Rational Decision-Making

Referendums and elections are always about human feelings, not about human rationality. If democracy were a matter of rational decision-making, there would be absolutely no reason to give all people equal voting rights – or perhaps any voting rights. There is ample evidence that some people are far more knowledgeable and rational than others, certainly when it comes to specific economic and political questions.

— Yuval Noah Harari

A CBS News/YouGov poll conducted earlier this month found that only 10% of Americans were willing to describe themselves as knowing “a lot of the specifics” about Joe Biden’s “Build Back Better” plan (figure below).

A third said they had “a general sense” and knew “some specifics.” A little over a quarter said they had a “general sense” but couldn’t identify any specifics. Nearly 30% said they didn’t have any idea what’s in the plan.

What survey respondents did know, however, was the price tag. Almost 60% said they’d heard the $3.5 trillion top line spending figure.

There was some nuance. There always is. Americans recognized some elements of the plan, including tax increases for the rich and expanded Medicare coverage. Nearly all Americans support lowering prescription drug prices and three quarters agree the federal government should fund family leave, the poll suggested. 68% support higher taxes for the rich and 67% are fine with corporate tax increases.

Still, the notion that just 10% of Americans considered themselves knowledgable about the plan by October speaks volumes about the extent to which voters are hopelessly uninformed.

It also plainly suggested Democrats did a terrible job selling the plan, in no small part because they didn’t know what was in it either. Months of party infighting between moderates and Progressives meant that even as Biden pleaded with the public to support his vision, no one, including Biden, knew what provisions would ultimately survive.

That said, the details of the original plan were readily available. There was never any mystery as to what was on the table. Any American with an internet connection could access a fact sheet. I doubt seriously that the percentage of Americans willing to say they’re knowledgable about “Build Back Better” would have been materially higher were it not for Joe Manchin and Kyrsten Sinema forcing rewrites.

In the same poll, just 36% said the plan would help them and their family. 31% said it would have no effect. That too suggests Americans are insufficiently informed. Say what you will about Biden’s social spending plan, but it would benefit more than 36% of American families if implemented as devised. And it would hurt far fewer than the 33% who said their family would be negatively affected.

Perceptions of the economy deteriorated markedly in the poll compared to a July survey. And 60% said the White House isn’t focusing enough on inflation. Americans did seem to understand that supply chain disruptions are the main culprit for price pressures, but even as 79% identified supply and manufacturing issues as a cause of inflation, two-thirds identified US government policy.

It’s difficult to reconcile survey respondents’ apparent acuity with regard to what’s driving inflation with the almost complete absence of participants who knew the specifics of Democrats’ fiscal agenda. Unless of course you take into account the sheer number of times supply chain bottlenecks have been mentioned by officials and the media, and the incessant banter from Republicans and Joe Manchin about the potential for big spending to be inflationary.

It’s entirely unrealistic to say most Americans are apprised of what quantitative easing actually is (i.e., debt monetization) and why that should be inflationary. And there’s something odd about two-thirds of respondents blaming existing fiscal policy for inflation when just 10% bothered to read the details of pending legislation.

But considering the $3.5 trillion price tag was the most recognized item when participants were asked about potential elements of the bill, you can understand why people would be inclined to cite US government policy when asked what’s driving up prices. Toss in the shrill cacophony emanating from critics who spent the last six months insisting that previous rounds of stimulus were the proximate cause of inflation, and it’s hardly surprising that voters are swayed.

All of this speaks to the idea that Americans are assessing the Biden fiscal plan based on feelings “informed” by headlines and soundbites, not rational decision-making based on a careful assessment of what’s being proposed.

Janet Yellen on Sunday told CNN’s Jake Tapper that annual inflation rates would moderate by the middle of next year, or the second half at the latest. Separately, Nancy Pelosi told Tapper Democrats are planning to agree on something at some point soon.

If those last two sentences come across as deadpan, that was the intent.

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9 thoughts on “Rational Decision-Making

  1. I am normally supercilious about the ignorance of the average American. On this issue, however, I empathize. I think I read more general news than 99% of Americans, and more financial/market news than 99.9%. I couldn’t tell you what’s in or out of the bill now – or at any time in the past few months.

    It’s been a display of political malpractice. Let’s see if the Dems can do better trumpeting the pared-down bill that actually passes.

    1. I’m with you… 🙂

      Also – not bad from the American public on what’s causing inflation – too much demand for “stuff” creating/complicating COVID related supply bottlenecks

  2. The Fed, and now Yellen, have been downplaying inflation for months. That Yellen now says, that inflation will moderate, is not terribly convincing. Later, next year, when inflation has not moderated, she’ll come up with some new excuse or some new talking point.

    1. And what about if it does moderate? Will Larry Summers and all the bloggers say they were wrong? Of course not. Instead, they’ll come up with some new excuse or new talking point, and everyone will give them a pass because they’re not accountable to anyone. Like Jeremy Grantham seeing bubbles everywhere and swearing they’re “destined” to pop at any moment. Then, when they don’t, nobody ever comes to him and says: “You know, you’ve gotten a few right, but for God’s sake, Jeremy, we can’t possibly be expected to take you seriously anymore.”

      1. Some of these guys are like aging prize fighters- they used to be good. It is good to take comments from the sidelines for what it is worth. Larry Summers and Jeremy Grantham are both very bright- that does not make them right every time. Remember the open letter to the Fed after the financial crisis that stated that the Fed would release a massive inflation? Totally and completely wrong. The writers never issued any sort of apology or acknowledgement. One thing to like about Paul Krugman- when he misses he frequently says so in his columns. Whether one likes him or not he owns his forecasts and commentary.

  3. At one point in time what was played television was described as programming. I think we need to bring that term back, because that is exactly what is going on every time an American turns on their TV, they are being programmed. Why do think think that BBB isn’t good for them? Because they have been programmed to think that. Why do they know explicitly the price tag, because they have been programmed to know how much BBB is expected to cost and that the expense is “bad”. Taking the time to read information, analyze it, and come to thoughtful conclusions is a lost art in the US. Billionaires paying millionaire talking heads to program the masses sounds like some dystopian novel but it’s actually the world we live in.

    1. Yes. Finally, someone has paid attention to the actual proposal here. Good on ya’. The total bill for all this stuff will likely end up around $200 bil for the first year and after three years probably be thrown out for a new “plan.” One thing I’ll say about the Chinese, btw, is that when they do a five year plan, they actually do it. Truth is, I admit to not knowing exactly what is in an actual actionable document yet and nothing I do will overcome the “negotiations” or the politics. We need to get much closer to the vote to see what actually shows up, what taxes might be involved. Besides, ongoing negotiations are limited mostly to the Dems so far. Mitch hasn’t pulled the plug yet.

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