The word “macroeconomics” doesn’t exactly get the blood boiling, and neither, really, do ostensibly exciting subtopics like inflation and unemployment.
That’s not to suggest James Carville was wrong. It is “the economy, stupid,” but when it comes to riling up voters, it’s all about what you say and how you say it. Otherwise, everyday Americans are inclined to a kind of disheartened apathy, worn down as they are by decades of middle-class oppression, nonexistent real wage growth, wanting evidence of upward mobility and the nauseating realization that meritocracy is a cruel myth.
Talking loudly about abortion or gun rights while seated at the end of a crowded bar is likely to result in confrontation regardless. Talking loudly at that same bar about inflation and unemployment could just as easily put everybody to sleep as it could incite them to violence, depending on your approach. Mention NAIRU and r-star and watch people politely ask the bartender for their tabs. (“Nice talkin’ with you. I gotta get goin.’ It’s late.” “It’s just 7:30.” “Have a good one!”)
Earlier this month, in “Americans Have No Idea What’s Going On,” I suggested that… well, that Americans have no idea what’s going on. Among other things, I pointed to the glaring disparity between everyday people’s perceptions of the employment landscape and what’s actually happening in the labor market.
Long story short, Americans simply don’t follow the data, and their views are in many cases “informed” by news stories which, by virtue of being news, should be objective but aren’t — because objectivity and facts don’t sell. Americans can be made to believe anything. Donald Trump made many lower- and middle-income voters believe his tax cuts were designed specifically to benefit working people when in fact they were tailored specifically to the wealthy and corporations. Over the last half-dozen years, Vladimir Putin’s global propaganda network turned scores of conservative-leaning, flag-waving American super-patriots (the type of people who plaster their pickup trucks with star-spangled bumper stickers) into Kremlin sycophants. And so on.
Throw in the reality distortion field associated with hyper-partisanship (wherein Republican voters will say the economy’s performing terribly even when it isn’t just because the sitting president happens to be a Democrat, and vice versa) and perceptions about the current state of affairs for jobs, inflation, growth and so on, can and do diverge wildly from reality.
But, as I alluded to above, the underlying, long run, 30,000-foot reality for everyday people is that the divide between the rich and everybody else gets wider every year and Main Street’s plight hasn’t improved in decades. That underlying reality explains the visceral reaction among everyday people to good news when it’s conveyed by people who haven’t suffered from the above-mentioned middle-class economic oppression. Various sorts of opportunists — from politicians to foreign governments to tabloid-style websites — seek to channel and exploit those visceral reactions for their own gain.
That’s why it’s so important the US address the underlying economic malaise. It’s the weakest link in the republic, which goes a long way towards explaining why some prominent web portals with unconfirmed ties to the Kremlin produce a veritable firehose of daily content centered on the economic plight of everyday Americans.
Increasingly, Carville’s old adage (and calling it “old” makes me feel old) applies more to America’s long-running middle-class malaise than it does to any one data point or even a series of data points. This goes beyond any one election cycle. It’s been decades since workers enjoyed consistent, meaningful wage gains in real terms, and it’s likewise been decades since labor (i.e., unions) had any real power on an economy-wide basis. If the scales are in the process of tipping back in favor of everyday people that’s great, but because it’s been so damn long since anyone cared about Main Street, we shouldn’t be surprised when Jerome Powell’s “regular economic people” scoff at good news.
Note that if recent economic developments mattered, the GOP would’ve fared a lot better during the 2022 midterms. Inflation was the highest in 40 years in 2022, and any idiot could’ve conjured a scary-sounding campaign video tying the situation directly to the “extreme socialists” running the show in D.C. Instead, Republicans underperformed in no small part because, as it turned out, abortion was more galvanizing than inflation.
Trump lied habitually about recent economic events. Importantly, they were very often demonstrable lies. By his final year in office, those lies (and his other lies too, but that’s a separate discussion) had reached cartoonishly epic proportions. On the eve of the pandemic, he told Davos attendees that, “the United States is in the midst of an economic boom the likes of which the world has never seen before.” You had to admire the audacity. It wasn’t just the greatest economic boom in modern US history. Or the greatest economic boom in all US history. It was the greatest economic boom in the history of human civilization. (The Trump years are imperceptible on a long-term chart of quarterly US GDP.)
By then (i.e., by 2020), it’s safe to say scarcely anyone took those sorts of declarations literally, not even Trump’s supporters. What mattered wasn’t so much the veracity of his claims about current events, but rather his overarching narrative which, in a nutshell, said that everyday Americans spent the last four decades getting screwed by anybody and everybody, that it was time for that to stop and that even if you were skeptical that he was the guy for the job, you didn’t have anything to lose because the situation couldn’t possibly get much worse.
I should be clear: Some people did believe his lies to the letter. So, hook, line and sinker. But I think it’s entirely fair to suggest that the appeal of Trump’s economic message was the extent to which it tapped into middle-class angst and disaffection tied not to any one event or president or Congress, but rather to the never-ending degradation of Main Street, a secular problem that would continue unless and until various swamps were drained, Chinas tamed and so on.
The tragicomedy of the 2020s is that the situation looks like it might finally be turning, and Trump is in part to thank because, true to his word, he ran the country just like he ran his businesses — recklessly and ultimately into the ground. I’m avowedly not among those inclined to believe Xi Jinping was desperate enough after two years trading trade war escalations to loose a plague if it meant dooming his counterpart’s re-election bid, but… well, people have gone to crazier lengths to rid themselves of Trump. (I’m just joking. Sort of.)
Just two months after regaling Davos with the fantastical tale of history’s greatest economic boom, Trump was forced to engineer the worst economic crash since the Great Depression, which in turn compelled the institution of emergency policy measures that ultimately set the stage for the macroeconomic conjuncture we have today — a conjuncture defined by still-elevated core price growth, hot nominal growth, escalating wage demands, strikes, emboldened unions, industrial policy, infrastructure spending and loud calls in many corners for fiscal dominance in the name of social justice and equality.
But it might be too late. And, in one final ironic turn, the onerous circumstances that sowed the seeds for Main Street’s eventual redemption might’ve also been the last straw. “A 3.7% YoY average price hike is on top of 8.2% in August of 2022 and 5.2% in August of 2021, meaning a total rise of 18.1% since August 2020,” Rabobank’s Michael Every wrote Thursday, editorializing around this week’s US CPI report. He continued:
[An economics professor on Twitter] explained that average US grocery prices have been unchanged for six months: Someone replied that his income of over $300,000 insulates him from such real-life observations. Nobel Prize-winner Paul Krugman told CNN, “The economic data have been just surreally good. Even optimists are just stunned.” “So why do polls show most Americans don’t think the economy is doing well?,” asked Christiane Amanpour. “There’s a really profound and peculiar disconnect going on,” was his reply. He also tweeted, “So basically the data are now saying that the war on inflation has been pretty much won — without a recession.” I can fiddle with data as well as the next analyst, but outside cloistered circles people are deeply unhappy with the state of the economy because of inflation. Those with a better feel for things than rate-cut addicted markets and bubble boys can pick up on that vibe. Even The Rolling Stones’s latest hit is called “Angry.” The band who sang of Street Fighting Men in the 60s, and by the 90s were so rich it was joked they all lived in a Manhattan penthouse, feeding on cocaine and diamonds with prehensile tongues, capture the 2023 zeitgeist with a new album called “Hackney Diamonds.” That’s London slang for the broken glass left behind after car windscreens have been smashed. The title is supremely appropriate in that most of Hackney — still a byword for urban poverty — is now unaffordable to either buy or rent in. A generation are in Exile on Main Street; can’t afford groceries on Main Street; or find there’s no Main Street anymore.
Now, do yourself a favor and go read “Exiles On Main Street“. I’ve made it publicly available for 24 hours.