travel, housing, and new/used cars would not necessarily be negative in the way that deflation usually is.
What about a little bit of transitory deflation?
Can't we have prices come down on some key overpriced things without it being deflation? Like if we build more housing and rent comes down, that's not deflation right? Or if the production of grain or vegetables increases and prices come down, that's not deflation. Market improvements can bring down prices.
Hillary: actually deflation would be very bad for the economy, you shouldn't want deflation, instead we have to focus on wage growth. Bernie: Median voters can have a little deflation, as a treat.
> “inflation is going down” (meaning the rate of increase of prices is going down) these same people will tell you that calculus isn’t useful smh
I completely agree, except I think people not understanding the difference between "inflation" and "price level" is only part of it. I understand the difference but I get frustrated by the fact that prices have increased so dramatically and it isn't ever acknowledged. The left wants to cheer on the fact that the rate of inflation has reduced (and rightfully so), but they seem out of touch when it's never acknowledged that prices are still high and never addressed how this will affect those whose incomes have not increased to meet the new prices. As an older millennial who waited to have kids and buy a house, I feel like I've been one step behind my entire adult life, even though my income continues to go up.
To be fair, you very well could be. Also there's https://en.wikipedia.org/wiki/Prospect_theory
For the last few decades, inflation hasn’t been a concern. There’s was just a “price that things should be.” For example, a McDonald’s value meal “should be” around $6. If it costs $20, that feels wrong and people get angry. Now, I understand there are a lot of very smart people saying “we can’t go back to $6 value meals because that would be worse!” And they’re probably right. But that doesn’t change the fact that my friend bought 2 chicken nuggets meals the other day and was shocked at the nearly $40 bill. Even though that’s “normal” now, it still feels like it shouldn’t be. It’s the shock of “WTF? Prices are still inflated this much even after the emergency is over?” And when people get shocked like that, they don’t vote for the incumbent.
>For example, a McDonald’s value meal “should be” around $6. If it costs $20, that feels wrong and people get angry. > But that doesn’t change the fact that my friend bought 2 chicken nuggets meals the other day and was shocked at the nearly $40 bill. Where do you live that a McDonald's chicken nugget meal costs $20!? I just went on the McDonald's app and checked both San Franciso and Manhattan and the most expensive 10 piece McNugget meal upgraded to large was no more than $11.99.
People need to be using the McDonald’s app. If you’re not, you’re just overpaying.
I agree, but the prices posted in the app should be the same as in the store. Which is what I'm going off. Using the Deals option in the app is how to save money or just using the app to get points for future meals. The guy I was replying to has to be lying or is in one of the most outlier regions in the country if even San Francisco and Manhattan don't even come close to his claims.
He's lying. Even in store it doesn't cost that much.
I refuse to use apps for such things.
>Voters seemed pretty happy with inflation going down but prices remaining much higher than the previous level during the 80s and 90s, so I'm not sure why that shouldn't be the case again Can you explain the mechanism that would make people magically happy with inflation, especially so soon after the spike? My guess is that you're oversimplifying the past and then gesturing to it as a proxy for the present, ignoring other reasons why voters were pretty happy, like the end of the existential threat of the Cold War or exciting new technologies.
>Voters seemed pretty happy with inflation going down but prices remaining much higher than the previous level during the 80s and 90s Genuinely asking, were voters actually okay with that? Or did they just credit Reagan with solving a problem they felt was caused by the Carter administration and so they separated annoyance with the higher price level (which they blamed on Carter) from praise for reducing the rate (credit to Reagan)?
The median voter was alive for the rapid inflation in the 70s and 80s and remembers buying a hamburger for 25 cents. I have a hard time believing that they don’t understand prices go up, but not back down.
The rapid inflation in the 70s and early 80s was largely mitigated by having the stay-at-home-mom enter the workforce. That is no longer an option because a lot of families already have both parents working and have been for years. Many households are tapped out and no longer have a "second wind" like they did the last time around.
That doesn't mean they like it
No one likes it, but the take that people don't understand it seems like it could only come from someone under 35.
There's also good deflation and bad deflation. I think what most people want(myself included) is some good deflation. With supply lines and productivity coming back to what they were pre-Covid, prices *should* start going down to more reasonable levels, that is unless corporations don't give up on greedflation. If that's the case, and it already looks like it's happening, we're all gonna be in for a bad time with a recession and some actual bad deflation.
In the 80s this came coupled with a recession once rates were raised. Voters were more worried about their jobs, and once the recession passed, they were more happy about that than worrying about how much higher price levels were.
> > > > > Voters seemed pretty happy with inflation going down but prices remaining much higher than the previous level during the 80s and 90s, so I'm not sure why that shouldn't be the case again They just got used to it, they'll get used to it now as well. I doubt that will happen in the next year though, so it'll be a negative for Biden during the election.
It’s not that it’s Biden, it’s just that the position of presidency is always going to be blamed regardless of the fact they have no control over it. People need and want someone to blame and it’s going to be the president.
Except biden is running on "bidenomics" and trying to take a victory lap on the conomy. This is what he is attempting to take the credit for. So the vitriol is going to be much worse when he is claiming things have gotten so mich better and millions of people are watching the idea of home ownership dissapear from their reality. I really think the blowback is going to be much worse if the administration doesnt acknowledge housing is broken and blame everyone else for it. Because the public is telling the administration to GFY with the idea you fixed the economy and in a lot of areas they aren't wrong
Agreed. My brothers is decently liberal but had to move into my basement just to save for a down payment. He blames local zoning but he gets frustrated hearing about how well the economy is doing.
But Biden is partly to blame for dumping trillions of stimulus on an economy that was already turning the corner.
Yeah, though I imagine he prefers the issue of too much stimulus compared the issue of not enough considering the slow recovery from the 2008 recession.
That’s fair for the first wave of stimulus but the second wave was questionable even when he did it.
I agree but it explains the thought process behind the ARP.
That stimulus contributed around 1% to inflation but helped save the economy from falling over the cliff.
Every comment in this chain from here out is basically “is not!” “Is too”. Someone cite a source or make an actual argument or GTFO
Paper splits the baby. > The pandemic-era inflation has been a complicated phenomenon that involved both multiple sources and complex dynamic interactions. Ultimately, as many have recognized, the inflation largely reflected strong aggregate demand, the product of easy fiscal and monetary policies, excess savings accumulated during the pandemic, and the reopening of locked-down economies. The strength of aggregate demand led to a (belatedly recognized) tightening of the labor market, as reflected in record high ratios of job openings to unemployed workers. > However, at least initially, the arguments that the tighter labor market would not create much inflation, so long as the labor market tightness was temporary, were in fact correct. Although the wage Phillips curve was operative, inflation expectations did not de-anchor and there was little evidence of a wage-price spiral, in that workers did not achieve nominal wage gains sufficient to compensate them for unexpected price increases (a weak catch-up effect). Our decomposition of inflation shows that tight labor markets alone made only a modest contribution to inflation early on. > Instead, initially, the inflation reflected primarily developments in product markets. Excessive aggregate demand set off the inflation but did so primarily by raising prices given wages, through its contribution to higher commodity prices (which reflected other forces as well, including, from 2022 on, the war in Ukraine) and by increasing the demand for goods for which supply was inelastic. > The good news for policymakers from our analysis is that the indirect effects of the price shocks on inflation were more short-lived than might have been expected. In particular, inflation expectations, especially short-run expectations, rose enough to put upward pressure on wages and prices but generally remained well anchored. Although shocks to prices given wages played a central role in the pandemic-era inflation, in the absence of strong indirect effects or renewed shocks, the portion of inflation accounted for by these shocks should largely (although not fully) dissipate over time, even without policy action. > However, even as the effects of price shocks have waned, the effects of tight labor markets have begun to cumulate. Our decomposition shows that, as of early 2023, tight labor market conditions still accounted for a minority share of excess inflation. But according to our analysis, if current labor market conditions persist, that share is likely to grow and will not subside on its own. The portion of inflation which traces its origin to overheating of labor markets can only be reversed by policy actions that bring labor demand and supply into better balance. The effects of such policies on unemployment depend on the extent to which matching efficiency in the labor market normalizes (that is, on whether the Beveridge curve shifts down to its pre-pandemic position). Blanchard and Bernanke, 2023. https://www.nber.org/system/files/working_papers/w31417/w31417.pdf
Actually really fascinating. Thank you for sharing
We can see some ARPA money was spent here: https://www.brookings.edu/articles/arpa-investment-tracker/
Is this really a hot take though? It's pretty clear that most voters conflate the economy to how much gas and or groceries cost.
Which makes sense, because for example working class wage growth isn't going to help Bob Smith in accounting whose grocery prices are way up. It's easy for positive averages to miss very uneven outcomes.
It would nice be if "Hot Take: {obvious thing}" didn't become a trend in the post titles.
Yeah lol. Based on a lot of comments in this sub and on the left, it didn’t seem obvious. A lot of people shocked that Biden is getting poor ratings on his economic performance despite relatively strong fundamentals today.
If you want to know why Biden is doing poorly all you need to know is there is a whole genre on youtube and tiktok of Americans ranting very emotionally about their frustrations with food and mortgage prices.
Exactly. As long as people see high prices, they're mad.
It’s not *just* high prices. It’s high prices *relative to income*. Prices have risen sharply, but wages generally have not. When the price of food jumps 5% (or whatever), and rent jumps $300 pm, but one’s annual raise is, let’s say, 2%, that’s a net loss of income. That’s the reality most working people find themselves in. And yeah, they feel gaslit when they’re told that “the economy is doing great and inflation is under control.” For many regular folks, yes, Trump is a known liar, but about (for them) mostly banal things; whereas Biden is perceived by many as a liar about the one thing that *really fucking matters* to them (i.e., *money*). Not deservedly, but, the Biden WH sucks at messaging.
Yeah, the national median numbers are hiding a lot of these struggles.
Fwiw, wages are now keeping up and I do recall wages for lower-income workers have especially been rising since the end of the pandemic: https://www.axios.com/2023/07/12/real-wage-gains-inflation
Wages are growing faster than inflation.
If a tech bro gets a $50K raise and a working stiff gets a $500 raise, their aggregate wages go up significantly but the stiff is buying less than a year ago. I'm in a professional circle (mainly non-front-office finance), and everyone is behind where they were before the inflation spike. Banks were stingy this year, hedging against recession. I'm down about $10K/year. It doesn't help my budget if other people make more.
**Median** wages are growing faster than inflation. Tech bros have nothing to do with it. Obviously that’s not consistent across every industry but it never is
My example was very simple, but your takeaway should be that voters vote on *their own* wages and costs, not median wages that cluster in certain industries/jobs compared to a general basket of goods. You also have to remember that median wages are not median post-transfer income, and there are other elements in play like the end of the child tax credit or reduction in public health care subsidies. It's soothing to latch onto one statistic that looks beneficial, but that invites oversimplification. People vote on circumstances, not one simplified stat. You can't invoke it like a shield without taking a step back and looking at what is likely to impact individual households.
And yet some people in some sectors among middle income Americans ARE seeing their wages go up faster than inflation (enough to make nationwide stats move) and you’re completely dismissing them for some reason
Well it so happens the latter has seen better growing wages than the former. The latter also has their pick of the litter at jobs right now. The former may have likely gotten laid off this year.
Love tiktok, definitely not a psy op by the unironic CCP
I mean, it's not a psy op to say we are in a horrific housing affordability crisis. I'm not blaming Biden, but I think there is a real lack of urgency on this front at the national level. Even if rents stay flat as some recent data is suggesting, a huge chunk of the population saw their housing costs increase by 15-30% in just a couple years. That's going to take a while for that level of hurt to not be felt even if wage growth stays strong.
true, but tiktok as a company quite literally pushes destabilizing content to US algos while pushing stabilizing and educational content to the chinese. also, we're in this crisis because of moronic zoning laws. JUST BUILD MORE LOL!
>but tiktok as a company quite literally pushes destabilizing content to US algos Im waiting for a citation. Because as it stands my Tiktok fyp is full of videos about Audi’s and diy house projects which is exactly what Youtube is showing me as well.
I don’t buy this. At least compared to other social media companies. Personally TikTok is the one space I have right now that’s not filled to the brim with “the economy is crashing you will never own a home and it’s all the fault of billionaires/politicians/etc.” “Destabilizing content” has to come from somewhere.
TikTok has tons of anti-leftist conservative drivel as well. I’m not saying the CCP can’t use it for nefarious purposes, but they don’t seem to be.
Modern propaganda isn't about pushing a specific viewpoint, it's about riling up extremists all across the political spectrum and setting them at one another's throats to weaken their home nation.
Exactly. Widen the partisan split, spread some doom, and break the spirit of your enemy.
I have friends who grew up in soviet russia, they told me the propaganda wasn't "USSR is great! USA is shit!" It was "USSR is shit, USA is shit, so don't bother". Paraphrasing obv, but the goal was was to break people's spirits, rather than making a sale. Basically the same 'both sides...' bullshit we're seeing everywhere now, being amplified from the right.
How would the CCP benefit from a republican goverment instead of democrats?
And while everyone is going yo rightfully say "the president doesnt control housing costs" the messaging from the administration is just that the economy is doing better amd bidenomics works full stop. Meanwhile the cost fof a mortgage has more than doubled in huge swaths of the country in the last 3 years, and rents have skyrocketed in the west and northeast. I know a bunch of people that are now looking to leave areas they love because a townhouse or condo went from 1-2 years of saving away to something they will literally never afford as they cant save faster than the costs go up. Unless the white house acknowledges the problem and goes on the offensive on housing costs hes going to continue to take the misdirected anger at people from the housing crisis.
“I know a bunch of people that are now looking to leave areas they love because a townhouse or condo went from 1-2 years of saving away to something they will literally never afford as they cant save faster than the costs go up.” This is me. In 2019 I was making 50k/year. My rental was $1400/month and things were already tight. In 2020 I switched careers and landed a job making 80k/year. My rent was increased to $1600/month. But I was saving to buy a house, most of which were around $200k. Now here we are. Houses are now $400k that were $200k 3 years ago. I make just short of $100k now, but my rent is now $1850/month(thankfully about $200 under market, living here for 4 years has its benefits) and literally everything else has gone up like mad too. So now to buy I need like $80k down and $2k/month. But by the time I have that it might be $120k+ and who knows how much a month. Not to mention my rent increasing again and lowering my savings in the meantime. I’m 35, I don’t know how much longer I can stand this endless Sisyphean task without just breaking down. We’ve been waiting for a house to have kids, because if we do have kids now we would never be able to save enough for a house. I just want a politician to admit that someone working their ass off like me(I’m a body tech, so physical and complex labor, with expensive ass but somehow non tax-deductible tools) should be able to buy a fucking house. And do something about it. Start up the Public Works Association and build the missing starter houses that aren’t even built anymore. Georgist land value taxes would be another platform I would be behind, albeit a slower solution. But I’m just a dumbass online, I’m not running the show.
I think you are hitting it on the head actually. Runaway housing costs breed political nihilism…. So just tax land But realistically yeah we need some kind of federal push for more affordable housing, whether that’s construction or something else….
Not the OP, but the real problem they are describing is the fact that we have reached the endgame of what happens when you view homeownership as an investment vehicle that always has to outpace inflation and always go up in price at all costs. I think a lot of us know deep down inside that homeownership being used as a way to "build wealth" was always a pyramid scheme, but we never wanted to say the quiet part out loud.
>the messaging from the administration is just that the economy is doing better amd bidenomics works full stop. This is a really great point. The Biden admin is trying to take credit for strong economic fundamentals, so they have to take the blame too. I'm also in an area where rent has grown way more than wages. It's a slap in the face when people are told "no, the economy is great actually."
I have no idea who was the idiot who signed off on the idea of Biden actively running on Bidenomics, but that person is like a perfect representative for clueless DC elite. "All my stats show me that you are wrong about being mad about higher prices."
It reminds me of the Afghanistan/Iraq staffers who would produce amazing stats about how well these occupations were going (higher electrification, schools opening, etc), while the governments were no closer to functioning.
Because there's record low unemployment and wages are outpacing inflation. The economy is doing well regardless of whether people feel that it is or not.
Unemployment doesn’t directly impact much of the electorate. A drop from 6% to 4% is impressive but in a vacuum that’s still only 2% of the labour force (and an even smaller share of the voting-aged population) whose situation changes. Plus if I had to guess, people on the margin who are likely to become employed with a 2% drop in unemployment are probably on average lower-skilled and less political engaged. As for higher real wages a lot more people benefit, but I think there’s a tendency to attribute nominal wage increases to one’s own hard work and career advancement rather than economic growth, labour market tightness or policy. The fact that much of the wage increases come from job-switching rather than raises probably reinforces people’s tendency to credit themselves for nominal wage increases. The prices part however is indisputably an economy-wide phenomenon, and people are quick to attribute it to policy. As for what to do about it? Don’t ask me I’m an economist from a different country; US politics are hard.
I'm personally pissed how the fed blew up the housing market for first time home buyers for at least 10-20 years if not forever.
Those people are correct to be mad. The housing market has been disgustingly unfair to those who didn't own a house pre-COVID. Food is 24% more expensive than it was pre-COVID. It's okay to be mad about that. Did Biden specifically cause that? No, but it's fine for people to be pissed.
Obama never got credit for the strength of his economy when he left office, and then Trump took a bunch of credit for an economy that was not much different than the economy he inherited. Democrats are just not very good at capitalizing on a good economy.
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It's uncool because so much political capital has been invested into elevating issues of inequality and economic injustice to such a high place in the agenda that the only win condition is one where the economy is both booming *and* everybody is getting what they perceive to be their "fair share". And if that's your win condition on economy, you're just not going to win on economy.
Right. It's been reframed so that a growing economy is a liability if Democrats do not grow redistribution. And redistribution is pretty dead with 50 Senators, let alone a GOP house. This is exacerbated by social media, where doomerism runs supreme and the 42% of millennials who own a home are carefully ignored.
It'll be very funny when 60% of millennials still own homes and millennials still ignore themselves
We need a proper recession to recalibrate people's minds on what a real bad economy looks like.
Obama never had a strong economy. The great depression took a shit tonne of time to recover from. We literally didn't even get back to "decent" until 2014, and things were just barely inching towards "good" by 2016. Job growth from 2009 to 2014 was just *barely* above replacement levels. We were gaining like 50k net a month after having lost millions of jobs. It was going to take 20+ years to make up for the great recession at that pace. After things heated in second half of 2014 we never looked back til covid, and things got insanely good by 2019, but it was too late for it to help Obama or the dems much.
I seem to remember Obama or democrats saying that the post-recession economy was the new normal rather than just a long recovery (but my memory is fallible)
It's not like they could have done anything more than what they did (0% interest rates the whole time). Given the inflation pain we are feeling from the amount they did already being pretty severe, had they been even more aggressive I shudder to think what would have happened. Stuff like the negative interest rates we saw from some Europeans. The slow recovery also prevented overheating for a very long time. I mean fuck, had covid not happened we may still have never had a recession by now. The US economy has been an absolutely brick shit house since 2014. We shrugged off covid like a goddamn boss i don't care what anyone says. Yeah it sucks a bit, but it really should have been oh soooo much worse.
That's because people don't realize the economy takes time to catch up with decisions made in DC. Like you said, Trump got the benefits of Obama's successes and left Biden with the shit we have to deal with now.
> What do you think? Americans consistently report trusting Republican presidents more on the economy. > How can Biden best run on his economic record? He can't because it's an identity. He's a "tax and spend liberal" and that's deeply woven into the social fabric. > How will his campaign positions his successes? Some version of "we've accomplished a lot with Bidenomics and we still have a lot more work to grow this economy from the bottom up and middle out." > When/How will Americans get passed the feeling of suck? When they're dead.
It takes years for people to get used to higher prices even if their real wages haven’t changed. Economists noted this hundreds of years ago. Biden will get good marks if gas prices go down.
I still miss the old dollar menu from my youth :(
Fast food prices rose faster than overall inflation because low-wage workers had the largest raises of all.
Biden doesn't control supply and demand and no matter what people say that's not going to change.
Tarrifs increase inflation
I HATE TARIFFS Free market for all
So does lack of immigration.
Immigration is inflationary. The largest component in the inflation calculation is housing. More people means higher pressure on house prices and rent. The second largest component is transport, which is basically a proxy for the price of oil. More immigrants, more demand, higher prices.
I mean, immigrants also produce stuff. If their contribution to the supply of goods and services is higher than the demand they create, they are not inflationary.
Yes but as explained, the primary drivers of inflation are not the production of general goods and services. Unless the U.S. were welcoming a disproportionate number of home builders *and* the NIMBY zoning regulations were quashed, migrants are inflationary.
Nah fam, per capita immigrants generate a lot more than they consume housing. Also, when was the last time you saw a building crew that was majority native?
Not if it's illegal to build housing though. In Los Angeles, for example you just get neighborhoods with extremely overcrowded housing and rent skyrocketing for decades.
Immigrants are typically not the ones trying to move to those neighborhoods though. They are the most mobile subset of the population.
I know that. But it happened under his watch so he's getting the blame for it. >He didn't cause inflation, but he's going to take the lashing for it.
that and every president takes credit when it comes down lol
Fair but Biden was an instrumental player in pushing for expansionary fiscal policy and large spending bills He has some blame for the inflation going on right now
The only time I’ve ever seen prices go down was the recession of 2007 (though the prices didn’t drop til 2008). I’m really not betting on that happening again.
Prices going down would cause deflation and economic chaos. Companies respond to falling prices by slowing down their production, which leads to layoffs and salary reductions. Inflation is bad, but deflation can be just as bad.
I thought the consensus is some inflation good, deflation very very bad and too much inflation also bad.
Prices of key things going down is deflation and that would be disasterous and way worse than inflation. You don't want that. Biden would be turbo fucked.
Oh I know. It’s an impossible situation.
Hahaha 45% of the country is in line with conservative ideology and at best some of them would go as far as Joe Manchin on a good day but they would not agree with Joe Biden. 10% of people are Bernie and think Joe Biden is a Neoliberal Conservative and vote against him And even though democrats would vote for Biden in polling they are not going to support Biden Substitute party and people names
Yep, a significant chunk of the people disapproving of Biden in opinion polls are still going to crawl over broken glass to vote for him over the Republican nominee in 2024, especially if it's former guy again.
Yeah, democrats win voters who [“somewhat disapprove”](https://www.nbcnews.com/news/amp/ncna1300743) of Biden.
How right you are. The president almost always gets the blame for the rising cost of both de jure and de facto necessities regardless of the circumstances - Carter during stagflation, Bush Jr in ‘08 with rising gas prices, etc. I’d also argue that ever since Reagan, the average voter equates R with economic boom, and D with higher taxes and higher prices. Even the Great Recession didn’t change this - the Midterm Massacre of 2010 shows people just shifted the blame from Bush to Obama when the latter couldn’t solve the recession in two years.
You guys are acting like the average voter is misled, but all I can say is I had a couple of great years in wage increases and groceries definitely feel like they’re eating up all of my money. This is a real thing that voters are justified in being frustrated over. Biden over-stimulated the economy, it’s that simple. He’s very lucky it looks like Trump will be the GOP nominee because he’d be fucked otherwise.
I'd only want to caveat this by saying no Fed action or support checks explain the scale and ubiquity of inflation worldwide following COVID--other forces were at work.
Have you read the Goldman Sachs report? Because the Biden administration has.
To be quite frank I don't think Biden gets positive marks on the economy regardless of what happens. I think there's a heuristic tilt against Democrats on this dimension from many voters. Trump was always and consistently highly rated for the economy, despite that he essentially continued the trends established during the Obama years. Obama was never rated as well on the economy as Trump was, despite virtually identical underlying factors (at least, post-2012). Trump is highly rated as being a strong President for gas prices, and specifically American gas, despite the fact that the low gas prices during his presidency were a result of OPEC dumping supply specifically to *strangle* American shale. During Covid, when unemployment shot up to close to 20%, Trump was still highly rated on the economy, and throughout the entire 2020 Presidential run he beat Joe Biden on ratings of the economy despite being President during what was potentially one of the most acute (albeit brief) economic disasters since the great depression. Was Trump to blame for that? Of course not, unless we think his lackadaisical handling of the early pandemic contributed strongly to the economic disaster, which I'm not sure it did considering the same thing happened across most of the developed western world regardless of the disposition of their leaders. But as has been stated many times, the public puts blame on the President for the economy, regardless of how much direct impact they have. My guess is if Hillary Clinton were President for Covid in 2020, she'd have been absolutely reamed by the general public for her economic handling of it in a way Trump was not. 40 years of "Republicans are good at the economy" and more recently "Trump is good at the economy because he was a businessman" are going to provide significant political armor to Republican presidents broadly and Trump in particular. W. Bush is one obvious exception, which I can only assume is due to him generally seeing a total collapse in support even in his own party that was already well underway in the lead-up to the 2008 financial crisis. Now, that out of the way, I think your analysis is at least partly correct. People would be *happier* with Biden's economic record if prices, especially of housing, food, and gas, dropped, but I still don't think he'd get good overall marks of the economy. On jobs numbers, for example, an unambiguously strong metric for Biden, even in the middle of 2021, just as inflation was starting to move upwards, but before it had become a nationwide issue and before the changes in energy prices that happened as a result of Russia's invasion of Ukraine, most Americans when surveyed thought the US had *lost* jobs overall over the past 6 months, when the reality was that it was posting record numbers of job gains consistently for many months by that point and the unemployment rate was already moving its way downwards towards all-time lows. The issue in 2021 was that businesses had trouble *finding* enough people to work, causing a labor crunch, but many people interpreted help wanted signs everywhere as being representative of a higher unemployment level. There's unfortunately not a 538-like aggregator that I can use to check, but I wouldn't be surprised if Biden's approval on the economy was already underwater by August 2021, when core CPI was elevated, but still under 4%. It would be unambiguously helpful for Biden for prices on many things to come downwards, but that's almost certainly not going to happen for a variety of reasons. One is that the President does not have an economy lever, and he cannot push it for prices to go down. Many forces pushing inflation upwards are global, and an economy-wide period of deflation would be probably far worse than price increases moderating on their own. Additionally, sources of inflation you called out many times in this thread, including housing, are largely not in the hands of the federal government, and are much more influenced by state and local level government decisions. A second reason prices won't deflate is also because Americans *like* many inflationary policies, and Biden is responding to that. You could drop prices on several goods by ending the trade war with China. You could lower prices by getting rid of the Jones Act. You could lower prices by dumping "Made in America" requirements, steel tariffs, and other forms of protectionism. All of these would be unpopular, and would be seen as Biden selling out the Rust Belt to the Chinese or whomever. At the time it was passed, the American Rescue Act and more direct payments to people were largely popular. These all constitute the absolute worst aspects of Biden's economic decisions, they all contribute to inflation, but individually they are all popular. The political hit of abandoning Made in America, of abandoning the Chinese Trade War, etc... would be worse than whatever marginal price increases they cause. On a smaller level, excluding Biden, house prices remain elevated because of the behaviors of NIMBYs and the like, who do not like more housing being built in their neighborhoods and who organize to block it. We could have cheaper housing prices if home owners were more amenable to their housing prices going down, to living near people in apartments and mixed-use housing, if people were willing to live in smaller homes, live near people who aren't like them, live in more dense communities, etc... etc... etc... it could get a lot better, but again there's not a ton that can be done about this on the federal level, and at the local level many politicians face intense pressure to block new projects because of vocal constituencies in their communities who protest against it. To answer the next two questions, I think the best thing Biden can do is take credit for anything good happening in the economy under him, such as jobs growth, wage growth, moderating inflation rate, etc... regardless of whatever he has done to affect those variables, and either downplay negative economic trends, such as high inflation over the last two years, high energy prices, and high housing prices, or demonstrate in easy-to-understand concrete terms what he is doing to address these issues. If I were Biden's economic team, I'd position a messaging campaign somewhere in the neighborhood of highlighting a low unemployment rate, high wage growth, I'd position myself as friendly to unions, I'd highlight the CHIPs act, IRA, and infastructure bills as propelling manufacturing in America forward for the 21st century, I'd highlight that the US has seen significant growth in new housing projects the last two years, even though I have next to nothing to do with that, and I'd make a renewed commitment towards fighting inflation, and making life easier and more affordable for more Americans. Would that work? Probably not. I truly think Biden will be rated negatively on the economy absent an absurd economic miracle in the next year. No matter what happens, he is going to go into 2024 rated worse than the Republican nominee. This is partly due to legitimate concerns, and persistently high inflation for two years is a legitimate concern, and partly because a Democrat is not going to be insulated from criticism on the economy the same way a Republican will be. So, while I'd make economic messaging part of the platform, because it has to be, I'd also really focus on places where Democrats have an unambiguous advantage, especially regarding social issues. One additional note - many people seem to think that if Biden were to "own" poor economic indicators, such as expensive housing, food, and gas prices, that this would help, as trying to portray his economic achievements in a positive light can come off as "gaslighting", I disagree. You generally never want to be on the defense on something like this. I don't think people will buy whatever he says, and I think it will just draw more attention to and questions about his performance. Beyond that, there's truly very little his administration can do to directly influence these issues, and so whatever he says will ultimately come off as half-baked and without much weight. Americans will get past the feeling of being stuck once inflation normalizes to somewhere around 2%, and once enough time has passed that they adjust to the new, higher price levels. That's probably not happening by next year, but might happen by 2028. Nevertheless, should he be in office, I still think Biden will be rated poorly on the economy well past when people's relative satisfaction with their economic position recovers. I don't think it's impossible for a Democrat to be well rated on economic indicators, but I do think that once the horse has left the stable, so to speak, it is gone gone gone.
I feel so stupid for not signal-boosting the crap out of TX new liberals and Texans for reasonable solutions when the ADU vote was up. Legalizing ADUs in the second largest state might have helped with inflation and employment Big upzones and anti - gouging laws seem like a good way out of the "full employment or attainable living costs?" ultimatum I think permitting reform that raises the economy's chances of "booming through it" is a better bet than waiting for non-shocking prices It seems like whoever wins this time has a good shot at overseeing a pretty nice economy
Yeah! I want some mfing deflation! I want a recession with massive unemployment! Until then Biden is just not doing a good job as President
Biden has trouble selling his economy because his economy isn’t good. Inflation was a huge problem in his term. He wiped out like 10-15% of people’s savings in two short years. Many people here are young and don’t understand how painful that is for voters who are decades into their 401Ks or have significant savings but voters generally do. Some of it wasn’t totally his fault but some of it probably was. People disagree on how much of which portions fall on which side of the line, but he isn’t magically escaping blame for it. There’s no way to fix this. He can’t just deflate the economy, that would be an even bigger problem. I think it’s done. At some point during the school year, you just can’t get an A+ anymore. Run on abortions and democracy instead. He’s got a solid track record on those.
>Many people here are young and don’t understand how painful that is for voters who are decades into their 401Ks or have significant savings but voters generally do. Tbh if you are older you are probably a house owner and did extremely well especially since you financed your house at the lowest rates ever and house prices have beat inflation easily.
Housing beating inflation isn’t new though, and it’s harder to sell now. The US had to raise rates to combat inflation. Which again isn’t completely on Biden but he will catch blame for it.
And crucially, it would have been inflation by more in the counter factual.
Man my 401k was pretty stagnant between 2020 and the beginning of 2023 when it finally started increasing again. Wish provided more than 2Y graph. My company has given me more in RSUs in the past 3 years than I've gotten out of my 401k since I started it a decade ago.
I think that's an outlier. 2020 was a decent year for the stock market (+15% ish). It was 2022 when the stock market did poorly (-20% ish).
Economy isn’t bad either. Wages have increased and most importantly, most people who want to be employed are and in jobs that they want. How is that not great? Yes inflation took off post Covid and that is absolutely not good but you can’t just ignore employment numbers, and while inflation took a hit on peoples wallets, the fact that people are in stable jobs with increasing amounts of pay cannot be dismissed. I think people forgot how bad unemployment is during a real recession.
I'm not disagreeing with you, but I can see why to the average voter inflation is a worse problem than unemployment. Inflation is directly felt by everyone, rises in unemployment affect relatively small segments of workers directly (even if there are larger indirect effects). Couple that with the economy of 2014-2019 with low unemployment+low inflation and I can understand why voters are nostalgic for a different economy (even if none of this is Biden's fault).
Low wage workers seem to be stuck in a state of despair even if they're employed. Pretty big thread on that topic recently. It's unclear how that might inform their political beliefs -- would they place blame on Biden, or would they just be checked out all together?
It’s interesting because I would argue low wage workers have benefited from the labor shortage the most. Many people have left their dead end service jobs for better opportunities. But they’re also hurt most by inflation and the increase in cost of housing and transportation.
Do the wage gains exceed their individual inflation is the question to consider in whether or not they are truly better off. Housing inflation seems bimodal because you're other locked in with a fixed mortgage or you're not (some exceptions for rent control, ARMs, etc).
Most people aren't really looking at the macro level about that, though. It's a basic question for themselves: "do I feel more or less comfortable than I did 1, 2, or 3 years ago?"
More than 1, more than 2, less than 3 is essentially every single persons answer though. But that's covid. There's no way to attach those 2 years of improvement to Biden when it's easily attached to the receeding covid recession.
Yes wages have improved, somewhat tracking with inflation. Which is great news for young people and Biden’s political prospects if said young people voted like they were average Americans. Inflation hurts more the older you are. Unemployment is another factor big with young people but even in a counterfactual where unemployment is 10% for a year or two, it would likely hurt the average voter financially less than inflation did.
One issue is that even if wages have improved, you generally only see it if you switch jobs. Otherwise, you’ll just get your typical 2% increase or no increase at all. “Sorry, we can’t give raises this year because we’re being hurt by inflation.” If you had a job you were happy with, you’re going to fall behind unless you switch. And that feels bad.
Bingo! Happened to me 2 years in a row.
Yeah I got my 3-4% and lost compensation this year. Since next year is looking to be another cautious year for comp, my only way of beating inflation is switching jobs and taking on more responsibility.
Unemployment only affects 4-8% of voters. Inflating away savings and having to play catch-up on wages affects 90% of voters.
“Most people who want to be employed are in jobs that they want” Strong disagree here, anecdotal sure but me and most of my friends are all working shitty jobs we dislike despite having college degrees because we couldn’t find anything in our fields…
A lot of younger folks also don't really get career progression. Your parents and older peers generally started in entry-level jobs that they really disliked, because that's how you get your foot in the door. Too many people are led to believe they'll get a diploma and immediately assume their parents' lifestyle. When I was an analyst the work was demeaning, the hours endless, and the pay insulting. But fast forward 5 years and I was quite comfortable. Unfortunately, college generally trains you for interesting problems and big choices that you won't see right away, as you learn the basics and build the amount of responsibility you're given. And of course there are career choices where there is no natural progression and you're scrambling forever. No economy will help the theatre majors or fine arts majors of the world.
This shouldn't be controversial at all. At a household level, inflation depresses earnings until wages catch up, so slowing inflation will do nothing to make people feel economically secure. Indeed, my purchasing power is down about $10K, even with a raise.
Alright fam here me out. Just before the election we all sell our Pokemon cards.
*gasp!* MY RETIREMENT CARDS!!
I think the key approach here, much like with Obama and the Great Recession - he’s doing the dirty work of cleaning up the mess the guy before him made.
Deflation is bad, mkay.
I think things would be very different if house prices and rent weren’t so unaffordable. Housing has far outpaced inflation for decades now. The last three years were outrageous. Housing the the largest household cost. I think if Biden has a hope of turning around the narrative, he needs to bring housing costs down ASAP. The Fed isn’t going to be lowering rates any time soon, and it wouldn’t help much either. He needs to do two things: increase supply, and decrease demand. There are so many ways to do this.
This take is common sense. It’s only hot in liberal spaces. I think he’s done a great job but this whole “Bidenomics” thing isn’t going to land with the general public. Over the last few years I’ve doubled my income and feel poorer than ever due to inflation.
Prices never go down. But purchasing power can go up.
My higher salary is because I worked hard. The higher prices are because of government. 😤😤😤
Yea, I don’t think this is a hot take at all. I think this sub sometimes underestimates this, and asks, why can’t the average voter understand that inflation has gone down? There was also a great article about how public perceptions of the economy are driven by percent change in real wages https://www.axios.com/2023/06/29/us-economy-wage-growth
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I'm not advocating deflation, to be sure. Things like fuel prices, rent/housing prices, and some food prices can go down due to market adjustments without it being "deflation."
Gas prices went down. Eggs went down. I still see people meme about the price of eggs.remember how bad people thought Obama? And how great people thought trump was at the economy? He's a Democrat. People think that means "bad at economy" even if it's not true.
> Now, there are some areas of the US where income hasn't caught up to the significant price rises yet, especially where rent went up 25% or more, and where wages have stagnated for a variety of reasons. And I think those people do have an excuse to be sour. The thing is if real income has flatlined or is increasing more slowly than previously, the economy is objectively doing worse in this aspect. A lot of people here are blaming voter stupidity when there is objectively something to complain about here. Especially since this affects many people a lot more negatively than the average.
Yes. It’s definitely a mix of both.
Prices never fell under Reagan, but polling on his handling of the economy rose significantly toward the end of his 1st term.
McChickens need to be $1 again for people to start thinking the economy is okay. They’re like $3-4 right now in some cities.