The "Perception Gap"
Is the U.S. economy "doing spectacularly well"?
A subscriber comment on the previous installment in this series asked me to comment on the post, This economic myth needs to go away: Sixty percent of Americans are not struggling to get by, written by Ben Krauss and published on Matthew Yglesias’s substack Slow Boring.
This article, published October 19, 2024, falls into a particular genre — “perception gap” — which was popular in the mainstream press during the run-up to the 2024 US presidential election. The perception gap refers to the disconnect between official economic indicators, which painted a positive picture of economy, and the perception of many Americans that the economy did not deliver for them. I remember, in particular, the opinion piece by the veteran journalist Steven Greenhouse, specializing in economic and labor issues: Trump wants you to believe that the US economy is doing terribly. It’s untrue.
Washington Post went even further. In an article, Why Trump is losing his edge among voters on the economy: It seems that good economic news is finally sinking in for voters, Catherine Rampell opined, “How good is the U.S. economy these days? So good that Republicans are pretending the numbers are fake.” And later on: “The U.S. economy is just doing spectacularly well.”
I also seem to remember that Paul Krugman wrote a similar opinion in The New York Times, but cannot find that article. (Note added later: A reader located the article: A ‘Glorious’ Economy, published on Oct. 30, 2024 in The New York Times.)
As we know, these efforts failed to persuade the stubborn American working class, and Trump was elected by a landslide.
Getting back to the Krauss article, he uses a fairly common trick: first putting up a strawman and then easily demolishing it.
He starts his piece by noting that populist politicians on both the left and the right “like to say that 60 percent of Americans are living paycheck to paycheck.” Krauss traces this meme to some obscure company’s annual report, based on opaque methodology. It’s not worth going into the details of his critique (you can read it in his post), because I agree with him on this issue — here we have a “factoid” that’s not worth paying attention to.
But I cannot agree with Krauss’ overall optimistic conclusion, that “the United States is not an economic dystopia, but rather a place where most Americans are still at least middle class and have comfortable living standards.” Yes, there are many countries that are in much worse economic shape than USA. The question we need to answer is not about the level, but about the trend. Immiseration is relative. Americans compare their well-being to that of their parent generation.
The statistics that we’ve reviewed in the previous post, SDSA II: Well-being/Immiseration, strongly suggest that common Americans have been losing ground since the late 1970s and that this trend has continued over the past decade. Particularly damning evidence comes from the statistics on the biological well-being and the deaths of despair.
The US economy has been performing reasonably well, but mainly for the top 10% and even more for the 1% and 0.01%. As I discuss in End Times, this is one of the reasons why the members of these privileged classes experience their own perception gap, failing to understand that immiseration for the lower socio-economic strata is real.
Krauss makes a nod in his piece to the worsening immiseration with a comment about increased health care costs that “has fractured the middle-class dream for many Americans.” In support of this, he cites a 2019 article, which in turn cites research by data company Clever, which I’ve never heard of. A better data source would be CMS.gov (Centers for Medicare & Medicaid Services).
As I wrote in the previous installment (and in End Times), health insurance is one of the three “big items” that define the quality of life for the American middle class. But I didn’t develop that theme further there. Now, and prompted by that throw-away comment in the Krauss post, I decided to delve into the numbers. I’ll report the results next week.
Very few people have a sense of history, especially aggregate economic history. Piketty among others has shown that economic divergence from the very wealthy compared to everyone else has rarely, almost never, been more egalitarian than in the U.S. during the late 20th Century. However, that history means nothing to people who measure economic wellbeing against their actual memory, against a single generation or two past.
Another factor that I don't see Mr. Turchin considering with the weight I think it deserves is the sense that universal media now provides to consumers of that media of what life should be like. What I mean is that the media all throughout presents background pictures of a lifestyle that is more settled, more adventurous, and just generally richer than many (perhaps most) people experience in their actual lives. This sense of the expected "normal" lifestyle is absorbed consciously and subconsciously, and when people measure it against their actual reality and realistic potential, they often become resentful and discontent. This is one source of current immiseration that I think should be better explored.
See also "Yes, inflation made the median voter poorer" at https://jzmazlish.substack.com/p/yes-inflation-made-the-median-voter . Among other things, it claims that the median change in wages is more important than the change in median wages, and it was bad under Biden.