I’m more and more convinced that the only thing that keeps Trump above 30% in polls is this false notion that he was/is competent at economic policy. Dems need to push back harder against this falsehood. He has managed his own inherited wealth terribly and his suggested policies will be pure poison to the US economy.
It's interesting that the message that Trump is not only corrupt, but also continuously bankrupt, never really stuck with voters. Especially because the trope of the skeezy, secretly broke rich guy is pretty well known in American pop culture.
Probably worth clarifying that Trump was never personally bankrupt. He might be heading there now if he can't come up with the NY bond but it's just been individual buildings previously which isn't rare in RE. Even Sam Zell - Chicago's best developer / turn around artist - has had his misses.
The economy was very good in 2017 up until Covid and he is riding on that. I dont think he was responsible for that, presidents are more passengers on the ship than running the ocean, but real income was up and in particular the lower end was doing well.
Sure, you and me think Trump is morally repugnant, but Dems repeating this endlessly have gained nothing, and imo is a waste of time.
For Dems to succeed they need to do several things that the polls clearly indicate, stop the border and be tough on crime, and take inflation more seriously. And I dont blame Biden for inflation, some, maybe 1-2% but I keep hearing liberals being effusive about gdp as if anybody but us wonks follows gdp, where every person in the country knows the price of bread. And that bread only went fron $4 to $4.20 is lost on people who remember when it was $3.
Part of it IMO is that back from the 2016 campaign coverage, the media spent a lot more time focusing on the "circus" of Trump (the rallies, the sexual assault/harassment accusations/scandals, his offensive statements, etc) than they did on his actual background and financial record.
Which I think was a big miss on behalf of informing the public on Trump's (lack of) qualifications and what to expect from a potential Trump Presidency. The circus stuff was right in front of everyone the entire time, for those who supported him these were mostly features and not bugs to begin with (and they reveled in how upset it made the "libs" the more it was reported anyway!), and for those who did not support him the "circus" was just confirmation as to why they will never support him. I don't think "Trump circus" reporting really moved the needle much for any "undecideds" or who for those who liked the noises he made about trade but changed their vote to Clinton over the Access Hollywood hot tape revelations, at any rate.
I think there was a big assumption made by the media that voters universally knew about Trump's shady and sketchy financial past and current dealings. In reality, the most prescient image of Trump for voters outside of the Tri-State area where Trump's businesses (and scandals/bankruptcies/failures) were concentrated was not that of the bankrupt failure from the 90s but that of The Apprentice's re-brand of Trump as a rough around the edges but otherwise uber-competent and uber-successful CEO. And the media's choice of "narrative" reporting about Trump in 2016 did nothing to dislodge this image. It probably just reinforced it "yeah the guy is crude but he's a massively successful multi-billionaire so he must be doing a lot right and we could use that kind of leadership".
Add that to the relatively good economy *that he inherited by luck* in 2017 - 2020 (which was showing signs of weakening, pre-COVID by the end of 2019 btw), and Trump has been given an unearned and inaccurate public perception of being a strong economy POTUS and figure, despite all his other faults. And given how "wallet based" voting works, this is a pretty strong vote carrier, especially in a time when so many voters are being so pessimistic about the current economy. It will certainly be interesting to see what happens if Trump does win, and a year later pretty much in the same economy (or worse, given Matt's predictions based on Trump's so far "policies").
It really is frustrating. Especially the 63% that say that Biden would allow the prices to increase on goods and services, while it's not even registering in Trump's top five. They have to figure out a way to explain as Matt has that his tariffs would be very aggravating toward raising prices.
Isn't part of the problem there that a substantial part of the Democratic base is anti-free trade, so many Democratic politicians are reluctant to vigorously criticize tariffs?
Certainly more so than in the past--the question is whether they'll negatively polarize against it when it becomes a Trump policy. Then, we'd be back to Gilded Age fiscal arguments!
But if the voters did buy a macro 101 Keynesian framework, wouldn't they just trust Trump more as a good Keynesian because he didn't overshoot the demand target during his presidency and Biden did?
From what I've read, without the ARP in March 2021, inflation would have topped out around 5% because of pandemic supply shocks. Instead it topped out at 8-9%.
That seems unlikely because so many other OECD countries had worse inflation with less stimulus. And took longer to recover in that as well as GDP growth.
There was a guest editorial by a couple economists in the WSJ around that time saying they’d modeled the ARP spending and predicted 9%-10% by the end of the year. They followed up in December (or thereabouts) with a we-told-you-so editorial. Meanwhile, Team Transitory was staring at their shoes.
I'm pretty sure ARPA only cost a little under the CARES Act? Blame Josh Hawley and Bernie Sanders for talking Biden into another round of checks for the Georgia special elections I guess...
The clearest way to do it is say that Trump wants to put a 10% sales tax on almost everything you buy. Which is only mostly true at best but is both clear and true enough in the effect (because of course domestic manufacturers will raise their prices just enough to undercut the foreign competition) not to get a pants on fire rating. And that’s what’s needed. It helps here that the rate proposed is a nice round number, opening the door to say that you are also talking in nice round numbers and not exactly.
Edited to add: Every Democrat should make a point of saying this at every opportunity. Ceterum censeo Trump wants to put a 10% sales tax on everything.
I have a theorem that praise and blame are overattributed especially to people you do or dont like. I dont think that Biden was the prime cause of inflation or that Trump was responsible for Covid.
But what is similar with the two, that contributed to Trump's loss, and Biden's current dismal approvals, is that both parties downplayed it. Trump with Covid was just the flu, and Biden with that inflation was just transient and the economy is great. No it isnt, if you are a looking to become a homeowner or see your APR interest going up, or just are buying bread.
Now we can argue how responsible the parties are for these things, but reality is that you will be attributed for whatever happens on your watch, regardless, and the mistake one makes is to downplay the seriousness. Inflation is the third rail of politics. Ask Jimmy Carter.
You can describe hypotheticals about tariffs and deficit-fueled inflation until the cows come home, but those two sentences capture the heart about what voters think.
Whether that will matter in November, especially if inflation remains tame and below real wage growth, is another question.
"The economy was put in a coma by my predecessor during COVID but my administration took strong action to bring it back to life. One consequence of that was a temporary spike in inflation but we've worked hard to cause that inflation rate to plunge. But yes, we still have more work to do -- let's finish the job!"
Meanwhile, I wouldn't say anything about how Trump's plans would increase inflation. Instead, I would say that he's planning on cutting Social Security and Medicare and raising the prices of medications.
I guarantee you can give Trump this exact economy and the vibes would be way more positive, with way more emphasis on the stock market and 401(k)s. That's the way it's been with Republican presidencies for a long time.
The presumption that Republicans have this magical teflon coating is belied by the fact that they lose half the time. Clinton's good economy helped him as well as Obama preventing a meltdown. And Bush Sr. who had a recession ion 1990 and Trump's Covid recession.
It is not that Trump is so popular, he did lose in 2020 or did I miss something, and he has never had approvals above 50%. He is just running against a weak candidate who even a majority of his own party want not to run and 75% of the public thinks is too old.
Your guarantee is a fallacy known as hypothesis contrary to fact.
Trump got dinged by making light of Covid and Biden by making light of inflation. Yes, us wonky types can read the gdp and unemployment figures and think all is well, but others just note the price of gas and bread and are mad.
You don't think the "brand" of our political parties is somewhat sticky? Perception of the economy and national security always seem to rise when a Republican is president, even if basic economic fundamentals like the stock market and GDP are unchanged. Democrats have baked in advantages too, like support of existing welfare programs and things like abortion and gay marriage. A lot of times, the election hinges on what swing voters find more important at the moment.
Obviously this whole (admittedly) vibes-based analysis is based on unplugged normies. Dems and Repubs have such steady bases of entrenched support that presidential elections will always be competitive.
You would have to demonstrate that to me, that the Rs have the advantage.- might be, they generally are trusted more on the economy. Then again Democrats win half the time, so obviously the economy is not everything. In effect you can look at what the Rs are campaigning on, and suspect that is where the biggest Dem weaknesses are, immigration and crime.
Nate Silver had an interesting piece on consumer sentiment where he looked at the surveys of sentiment and contrasted two metrics and the one that was more tied to inflation did poorest. As stated before the stock market and gdp are important for a limited amount of people. The price of bread effects everybody.
But, the reality is that consumer confidence is rising (Silver goes into that in depth) but Bidens approvals are going down. That to me implies that there are other issues, and in the forefront is Bidens age, which Demorats are pretending isnt real, as Republicans pretend that Trump is not a liar and sore loser. When 75% of the public thinks he is too old to be president, I dont think a good economy is going to over come that. Here is Silver's article, "Biden isn't losing because of bad economic vibes":
Consumer sentiment surveys are crap because they're stand-ins for partisan sentiment, with an asymmetrical effect of Republicans swinging more wildly based on which party controls the White House than Democratic voters do.
A survey is what it is. Of note is that consumer sentiment is rising. If it were solely partisan, since the number of Rs hasn't changed, indeed the country is tilting more that way, that implies that it isnt just politics.
The real question is that why, if consumer sentiment is rising, are Biden's approvals declining, and I would guess that is somewhat due to non economic matters - Southern Border and the elephant in the room that 75% of voters think he is too old.
Republican consumer sentiment has increased slightly (about 10 points in the past year, compared to an increase of about 20 points for Democrats and ~15 for independents).
The overall long-term consumer sentiment trendline is overwhelmingly driven by changes in Republican sentiment which is in turn overwhelmingly driven by who is in the White House. For example, with Trump in the White House, Republicans had a ~120 consumer sentiment score, dropping into the mid-30s as soon as Biden took over. Democrats, by contrast, averaged a bit under 80 with Trump in the White House, spiked briefly to 100 in Biden's first months, before plunging back to 70 and now just crawling up to ~90. In other words, there is a bit of value to looking at the trendline during a single administration, but it's worthless as an indicator of what consumers are feeling once you cross the line between administrations.
The overall consumer sentiment if it is R, D, and I, being 10, 20, 15 is driven by all three, and reinforces my point that despite this fairly dramatic shift, Biden is no more popular, so I think Carville's proverbial "it's the economy stupid" may not be the only factor. Immigration is a big one. Nor does consumer sentiment entail the whole economy. I think Biden lost a lot of moderate and conservative Dems and Independents with massive increases in debt. This is the centrist/conservative cohort that voted for Biden because he isnt Trump but wont support gargantuan programs like the 1.9 T Build Back Better, that Manchin nixed. That imo that is where Biden lost the moderate middle, by governing left of the moderate lane he campaigned on, which wasn't to pass the biggest spending bill since WW2.
My counter-hypothesis is that people were scarred by the inflation spike and remain nervous and unhappy, and worried that it will return (and they blame the President currently in charge), but over time with no recurrence they'll simmer down and give Biden more credit for the good economy.
So if inflation remains at the current low level, we should see his approval ratings improve noticeably over the next eight months.
If I'm right. If not, then obviously other things were driving their dislike of him and the job he's doing, as you suggest.
It's a frustrating fact that unfortunately I think would be true, for several reasons. Republican voters primarily have demonstrated high partisanship in their views of the economy - in Obama's last year, which economically speaking was exactly the same as Trump's first year, Republican voters rated the economy very poorly (Trump ran on what a "disaster" it was, yeah 4% unemployment and falling, strong job and wage growth, low inflation etc), the instant Trump won and took Office it turned into a "roaring" economy, the best ever, etc. Numbers-wise, nothing materially had changed much on any trend line other than an increase in the trends that began under Obama's second term. But Trump's "economic" polling got a strong boost when Republican voters started giving him strong approvals on the economy, while Democratic voters who rated the economy well under Obama mostly continued to rate it well under Trump (even as they dogged Trump on all the other "POTUS" approval rating categories). And much the same has occurred under Biden - Republican voters partisanship gives Biden an automatic low ceiling on his economic approval ratings, we could have the economy Trump had in his first three years of his term and Republican voters would still give Biden very poor approvals regarding. Then add to it the actual economic perception happening due to inflation with less partisan voters and Biden is sunk no matter what.
If Trump was re-elected in 2020 and presiding over the same economy (he also wanted to do a third round of stimulus - recall from his campaigning and excoriation of Mitch McConnell for "costing" him Georgia by not having passed it before the run-off), he would be blasting us with the "strong market" emphasis as you mention, and no matter inflation, Republican voters would give him a pass on it for not causing, and that would give Trump a higher floor than Biden to counter less partisan voters more inflation based approvals who would be more likely to rate Trump more poorly in that regard as the typical "head of state" gets.
There is also the tendency of voters and the media to perceive Republicans as the more "fiscally responsible" party - and while this is FALSE in the bigger view, it is also more true that Republicans won't be out campaigning and pushing for more social spending that voters (and the media) tend to view as more profligate and irresponsible spending. So inflation experienced under a Republican administration is likely to get a much more "macro-economic" treatment, Trump would have blamed COVID supply chain effects exclusively and most would have nodded along in a way they have not been willing to give Biden that pass on (even though COVID supply chain effects is the primary reason for resultant inflation!). Biden and the Democrats OTOH have their record of pushing spending that a lot of the Very Smart People will pin on inflation at any point in time, and happened to be right this time (even if in the case of this inflation, would only be partly responsible at best), and they look more culpable for the cause than a Republican administration would look (even if Republicans can cause inflation by their other policies, but that don't register as much in the public perception - and media reporting - as direct causes of).
Presidents have very little control over the economy, yet the public holds them responsible for the state of the economy. It's one of bizarre political truths that's existed at least as long as I've been alive.
So it doesn't matter how competent Trump was at economic policy. Or really how competent Biden is at economic policy. They have very limited authority to do anything without legislation from Congress.
The president has more control over taxes than he does over the economy. He has as much control over it as he does over any domestic policy other than regulations (can push Congress for things but can't force it).
It's tough to push back though when the Dems do highly salient things like attempt to cancel hundreds of billions of dollars of student debt. People remember that sort of thing and it just reaffirms the idea that "these people couldn't care less about fiscal responsibility." You could have a well laid evidence-based argument to the contrary, but most normies just remember stuff like seemingly arbitrary debt cancellation.
Yes, and Nate Silver opines on the debate amongst Dems of whether you should please the left and boost turnout or allay non turnout, college debt eg, or go after the middle, and points out that polls show that 3% of Trumps voters from 2020 plan to vote for Biden where a full 13% of Biden voters plan to vote for Trump, so a loss of 10%. We presume that those switching Biden voters are not MAGA but swing voters who dont like Trump but are conservative, and Biden lost them trying to be the next FDR. He points out that a vote flip actually costs 2 votes, where the progressive argument that eg Bidens support of Israel will lose votes in MI, but they wont flip to Trump but maybe to Cornel West or blank, so a one vote loss. Here is the article:
Joachim, your argument I find very typical of liberals, myself of the ilk, and implies that the many millions of dollars that the Dems are spending on campaign advisors, pollsters, equal to what the GOP is spending, is being wasted on people who dont know what they are doing, namely avoiding "pushing back".
I hate Trump so no qualms there, but the reason he is leading in the polls and will likely win in November is not that the Dems can somehow transform their message or not trying hard enough, but that the publics goals dont align with the Dems and specifically on crime and immigration where the GOP has a big advantage. And lastly, the vast majority of voters, even Democrats think that Biden is too old. The mood of the country as based on the congressional generic polling is slightly toward the Rs, but Joe Biden is taking the party down with him by not acknowledging that he is the most unpopular incumbent since they started approval polling. He needs to step aside or he will pull off a Ruth Bader Ginsburg.
Are there any good examples of countries taking Keynesian economics seriously in a consistent way? Every country I can think of is either a permanent deficit hawk (Germany) or endlessly stimulating the economy (basically everyone else).
Australia has done reasonably well. We had a large surplus prepared during the boom years of the 2000s that was spent to avoid a recession during the GFC. Result - longest period of uninterrupted growth of a developed economy and the lowest debt level of any rich country.
IMO the Australian experience is more about the Chinese resource boom than anything Australia did. Similar to Norway with its oil & gas SWF. When you have an unexpected and precarious windfall, it does make sense to save at least some of it. Australian politics from 2007 to 2018 was a shambles with one PM after another getting knifed by their own party so Australian political institutions in themselves don't seem particularly favourable.
EDIT Howard and Costello seem to have done a good job but lots of countries have one off good leaders
Israel under Slow Boring's favourite politician Benjamin Netanyahu to some extent did this as part of a broader reform effort
"Minister of Finance (2003–2005)
As finance minister, Netanyahu undertook an economic plan in order to restore Israel's economy from its low point during the Second Intifada. Netanyahu claimed that a bloated public sector and excessive regulations were largely responsible for stifling economic growth. His plan involved a move toward more liberalized markets, although it was not without its critics. He instituted a program to end welfare dependency by requiring people to apply for jobs or training, reduced the size of the public sector, froze government spending for three years, and capped the budget deficit at 1%. The taxation system was streamlined and taxes were cut, with the top individual tax rate reduced from 64% to 44% and the corporate tax rate from 36% to 18%. A host of state assets worth billions of dollars were privatized, including banks, oil refineries, the El Al national airline, and Zim Integrated Shipping Services. The retirement ages for both men and women were raised, and currency exchange laws were further liberalized. Commercial banks were forced to spin off their long-term savings. In addition, Netanyahu attacked monopolies and cartels to increase competition. As the Israeli economy started booming and unemployment fell significantly, Netanyahu was widely credited by commentators as having performed an 'economic miracle' by the end of his tenure."
I once heard an interview with Netanyahu in which he said that he considered his stint as Finance Minister as the most consequential service he provided to his country. (I’m heavily paraphrasing, but that was the gist.) It’s certainly easy to imagine that the last two decades of Israel’s economic growth is, and will continue to be, one of the most important factors in Israel’s survival.
The basic problem with the Keynesian model is that it forgets that governing structures are made up of people. There is relatively little pushback to stimulus because people tend to like spending and tax cuts, whereas it's a lot harder to convince them that tax increases and cuts to spending are a good idea even if there's an economic boom.
For stimulus, yes. I can't think of any automatic austerity stabilizers, unless you include decreases in unemployment spending (because fewer are unemployed).
1. They shouldn’t be, tax increases are a huge pain to pass politically, it would be lovely if politicians always got to either cut taxes or do nothing, no?
2. Other countries don’t automatically adjust brackets for inflation, so that an example of automatic austerity stabilizers, per your question
During the talk of the CARES Act and everything after, there was some pressure on the left to put automatic stabilizers on the spending side in the bill, something left-leaning policy folks have wanted for years, and somewhat exists in some European countries.
OTOH, the issue for 'austerity measures' is what austerity measures? The GOP would want social spending cuts, some Dem's would want tax raises, other Dem's would want neither, and defense cuts are off the table (despite their being plenty of fat to cut that wouldn't effect American strength).
On the austerity side, progressive income taxes and taxation of capital gains accomplish this to a certain extent. Booms tend to come with asset price bubbles, so a small and well-assessed wealth tax could serve similar ends.
someone working (relatively) inefficiently in a highly productive sector/role/project/whatever may very well be more productive than someone working efficiently in an unproductive one, though
I know it's not going to happen, but it would be more effective to have some kind of spending reduction (probably on an absolute dollar basis, but at least on an inflation-adjusted basis). Just as more government spending is more effective to stimulate the economy than tax cuts, less government spending will be more effective to remove excess stimulation from the economy than tax increases.
Like, I would prefer a world that was more peaceful, where the govt could spend less on the military. I would prefer a world where healthcare were less expensive (or people were in better health) so govt medical spending could be reduced. Etc.
But I can't start from an abstract "prefer spending reductions" without knowing where the money goes & considering my opinions on those expenses.
I think we are moving from a world where global peace was relatively cheap. Now we have a bunch of authoritarians with desires for “historical greatness” threatening global peace.
Just my opinion, but I think the government can and absolutely should spend less on the military, even with all the conflict in Ukraine and the Middle East. I remember the Pentagon itself saying they were over-under during the Obama admin
Reducing spending would generally reduce stimulation from the less affluent, whereas progressive taxation would reduce stimulation from the more affluent. It is not clear went reducing spending is preferable.
The U.S. needs broad based taxes like the EU. We already have a pretty progressive tax system. We just live in a system where people who pay no Federal taxes think they pay too much in Federal taxes.
I mean the American tax system is fucking bizarre.
Of course probably everyone here can explain the several types of taxation the average person is exposed to but you need to pay a non-trivial amount of attention. We have broad based taxes, but they’re for sort of special specific ones the payroll and state and local sales taxes. And then income taxes are nominally broad based but because it’s used as much for social engineering as revenues it’s weird who pays what.
Like I don’t even think you could fix this with a 75 seat senate majority because of federalism and status quo bias
There was a survey recently where something like 60% of Americans said they pay too much Federal income taxes when something like 45% of the population has zero Federal income tax liability.
I should have specified income taxes, not payroll. Also FICA is low relative to what Europeans have.
FICA is pretty small (15%ish), however, and while it is a tax, it is also something that most people get some proportion back in a manner that is much more direct (i.e., direct cash payments and medical treatment). It also has all the other oddities like being regressive.
So yes, it is a federal tax, but is kind of unique.
Long term capital gains tax rates (including step up in basis) are really important, are not progressive, and are way too often set aside in analyses of equality.
Reducing spending reduces stimulation from the government. This would impact the economy broadly (not just the less affluent), but that is the whole point: the economy is overstimulated; it needs to be stimulated less. Increasing taxes on the wealthy would probably have some impact on how much the wealthy spend, but since they're wealthy, they'll still have the money to spend.
Cutting spending is a great idea in the abstract but reality can be messy. Matt focuses on making government more efficient, which is great but really hard to do at scale. And every spending line is a vital interest for someone. For me, aid to Ukraine is a vital national interest. But shouldn't it be cut, if not zeroed out, because of the need for austerity? And if not that, then what other areas?
Sometimes you do have to make painful spending cuts, or make painful tax increases, but this is why politicians are Keynesian when it's time for stimulus and less eager devotees when it's time for austerity.
Watching my fiancé panic over filing taxes makes me realize that I am weird. It’s like auditing my finances and is fairly simple for me. For other people it is a panic attack.
I was actually impressed that Matt kept it popularist and left new taxes off the table. Expiring the TCJA is the easy part, but adding more taxes that he wants get much harder, particularly the greenhouse gas tax that he really likes but also knows is really unpopular.
I think it would still be popularist to propose new taxes on the rich beyond the TCJA expiration. Like, jack up the top rates all the way up to 40-something %. Polls seem to be fine with that conceptually, and it could bait rich Trump supporters (and Trump himself) into some classic "we're the job creators" rhetoric.
That might or might not raise a problem after the fact when it comes time to decide how to allocate the revenue from this proposed increase, but there's no logical reason why it would present any kind of problem for advocating for taxes to be increased on the rich in the here and now.
The problem is there is this popular fiction on the left that there is all this untaxed money in a tiny fraction of the population that can pay for all a Danish style welfare state. It’s just mathematical impossible. If we want things then we need to pay for them.
I know you really want to talk about this issue, but ask yourself how it's in any way responsive to what I was talking about. It's only tangentially related at best, so I'd encourage you to comment about it elsewhere, and not in reply to me.
Job creators pay capital gains rates to skim off the top of their appreciated assets. Top marginal rates on income are for professional-class W2 employees.
I'm fine with raising rates on long-term capital gains too. But if someone's a professional-class W-2 employee making over $693k of income per year after deductions, I remain comfortable raising his/her marginal tax rate.
Sinema did not. Neera Tanden told us at a Yale Dems event that Manchin wanted the IRA to allow Medicare to negotiate the price of 25 Rx drugs and Sinema pushed it down the 15. This made the bill worse.
Don't get me wrong, Sinema made a number of things worse.
But she and Manchin also prevented Biden from passing an over $3 trillion reconciliation bill that would have made inflation a lot worse. They made themselves hated figures in the Democratic Party, but if Biden does somehow come from behind and get reelected, Sinema and Manchin's action will have played a role in saving him.
I think the difference between the IRA and BBB inflation-wise was a lot smaller than people think, considering as a nation, we did among the most extra spending per capita, and still ended up with some of the lowest inflation among major countries. Now, is there an argument that the higher inflation would be dooming Biden right now? Maybe.
I think it was enormous actually. The reconciliation bill would have committed us to gigantic spending increases over 10 years. Inflation is partly about current spending and partly about expectations, and the reconciliation bill would have locked in the expectation of gigantic social spending. Indeed, that was the entire point of it.
The people who wrote the reconciliation bill were completely ignorant at the time about the inflation dangers.
A decent chunk are, but if you could get a bipartisan mortgage interest deduction phase-out or heavy cut, I'd actually accept some pretty bad stuff from the GOP side.
I wish voters cared as much about how we tax as how we spend. There is some debate on other threads about estate & capital gains taxes. It it is important to compare those options to the other ways the government could raise or save money to see that substantial increases are needed, not just think of them in isolation.
The Bolhuis et al paper is absurd. They do a bunch of statistical gymnastics to prove why consumer sentiment currently is as bad as it was not only during the Great Recession but also during the worst of the late Carter/early Reagan years by using new measures incorporating interest rates. Yet certainly in the latter, not only was the misery index (inflation and unemployment rate) much worse than recently, but so were interest rates, which were close to three times higher than now. Even by their own logic, consumer sentiment should be far, far better now than in, say, 1980, rather than basically the same. And having lived then and been on the job market, I can confirm that 1979-1982 was a far worse time than 2021-2023.
Plus, there is a huge divergence between people currently saying their own situation is good but that of the nation's economy is bad. I imagine that wasn't the case in 1979-1982.
Call it a vibecession, media bias toward negativity, the Republican partisan effect or whatever, but people are not responding to these surveys rationally.
Interesting! And a great addition to the question. (I know you meant "lower" and not actually "higher.")
The other problem with their focus on interest rates is that they only affect a relatively small and rolling part of the population. Most people aren't buying a car or buying a house. Most people with mortgages have them at pretty low rates. And even if you buy a house with a high mortgage rate, refinancing is so easy that when rates fall (and that's what the Fed is saying it's highly likely to do), you can just grab the lower rate.
Also, I don't think people care *that* much about prices actually falling (see: Reagan reelection; prices didn't fall, but people were just happy they weren't zooming up so fast). I think they care about things being under control. They'll get used to the higher prices (especially if their wages/salaries are increasing) as long as they're not going up by more than 2 or 3 percent. Admittedly, it takes a while for them to get used to the higher prices, and it's an open question if they'll feel more accepting of them by this November.
There are two, distinct questions about austerity:
1) Is ideally structured austerity desirable; and
2) Is an austeirity bill that could actually pass Congress desirable.
The answer to (1) is clearly yes. There are plemty of fat oxen to gore. Bring back Eisenhower (or Nixon) era tax rates on the upper brackets and you pacify the left, please deficit hawks, lower inflation and improve fiscal capacity all at once. The only contentious question would be how far down the income ladder austerity should extend, and there would be a simple tradeoff between broadening the pro-austerity coalition and actually reducing aggregate demand.
This does NOT imply that real world austerity would be desirable. I would rather rather tolerate modestly higher inflation than across the board cuts to Medicaid or Social Security. This implies that looking for Harberger triangles (waste) is politically convenient even if it is macroeconomically impotent. Channeling political energy towards identifying waste could shield useful programs from across the board cuts and sanitize the idea of government spending.
I worked with DoD on logistics for many years, and when the budget cuts came, they tended to roll downhill to the logistics pot first (no senior generals were logisticians), and typically wound up being, say, a 10% cut with very little direction as to what to cut or why except to make logistics "more business-like" which no one knew how to define.
The big problem is that inefficiencies are marbled throughout the operation of the organization and there isn't a scalpel delicate or accurate enough to deftly slice those bits and pieces out while leaving the larger and more productive parts of it untouched. To cut out the fat, unfortunately, you wind up cutting out a lot of muscle too.
Cut procurement regs and the people who do compliance with them. Let people do what they want in procurement and contracting, and then if you catch someone doing self-dealing that actually harms the taxpayer (dishonest graft) throw the people involved in prison.
Basically all the required contract clauses, all the “pro-competition” stuff on advertising, soliciting bids, protesting awards, the small business stuff, essentially everything that makes you have a “Procurement Office” full of specialists in the first place, and that makes it so only beltway-bandit specialists can successfully bid on government contracts.
Sure, that might make procurement more "efficient." But that's not the only value we put on use of tax funds. We also value equity, fair treatment, protection from abuse and fraud and on and on.
Basically every single regulation tracks its origins back to some scandal or outrage and, probably, an embarrassing Washington Post story.
I’m sure every individual bit of cruft was added with good intentions, but the entire edifice, taken as a whole as it exists now, is one of the purest concentrated examples of dysfunctional government waste I know of. It’s hard to believe anyone could look at the results the system generates and not think that something has gone terribly wrong.
This is tangential to the main point of the post, but something I've wondered is whether there have been any studies yet to determine whether the increasing number of states and municipalities that have built automatic inflation adjustments into their minimum wages are making it harder to tamp down inflation by putting continuous upward pressure on wages.
My suspicion is the automatic increases in minimum wages have a very, very small effect. Just not a large enough population of affected workers to matter.
On the other hand, the recent increases in federal salaries (5.2% in 2024) and the UAW automaker contracts (11% increase in 2024) are probably providing upward pressure.
Most workers are well above the minimum wage so minimum wage increases have a minimal direct effect as a price floor. Union contracts and contracts stipulating COLAs also are not as common.
One thing we have seen over the past few years is that incomes for top earners has not kept up with inflation (and thus it lowers income inequality.) It also has resulted in a bunch of people earning $100k a year to complain about “cost of living.”
The effect of the federal salaries and UAW contracts goes beyond the affected workers. Auto suppliers, for example, have to compete with the "Big 3" for labor and the increases at GM trickle down to their supply base, plus the non-union automakers increase wages to avoid unionization risks.
I'm not as familiar with the knock-on effects for the federal government employees, but with ~3 million workers, the direct effects are substantial enough on their own to move the needle.
Remember lots of Federal workers got less than 5.2% since there are locality adjustments to COLA.
It might move the needle, but automatic adjustments don’t seem to be the pusher for wage growths. It’s the tight labor market that is driving wages up, primarily at lower income quartiles.
The whole discourse around the Five Guys burger and food delivery as a whole this past weekish led me to my new favorite tweet on the topic: "Anytime you ask anyone to lift a finger to do anything, someone will accuse you supporting genocide."
I can’t imagine he’d have a problem once he tasted the toasted brioche, nueske’s applewood-smoked bacon, ghost pepper cheese, fresno chili jam, mashed avocado, crispy onions, tomato, and spicy aioli.
I would also add automatic inflation-based increases in Social Security payouts. Those payments total $1.5 trillion (projected for 2024) and recent automatic increases included 5.9% in 2021, and 8.7% in 2022 before dropping to 3.2% last year.
I think aggregate federal wage increases since 2020 (~15%) have been lower than inflation over the same time period (~20%). If federal wages are falling in real terms, I wouldn’t say they’re exacerbating the problem?
I just looked up who Arnold Harberger is, and today I learn that he's still alive, and will turn 100 in July. A lot of economists know how to live long. We'll have to send him off with a ▶ symbol to honor his work on the subject when he finally dies.
EDIT: not thrilled that Substack is automatically translating what was just supposed to be a solid black triangle into an emoji, that's dulling the reference I'm trying to make there.
Good, that's what you're supposed to see. I see a white triangle in a blue box. Maybe it's browser/device specific--although I see it on both Firefox and Chrome.
I wonder if a 0.5% tax increase on every household making more than say 80,000 that is specifically for deficit reduction only would have popular support.
I'm very much in the minority, but I believe that any new taxes should go toward deficit reduction first before going toward new spending. I support your idea.
This is a useful data set in terms of housing affordability, which gets to the point of why views on the economy are more pessimistic than the macro stats like GDP and unemployment.
As usual, this is a great post and I agree with all of it. And as a longtime MattY fan and reader, I remember you writing about this in 2011 (and 2013 etc etc) and thinking “well the Democrats are the party of Reason and Science, surely they’ll do the right thing when the time comes”.
Well I’m no longer a naive college kid who thinks the Democrats are “the party of Reason and Science”. But it has to be said that we’re accumulating a long list of instances where Democrats are simply refusing to do the right thing on the merits, according to the arguments they themselves made. Moreover they’re doing this in a way that harms them electorally against Donald Trump who is a threat to them, their agenda, democracy, humanity, rule of law, etc etc in basically every way.
How do you make sense of this complacency? Especially on the part of administration leaders who are supposed to be mature adults who know better (as opposed to Sunrise activists)?
Counterpoint: Years ago economist Charles Linblom wrote a seminal article on the art of "muddling through." You can't know the future and even the present is a tangled web to navigate so most often what you want to do is muddle through successfully and adapt in the future as conditions change.
Thus Biden's plan to stabilize the deficit. No drastic cuts or huge tax increases, but a more reasonable approach to staunch the bleeding. Get back on a better path and then adjust in the future as conditions become better known.
I tackled a version of this question in my book on early radiation therapy--a bunch of people who clearly articulated why a thing was bad while proceeding to do the bad thing, killing themselves in the process--and my conclusion was that humans are subject to (surprisingly predictable) cognitive errors.
To be clear, I'm not saying that anyone involved is "dumb"; it's more pernicious than that, which is what I try to capture by calling it a "cognitive error." Our minds just aren't well adapted to processing certain kinds of high-complexity inputs and tradeoff choices with a non-immediate temporal component, and those come up a lot in politics and public policy. It's the same thing that I was writing about in that other thread on Israel-Gaza politics that you asked about the other day.
What's been a little surprising to watch is how the Jones Act, long a niche issue that a handful of nerds who read Cato white papers complain about, is getting more attention in the news as a hurdle for offshore wind energy-a big goal of the progressive left-and there's been no actual policy change at all to address the hurdle. I would have expected at least some Democrats to decide that fast deployment of offshore wind is better than protectionism, but the party has been amazingly unified in refusing to see a problem. And IRL I've been surprised that Green groups don't even seem to care about this.
So many environmental activists are used to weaponizing regulations to stop dirty energy developments that they end up being averse to disarming that same weapon when it comes to clean energy developments.
"And IRL I've been surprised that Green groups don't even seem to care about this."
this one is much easier to explain than the former. Green groups believe environmentalism means not doing stuff and the more stuff you do the less environmental it is
New policy: "People waiting for asylum hearings can work in the US, but only on foreign-flagged vessels doing work on offshore wind farms adjacent blue states."
I suspect that at least some of electeds’ reluctance to take on the Jones Act stems from national security concerns. The protected cabotage market helps ensure that the US has plenty of guys with boats to move stuff from Point A to Point B whenever we next get embroiled in a WWII-scale conflict, and it also helps prevent foreign-operated domestic shipping from turning into a vulnerable point for smuggling or immigration violations.
I think there are probably better ways of achieving this set of objectives, but if I were a member of Congress, I’d recognize that when the domestic shipping industry hired some ex-military or ex-CBO people to make the case that I was hurting the US’s war preparedness or opening up a new vector for fentanyl imports, I would pay a political price for my choices.
As of January 2023, there were some 56 tankers and 23 container ships in the Jones Act fleet. The Jones Act requires that all goods transported between U.S. ports by boat or ship must be U.S.-crewed, -owned, and -registered.Dec 8, 2023"
I just don't believe that "56 tankers and 23 container ships" constitutes "plenty of guys with boats". There are 5,461 container ships worldwide, so we've got less than half of a percentage of them,
Whoa, glad to learn that. I’m genuinely surprised that waterborne US domestic freight doesn’t support a bigger merchant fleet despite Jones Act-inflated costs. I guess that trucking and rail just provide better cost/speed tradeoffs in most cases?
In general, agree with the thrust of this post. We can debate the details for sure as to what should be cut or what taxes should be made, but it really does seem like this is the actual right time for deficit reduction.
However, I need to address something you wrote "If you look at contemporary polling, it’s still the case that voters want reassurance that Democrats care about the national debt...". Yeah going to stop you right there. Unless your "voters" are policy wonks at AEI or Brookings or economists at banks or colleges, there is no way this is actually a true statement. Vast majority of voters do not actually care about the national debt. In fact, vast majority of voters I doubt could tell you the mechanics of why bad debt is a problem in the public policy realm beyond associating with their own personal finances; which as you know is actually a terrible way of assessing national debt.
It's weird that this lesson was apparently only heeded by Bill Clinton who famously got a question at a debate in 1992 about the deficit and then pivoted because he (or someone on his team) understood that when voters worry about the deficit or debt, it's really general (to use the famous phrase from November, 2016) "economic anxiety".
Looking at pure politics, the reason to decrease deficits is that it should put downward pressure on interest rates which voters should notice in lower borrowing costs which should lead to less worries about the economy generally. But worry about the deficit and debt is just pure "serious people" stuff and saying the public wants debt reduction is just categorically incorrect.
What's weird is I'm pretty sure Matt is one of the people who taught me to not look at issue polling at face value but ask yourself what is the real thing public is worried about so odd to me he would sort of throw that line in.
I saw that poll. And I'll reiterate on the merits, I think Matt has a good argument for reasons Keynes originally laid out.
I think what I'll say is that issue polling in general should be taken with a grain of salt; especially on policy issues that are more esoteric to the general public. But even on issues that are simpler and/or voters have strong feelings about. This actually one of the reasons that Kevin Drum (somewhat) correctly notes to liberals that a lot of their favorite policies are not as popular as polls indicate. https://jabberwocking.com/surprise-surveys-are-unreliable-guides-to-actual-voting-patterns/
In fact we're seeing a real world example of an issue that people have extremely passionate feelings regarding; abortion. One reason GOP felt confident that overturning Roe vs Wade would be popular was due to polls conducted on the issue pre 2022. They took these polls too much at face value when a closer reading of the issue would suggest a lot of voters a) never really thought through the implications of overturning Roe and therefore didn't consider real world impacts b) never seriously thought Roe would be overturned given Democrats have been warning about this possibility for over 30 years which gave it a "boy who cried wolf" aspect c) mostly didn't like thinking about the issue more than having passionate feelings one way or the other.
The point isn't that issue polling is useless. The point is the top line survey results need to be interpreted correctly or less you will be left with wildly overestimating or underestimating actual public support for a particular policy.
I’m more and more convinced that the only thing that keeps Trump above 30% in polls is this false notion that he was/is competent at economic policy. Dems need to push back harder against this falsehood. He has managed his own inherited wealth terribly and his suggested policies will be pure poison to the US economy.
It's interesting that the message that Trump is not only corrupt, but also continuously bankrupt, never really stuck with voters. Especially because the trope of the skeezy, secretly broke rich guy is pretty well known in American pop culture.
Probably worth clarifying that Trump was never personally bankrupt. He might be heading there now if he can't come up with the NY bond but it's just been individual buildings previously which isn't rare in RE. Even Sam Zell - Chicago's best developer / turn around artist - has had his misses.
He is personally bankrupt in a moral sense.
Sure. He's a monster. Even more reason to not make stuff up about him when the facts are so damning.
You mean like the bloodbath headlines this week - good luck w that
Exactly. I mean ... the 100% tariff comment was bad enough right??
The economy was very good in 2017 up until Covid and he is riding on that. I dont think he was responsible for that, presidents are more passengers on the ship than running the ocean, but real income was up and in particular the lower end was doing well.
Sure, you and me think Trump is morally repugnant, but Dems repeating this endlessly have gained nothing, and imo is a waste of time.
For Dems to succeed they need to do several things that the polls clearly indicate, stop the border and be tough on crime, and take inflation more seriously. And I dont blame Biden for inflation, some, maybe 1-2% but I keep hearing liberals being effusive about gdp as if anybody but us wonks follows gdp, where every person in the country knows the price of bread. And that bread only went fron $4 to $4.20 is lost on people who remember when it was $3.
>>>Especially because the trope of the skeezy, secretly broke rich guy is pretty well known in American pop culture.<<<
...Is it?
I can think of, like, one Twilight Zone episode to which this applies but I would not say that this seems like an especially prominent trope.
Part of it IMO is that back from the 2016 campaign coverage, the media spent a lot more time focusing on the "circus" of Trump (the rallies, the sexual assault/harassment accusations/scandals, his offensive statements, etc) than they did on his actual background and financial record.
Which I think was a big miss on behalf of informing the public on Trump's (lack of) qualifications and what to expect from a potential Trump Presidency. The circus stuff was right in front of everyone the entire time, for those who supported him these were mostly features and not bugs to begin with (and they reveled in how upset it made the "libs" the more it was reported anyway!), and for those who did not support him the "circus" was just confirmation as to why they will never support him. I don't think "Trump circus" reporting really moved the needle much for any "undecideds" or who for those who liked the noises he made about trade but changed their vote to Clinton over the Access Hollywood hot tape revelations, at any rate.
I think there was a big assumption made by the media that voters universally knew about Trump's shady and sketchy financial past and current dealings. In reality, the most prescient image of Trump for voters outside of the Tri-State area where Trump's businesses (and scandals/bankruptcies/failures) were concentrated was not that of the bankrupt failure from the 90s but that of The Apprentice's re-brand of Trump as a rough around the edges but otherwise uber-competent and uber-successful CEO. And the media's choice of "narrative" reporting about Trump in 2016 did nothing to dislodge this image. It probably just reinforced it "yeah the guy is crude but he's a massively successful multi-billionaire so he must be doing a lot right and we could use that kind of leadership".
Add that to the relatively good economy *that he inherited by luck* in 2017 - 2020 (which was showing signs of weakening, pre-COVID by the end of 2019 btw), and Trump has been given an unearned and inaccurate public perception of being a strong economy POTUS and figure, despite all his other faults. And given how "wallet based" voting works, this is a pretty strong vote carrier, especially in a time when so many voters are being so pessimistic about the current economy. It will certainly be interesting to see what happens if Trump does win, and a year later pretty much in the same economy (or worse, given Matt's predictions based on Trump's so far "policies").
But he wasn’t broke. Looks like he was a centa-millionaire the whole time.
It really is frustrating. Especially the 63% that say that Biden would allow the prices to increase on goods and services, while it's not even registering in Trump's top five. They have to figure out a way to explain as Matt has that his tariffs would be very aggravating toward raising prices.
Isn't part of the problem there that a substantial part of the Democratic base is anti-free trade, so many Democratic politicians are reluctant to vigorously criticize tariffs?
Certainly more so than in the past--the question is whether they'll negatively polarize against it when it becomes a Trump policy. Then, we'd be back to Gilded Age fiscal arguments!
I'm bulk printing "Free Coinage of Silver Now!" t-shirts to get in on the ground floor!
The Republican base too, it's not popular.
Yes, but City of Trees was talking about what Democratic candidates could do to argue against Trump's protectionism . . . .
Is it worth gaining the suburbs in exchange for working-class minorities?
I have tried to get that sort of thing into the message tests and it’s really tricky to get voters to understand macro 101
But if the voters did buy a macro 101 Keynesian framework, wouldn't they just trust Trump more as a good Keynesian because he didn't overshoot the demand target during his presidency and Biden did?
Didn’t basically all the stimulus happen under Trump? I think there was one last round in March 2021.
From what I've read, without the ARP in March 2021, inflation would have topped out around 5% because of pandemic supply shocks. Instead it topped out at 8-9%.
That seems unlikely because so many other OECD countries had worse inflation with less stimulus. And took longer to recover in that as well as GDP growth.
There was a guest editorial by a couple economists in the WSJ around that time saying they’d modeled the ARP spending and predicted 9%-10% by the end of the year. They followed up in December (or thereabouts) with a we-told-you-so editorial. Meanwhile, Team Transitory was staring at their shoes.
"President Biden’s $1.9 trillion American Rescue Plan is ambitious, but achievable, and will rescue the American economy and start beating the virus."
That was Summers' entire point. That the ARP stimulus was 3x (!!!) the size of the actual vs. estimated potential output gap at the time.
https://www.whitehouse.gov/briefing-room/legislation/2021/01/20/president-biden-announces-american-rescue-plan/
https://thehill.com/policy/finance/537521-key-ex-obama-adviser-says-biden-stimulus-is-too-big/
I'm pretty sure ARPA only cost a little under the CARES Act? Blame Josh Hawley and Bernie Sanders for talking Biden into another round of checks for the Georgia special elections I guess...
Have you tried what Kareem suggested just two minutes ago?
Trying to get some version of it into one of the next two message tests, yeah.
Best of luck!
Keynesian fiscal theory is not "macro 101". That's part of the problem. Monetary policy controls aggregate demand, not fiscal policy.
The clearest way to do it is say that Trump wants to put a 10% sales tax on almost everything you buy. Which is only mostly true at best but is both clear and true enough in the effect (because of course domestic manufacturers will raise their prices just enough to undercut the foreign competition) not to get a pants on fire rating. And that’s what’s needed. It helps here that the rate proposed is a nice round number, opening the door to say that you are also talking in nice round numbers and not exactly.
Edited to add: Every Democrat should make a point of saying this at every opportunity. Ceterum censeo Trump wants to put a 10% sales tax on everything.
I have a theorem that praise and blame are overattributed especially to people you do or dont like. I dont think that Biden was the prime cause of inflation or that Trump was responsible for Covid.
But what is similar with the two, that contributed to Trump's loss, and Biden's current dismal approvals, is that both parties downplayed it. Trump with Covid was just the flu, and Biden with that inflation was just transient and the economy is great. No it isnt, if you are a looking to become a homeowner or see your APR interest going up, or just are buying bread.
Now we can argue how responsible the parties are for these things, but reality is that you will be attributed for whatever happens on your watch, regardless, and the mistake one makes is to downplay the seriousness. Inflation is the third rail of politics. Ask Jimmy Carter.
That's not the way things work.
Under Biden, there was inflation.
Under Trump, there wasn't inflation.
You can describe hypotheticals about tariffs and deficit-fueled inflation until the cows come home, but those two sentences capture the heart about what voters think.
Whether that will matter in November, especially if inflation remains tame and below real wage growth, is another question.
What should the Biden team's plan be then if this gets brought up?
"The economy was put in a coma by my predecessor during COVID but my administration took strong action to bring it back to life. One consequence of that was a temporary spike in inflation but we've worked hard to cause that inflation rate to plunge. But yes, we still have more work to do -- let's finish the job!"
Meanwhile, I wouldn't say anything about how Trump's plans would increase inflation. Instead, I would say that he's planning on cutting Social Security and Medicare and raising the prices of medications.
I guarantee you can give Trump this exact economy and the vibes would be way more positive, with way more emphasis on the stock market and 401(k)s. That's the way it's been with Republican presidencies for a long time.
The presumption that Republicans have this magical teflon coating is belied by the fact that they lose half the time. Clinton's good economy helped him as well as Obama preventing a meltdown. And Bush Sr. who had a recession ion 1990 and Trump's Covid recession.
It is not that Trump is so popular, he did lose in 2020 or did I miss something, and he has never had approvals above 50%. He is just running against a weak candidate who even a majority of his own party want not to run and 75% of the public thinks is too old.
Your guarantee is a fallacy known as hypothesis contrary to fact.
Trump got dinged by making light of Covid and Biden by making light of inflation. Yes, us wonky types can read the gdp and unemployment figures and think all is well, but others just note the price of gas and bread and are mad.
You don't think the "brand" of our political parties is somewhat sticky? Perception of the economy and national security always seem to rise when a Republican is president, even if basic economic fundamentals like the stock market and GDP are unchanged. Democrats have baked in advantages too, like support of existing welfare programs and things like abortion and gay marriage. A lot of times, the election hinges on what swing voters find more important at the moment.
Obviously this whole (admittedly) vibes-based analysis is based on unplugged normies. Dems and Repubs have such steady bases of entrenched support that presidential elections will always be competitive.
You would have to demonstrate that to me, that the Rs have the advantage.- might be, they generally are trusted more on the economy. Then again Democrats win half the time, so obviously the economy is not everything. In effect you can look at what the Rs are campaigning on, and suspect that is where the biggest Dem weaknesses are, immigration and crime.
Nate Silver had an interesting piece on consumer sentiment where he looked at the surveys of sentiment and contrasted two metrics and the one that was more tied to inflation did poorest. As stated before the stock market and gdp are important for a limited amount of people. The price of bread effects everybody.
But, the reality is that consumer confidence is rising (Silver goes into that in depth) but Bidens approvals are going down. That to me implies that there are other issues, and in the forefront is Bidens age, which Demorats are pretending isnt real, as Republicans pretend that Trump is not a liar and sore loser. When 75% of the public thinks he is too old to be president, I dont think a good economy is going to over come that. Here is Silver's article, "Biden isn't losing because of bad economic vibes":
https://www.natesilver.net/p/biden-isnt-losing-because-of-bad
Consumer sentiment surveys are crap because they're stand-ins for partisan sentiment, with an asymmetrical effect of Republicans swinging more wildly based on which party controls the White House than Democratic voters do.
A survey is what it is. Of note is that consumer sentiment is rising. If it were solely partisan, since the number of Rs hasn't changed, indeed the country is tilting more that way, that implies that it isnt just politics.
The real question is that why, if consumer sentiment is rising, are Biden's approvals declining, and I would guess that is somewhat due to non economic matters - Southern Border and the elephant in the room that 75% of voters think he is too old.
Republican consumer sentiment has increased slightly (about 10 points in the past year, compared to an increase of about 20 points for Democrats and ~15 for independents).
The overall long-term consumer sentiment trendline is overwhelmingly driven by changes in Republican sentiment which is in turn overwhelmingly driven by who is in the White House. For example, with Trump in the White House, Republicans had a ~120 consumer sentiment score, dropping into the mid-30s as soon as Biden took over. Democrats, by contrast, averaged a bit under 80 with Trump in the White House, spiked briefly to 100 in Biden's first months, before plunging back to 70 and now just crawling up to ~90. In other words, there is a bit of value to looking at the trendline during a single administration, but it's worthless as an indicator of what consumers are feeling once you cross the line between administrations.
https://data.sca.isr.umich.edu/charts.php
The overall consumer sentiment if it is R, D, and I, being 10, 20, 15 is driven by all three, and reinforces my point that despite this fairly dramatic shift, Biden is no more popular, so I think Carville's proverbial "it's the economy stupid" may not be the only factor. Immigration is a big one. Nor does consumer sentiment entail the whole economy. I think Biden lost a lot of moderate and conservative Dems and Independents with massive increases in debt. This is the centrist/conservative cohort that voted for Biden because he isnt Trump but wont support gargantuan programs like the 1.9 T Build Back Better, that Manchin nixed. That imo that is where Biden lost the moderate middle, by governing left of the moderate lane he campaigned on, which wasn't to pass the biggest spending bill since WW2.
My counter-hypothesis is that people were scarred by the inflation spike and remain nervous and unhappy, and worried that it will return (and they blame the President currently in charge), but over time with no recurrence they'll simmer down and give Biden more credit for the good economy.
So if inflation remains at the current low level, we should see his approval ratings improve noticeably over the next eight months.
If I'm right. If not, then obviously other things were driving their dislike of him and the job he's doing, as you suggest.
It's a frustrating fact that unfortunately I think would be true, for several reasons. Republican voters primarily have demonstrated high partisanship in their views of the economy - in Obama's last year, which economically speaking was exactly the same as Trump's first year, Republican voters rated the economy very poorly (Trump ran on what a "disaster" it was, yeah 4% unemployment and falling, strong job and wage growth, low inflation etc), the instant Trump won and took Office it turned into a "roaring" economy, the best ever, etc. Numbers-wise, nothing materially had changed much on any trend line other than an increase in the trends that began under Obama's second term. But Trump's "economic" polling got a strong boost when Republican voters started giving him strong approvals on the economy, while Democratic voters who rated the economy well under Obama mostly continued to rate it well under Trump (even as they dogged Trump on all the other "POTUS" approval rating categories). And much the same has occurred under Biden - Republican voters partisanship gives Biden an automatic low ceiling on his economic approval ratings, we could have the economy Trump had in his first three years of his term and Republican voters would still give Biden very poor approvals regarding. Then add to it the actual economic perception happening due to inflation with less partisan voters and Biden is sunk no matter what.
If Trump was re-elected in 2020 and presiding over the same economy (he also wanted to do a third round of stimulus - recall from his campaigning and excoriation of Mitch McConnell for "costing" him Georgia by not having passed it before the run-off), he would be blasting us with the "strong market" emphasis as you mention, and no matter inflation, Republican voters would give him a pass on it for not causing, and that would give Trump a higher floor than Biden to counter less partisan voters more inflation based approvals who would be more likely to rate Trump more poorly in that regard as the typical "head of state" gets.
There is also the tendency of voters and the media to perceive Republicans as the more "fiscally responsible" party - and while this is FALSE in the bigger view, it is also more true that Republicans won't be out campaigning and pushing for more social spending that voters (and the media) tend to view as more profligate and irresponsible spending. So inflation experienced under a Republican administration is likely to get a much more "macro-economic" treatment, Trump would have blamed COVID supply chain effects exclusively and most would have nodded along in a way they have not been willing to give Biden that pass on (even though COVID supply chain effects is the primary reason for resultant inflation!). Biden and the Democrats OTOH have their record of pushing spending that a lot of the Very Smart People will pin on inflation at any point in time, and happened to be right this time (even if in the case of this inflation, would only be partly responsible at best), and they look more culpable for the cause than a Republican administration would look (even if Republicans can cause inflation by their other policies, but that don't register as much in the public perception - and media reporting - as direct causes of).
Presidents have very little control over the economy, yet the public holds them responsible for the state of the economy. It's one of bizarre political truths that's existed at least as long as I've been alive.
So it doesn't matter how competent Trump was at economic policy. Or really how competent Biden is at economic policy. They have very limited authority to do anything without legislation from Congress.
The president also doesn't control taxes, and yet all my life I hear people making their presidential choices based on taxes. It's asinine.
The president has more control over taxes than he does over the economy. He has as much control over it as he does over any domestic policy other than regulations (can push Congress for things but can't force it).
It's tough to push back though when the Dems do highly salient things like attempt to cancel hundreds of billions of dollars of student debt. People remember that sort of thing and it just reaffirms the idea that "these people couldn't care less about fiscal responsibility." You could have a well laid evidence-based argument to the contrary, but most normies just remember stuff like seemingly arbitrary debt cancellation.
Yes, and Nate Silver opines on the debate amongst Dems of whether you should please the left and boost turnout or allay non turnout, college debt eg, or go after the middle, and points out that polls show that 3% of Trumps voters from 2020 plan to vote for Biden where a full 13% of Biden voters plan to vote for Trump, so a loss of 10%. We presume that those switching Biden voters are not MAGA but swing voters who dont like Trump but are conservative, and Biden lost them trying to be the next FDR. He points out that a vote flip actually costs 2 votes, where the progressive argument that eg Bidens support of Israel will lose votes in MI, but they wont flip to Trump but maybe to Cornel West or blank, so a one vote loss. Here is the article:
https://www.natesilver.net/p/bidens-problem-is-with-swing-voters
Joachim, your argument I find very typical of liberals, myself of the ilk, and implies that the many millions of dollars that the Dems are spending on campaign advisors, pollsters, equal to what the GOP is spending, is being wasted on people who dont know what they are doing, namely avoiding "pushing back".
I hate Trump so no qualms there, but the reason he is leading in the polls and will likely win in November is not that the Dems can somehow transform their message or not trying hard enough, but that the publics goals dont align with the Dems and specifically on crime and immigration where the GOP has a big advantage. And lastly, the vast majority of voters, even Democrats think that Biden is too old. The mood of the country as based on the congressional generic polling is slightly toward the Rs, but Joe Biden is taking the party down with him by not acknowledging that he is the most unpopular incumbent since they started approval polling. He needs to step aside or he will pull off a Ruth Bader Ginsburg.
“…the only thing that keeps Trump above 30% in polls is this false notion that he was/is competent at economic policy”
That’s all you can think of? Really?
Are there any good examples of countries taking Keynesian economics seriously in a consistent way? Every country I can think of is either a permanent deficit hawk (Germany) or endlessly stimulating the economy (basically everyone else).
Australia has done reasonably well. We had a large surplus prepared during the boom years of the 2000s that was spent to avoid a recession during the GFC. Result - longest period of uninterrupted growth of a developed economy and the lowest debt level of any rich country.
IMO the Australian experience is more about the Chinese resource boom than anything Australia did. Similar to Norway with its oil & gas SWF. When you have an unexpected and precarious windfall, it does make sense to save at least some of it. Australian politics from 2007 to 2018 was a shambles with one PM after another getting knifed by their own party so Australian political institutions in themselves don't seem particularly favourable.
EDIT Howard and Costello seem to have done a good job but lots of countries have one off good leaders
Israel under Slow Boring's favourite politician Benjamin Netanyahu to some extent did this as part of a broader reform effort
"Minister of Finance (2003–2005)
As finance minister, Netanyahu undertook an economic plan in order to restore Israel's economy from its low point during the Second Intifada. Netanyahu claimed that a bloated public sector and excessive regulations were largely responsible for stifling economic growth. His plan involved a move toward more liberalized markets, although it was not without its critics. He instituted a program to end welfare dependency by requiring people to apply for jobs or training, reduced the size of the public sector, froze government spending for three years, and capped the budget deficit at 1%. The taxation system was streamlined and taxes were cut, with the top individual tax rate reduced from 64% to 44% and the corporate tax rate from 36% to 18%. A host of state assets worth billions of dollars were privatized, including banks, oil refineries, the El Al national airline, and Zim Integrated Shipping Services. The retirement ages for both men and women were raised, and currency exchange laws were further liberalized. Commercial banks were forced to spin off their long-term savings. In addition, Netanyahu attacked monopolies and cartels to increase competition. As the Israeli economy started booming and unemployment fell significantly, Netanyahu was widely credited by commentators as having performed an 'economic miracle' by the end of his tenure."
https://en.wikipedia.org/wiki/Benjamin_Netanyahu
The obvious implication - Biden should appoint Netanyahu as Treasury Secretary. Peace in Gaza and prosperity in America, what more could one ask for
I’d love to see those confirmation hearings.
I once heard an interview with Netanyahu in which he said that he considered his stint as Finance Minister as the most consequential service he provided to his country. (I’m heavily paraphrasing, but that was the gist.) It’s certainly easy to imagine that the last two decades of Israel’s economic growth is, and will continue to be, one of the most important factors in Israel’s survival.
The basic problem with the Keynesian model is that it forgets that governing structures are made up of people. There is relatively little pushback to stimulus because people tend to like spending and tax cuts, whereas it's a lot harder to convince them that tax increases and cuts to spending are a good idea even if there's an economic boom.
I'm curious if any country has passed laws that automatically trigger austerity measures in boom years or stimulus measures in downturns.
Things like unemployment insurance and poverty aid do precisely this.
For stimulus, yes. I can't think of any automatic austerity stabilizers, unless you include decreases in unemployment spending (because fewer are unemployed).
Tax brackets that aren’t indexed to inflation would have this effect. Same with tax credits, deductions, etc.
But brackets are indexed to inflation.
In the US, yes, but:
1. They shouldn’t be, tax increases are a huge pain to pass politically, it would be lovely if politicians always got to either cut taxes or do nothing, no?
2. Other countries don’t automatically adjust brackets for inflation, so that an example of automatic austerity stabilizers, per your question
During the talk of the CARES Act and everything after, there was some pressure on the left to put automatic stabilizers on the spending side in the bill, something left-leaning policy folks have wanted for years, and somewhat exists in some European countries.
OTOH, the issue for 'austerity measures' is what austerity measures? The GOP would want social spending cuts, some Dem's would want tax raises, other Dem's would want neither, and defense cuts are off the table (despite their being plenty of fat to cut that wouldn't effect American strength).
On the austerity side, progressive income taxes and taxation of capital gains accomplish this to a certain extent. Booms tend to come with asset price bubbles, so a small and well-assessed wealth tax could serve similar ends.
"Every middle manager working on an ineffective program is someone who could be managing a Target or a Chipotle."
Which I'm guessing would be a nightmare for middle managers out there. (And, yes, it's fine to inflict that nightmare.)
People don't work efficiently in jobs they consider nightmares
someone working (relatively) inefficiently in a highly productive sector/role/project/whatever may very well be more productive than someone working efficiently in an unproductive one, though
It’s the capitalist equivalent of China’s Down to the Countryside Movement.
https://en.wikipedia.org/wiki/Down_to_the_Countryside_Movement
Taxes?
Taxes!
Yeah the MATH of fighting the deficit has always been more obvious than the POLITICS of the fight... Taxes.
I know it's not going to happen, but it would be more effective to have some kind of spending reduction (probably on an absolute dollar basis, but at least on an inflation-adjusted basis). Just as more government spending is more effective to stimulate the economy than tax cuts, less government spending will be more effective to remove excess stimulation from the economy than tax increases.
I don't think I have a blanket opinion on this.
Like, I would prefer a world that was more peaceful, where the govt could spend less on the military. I would prefer a world where healthcare were less expensive (or people were in better health) so govt medical spending could be reduced. Etc.
But I can't start from an abstract "prefer spending reductions" without knowing where the money goes & considering my opinions on those expenses.
I think we are moving from a world where global peace was relatively cheap. Now we have a bunch of authoritarians with desires for “historical greatness” threatening global peace.
Just my opinion, but I think the government can and absolutely should spend less on the military, even with all the conflict in Ukraine and the Middle East. I remember the Pentagon itself saying they were over-under during the Obama admin
The government is spending less "real" money than it was under Obama, or really at almost any point post WW2.
Reducing spending would generally reduce stimulation from the less affluent, whereas progressive taxation would reduce stimulation from the more affluent. It is not clear went reducing spending is preferable.
The U.S. needs broad based taxes like the EU. We already have a pretty progressive tax system. We just live in a system where people who pay no Federal taxes think they pay too much in Federal taxes.
I mean the American tax system is fucking bizarre.
Of course probably everyone here can explain the several types of taxation the average person is exposed to but you need to pay a non-trivial amount of attention. We have broad based taxes, but they’re for sort of special specific ones the payroll and state and local sales taxes. And then income taxes are nominally broad based but because it’s used as much for social engineering as revenues it’s weird who pays what.
Like I don’t even think you could fix this with a 75 seat senate majority because of federalism and status quo bias
Doesn't the AVERAGE person do a simple W2 income + standard deduction and it's all quite easy?
Which people who don't pay federal taxes are you referring to? There's both FICA and income taxes out there.
There was a survey recently where something like 60% of Americans said they pay too much Federal income taxes when something like 45% of the population has zero Federal income tax liability.
I should have specified income taxes, not payroll. Also FICA is low relative to what Europeans have.
FICA is pretty small (15%ish), however, and while it is a tax, it is also something that most people get some proportion back in a manner that is much more direct (i.e., direct cash payments and medical treatment). It also has all the other oddities like being regressive.
So yes, it is a federal tax, but is kind of unique.
Yup and FICA low-key raises about the same government revenue as personal income tax.
It's like we already did a back-door flat tax for half the money we raise from individuals.
Long term capital gains tax rates (including step up in basis) are really important, are not progressive, and are way too often set aside in analyses of equality.
Reducing spending reduces stimulation from the government. This would impact the economy broadly (not just the less affluent), but that is the whole point: the economy is overstimulated; it needs to be stimulated less. Increasing taxes on the wealthy would probably have some impact on how much the wealthy spend, but since they're wealthy, they'll still have the money to spend.
Cutting spending is a great idea in the abstract but reality can be messy. Matt focuses on making government more efficient, which is great but really hard to do at scale. And every spending line is a vital interest for someone. For me, aid to Ukraine is a vital national interest. But shouldn't it be cut, if not zeroed out, because of the need for austerity? And if not that, then what other areas?
Sometimes you do have to make painful spending cuts, or make painful tax increases, but this is why politicians are Keynesian when it's time for stimulus and less eager devotees when it's time for austerity.
"Like" for "soak the rich in taxes" but big dislike on "put price controls in place."
Watching my fiancé panic over filing taxes makes me realize that I am weird. It’s like auditing my finances and is fairly simple for me. For other people it is a panic attack.
Yeah I don’t get it. And I think every accountant I’ve taken my taxes to has made simple mistakes when I check their work.
I was actually impressed that Matt kept it popularist and left new taxes off the table. Expiring the TCJA is the easy part, but adding more taxes that he wants get much harder, particularly the greenhouse gas tax that he really likes but also knows is really unpopular.
I think hiding it under a carbon or pollution border adjustment might work.
Call it a Border Adjustment Tariff and it could be sold.
Start it off very small, get the infrastructure in place, and then grow it over time.
Tie the funding to something that is difficult/unpopular to take away from the public.
I think it would still be popularist to propose new taxes on the rich beyond the TCJA expiration. Like, jack up the top rates all the way up to 40-something %. Polls seem to be fine with that conceptually, and it could bait rich Trump supporters (and Trump himself) into some classic "we're the job creators" rhetoric.
Problem is that only brings enough revenue to do “a” thing, not the things every interest group is clamoring for.
Remember the BBB negotiations, big bloated boondoggle.
That might or might not raise a problem after the fact when it comes time to decide how to allocate the revenue from this proposed increase, but there's no logical reason why it would present any kind of problem for advocating for taxes to be increased on the rich in the here and now.
The problem is there is this popular fiction on the left that there is all this untaxed money in a tiny fraction of the population that can pay for all a Danish style welfare state. It’s just mathematical impossible. If we want things then we need to pay for them.
I know you really want to talk about this issue, but ask yourself how it's in any way responsive to what I was talking about. It's only tangentially related at best, so I'd encourage you to comment about it elsewhere, and not in reply to me.
39.6% is sacrosanct to Democrats.
Still better than the 9/10ths bullshit that the gas stations keep running with.
Job creators pay capital gains rates to skim off the top of their appreciated assets. Top marginal rates on income are for professional-class W2 employees.
I'm fine with raising rates on long-term capital gains too. But if someone's a professional-class W-2 employee making over $693k of income per year after deductions, I remain comfortable raising his/her marginal tax rate.
The upshot of this is that Joe Manchin and Kyrsten Sinema saved America.
Sinema did not. Neera Tanden told us at a Yale Dems event that Manchin wanted the IRA to allow Medicare to negotiate the price of 25 Rx drugs and Sinema pushed it down the 15. This made the bill worse.
Don't get me wrong, Sinema made a number of things worse.
But she and Manchin also prevented Biden from passing an over $3 trillion reconciliation bill that would have made inflation a lot worse. They made themselves hated figures in the Democratic Party, but if Biden does somehow come from behind and get reelected, Sinema and Manchin's action will have played a role in saving him.
Right that part was good. But her input on IRA actively made the legislation worse whereas Manchin unequivocally improved on BBB.
I think the difference between the IRA and BBB inflation-wise was a lot smaller than people think, considering as a nation, we did among the most extra spending per capita, and still ended up with some of the lowest inflation among major countries. Now, is there an argument that the higher inflation would be dooming Biden right now? Maybe.
I think it was enormous actually. The reconciliation bill would have committed us to gigantic spending increases over 10 years. Inflation is partly about current spending and partly about expectations, and the reconciliation bill would have locked in the expectation of gigantic social spending. Indeed, that was the entire point of it.
The people who wrote the reconciliation bill were completely ignorant at the time about the inflation dangers.
Inflation without ARP would have been 5%. Inflation with ARP as passed topped out at 8%. Inflation with a larger ARP would have been more than that.
This policy was basically the centerpiece of the Clinton administration and it worked great.
Treasury says tax expenditures cost it $1.6t last year, or ~95% of the deficit...good place to start
https://home.treasury.gov/policy-issues/tax-policy/tax-expenditures
Those tax expenditures are REALLY popular
A decent chunk are, but if you could get a bipartisan mortgage interest deduction phase-out or heavy cut, I'd actually accept some pretty bad stuff from the GOP side.
Best way to do that is to put in a cap at a pretty decent number (500k) and then just not adjust it for inflation.
It is already capped at $750k of principal.
Good point.
Yeah, that'd be reasonable - just find a way to pass it so that our Cali & NY representatives in the suburbs can vote against and rail against it. :)
I would be very interested in getting rid of the mortgage deduction. Tax breaks on other things like R&D research, or deprecation, less so.
Eliminate the corporate income tax and raise the capital gains tax rate. Problem solved.
Every dollar of wages not collected as tax is a tax expenditure. Tax rates could be 100%!
I wish voters cared as much about how we tax as how we spend. There is some debate on other threads about estate & capital gains taxes. It it is important to compare those options to the other ways the government could raise or save money to see that substantial increases are needed, not just think of them in isolation.
The Bolhuis et al paper is absurd. They do a bunch of statistical gymnastics to prove why consumer sentiment currently is as bad as it was not only during the Great Recession but also during the worst of the late Carter/early Reagan years by using new measures incorporating interest rates. Yet certainly in the latter, not only was the misery index (inflation and unemployment rate) much worse than recently, but so were interest rates, which were close to three times higher than now. Even by their own logic, consumer sentiment should be far, far better now than in, say, 1980, rather than basically the same. And having lived then and been on the job market, I can confirm that 1979-1982 was a far worse time than 2021-2023.
Plus, there is a huge divergence between people currently saying their own situation is good but that of the nation's economy is bad. I imagine that wasn't the case in 1979-1982.
Call it a vibecession, media bias toward negativity, the Republican partisan effect or whatever, but people are not responding to these surveys rationally.
I got an option on “higher rates on mortgages and credit cards” put into the “what would you most like to see improved in the economy” question on this survey because of that paper and overwhelmingly voters’ top issue remains the price level. https://acrobat.adobe.com/id/urn:aaid:sc:va6c2:ee2fd7af-680a-4a4d-996c-e171816c6f25
Interesting! And a great addition to the question. (I know you meant "lower" and not actually "higher.")
The other problem with their focus on interest rates is that they only affect a relatively small and rolling part of the population. Most people aren't buying a car or buying a house. Most people with mortgages have them at pretty low rates. And even if you buy a house with a high mortgage rate, refinancing is so easy that when rates fall (and that's what the Fed is saying it's highly likely to do), you can just grab the lower rate.
Also, I don't think people care *that* much about prices actually falling (see: Reagan reelection; prices didn't fall, but people were just happy they weren't zooming up so fast). I think they care about things being under control. They'll get used to the higher prices (especially if their wages/salaries are increasing) as long as they're not going up by more than 2 or 3 percent. Admittedly, it takes a while for them to get used to the higher prices, and it's an open question if they'll feel more accepting of them by this November.
There are two, distinct questions about austerity:
1) Is ideally structured austerity desirable; and
2) Is an austeirity bill that could actually pass Congress desirable.
The answer to (1) is clearly yes. There are plemty of fat oxen to gore. Bring back Eisenhower (or Nixon) era tax rates on the upper brackets and you pacify the left, please deficit hawks, lower inflation and improve fiscal capacity all at once. The only contentious question would be how far down the income ladder austerity should extend, and there would be a simple tradeoff between broadening the pro-austerity coalition and actually reducing aggregate demand.
This does NOT imply that real world austerity would be desirable. I would rather rather tolerate modestly higher inflation than across the board cuts to Medicaid or Social Security. This implies that looking for Harberger triangles (waste) is politically convenient even if it is macroeconomically impotent. Channeling political energy towards identifying waste could shield useful programs from across the board cuts and sanitize the idea of government spending.
How do you identify and cut waste?
I worked with DoD on logistics for many years, and when the budget cuts came, they tended to roll downhill to the logistics pot first (no senior generals were logisticians), and typically wound up being, say, a 10% cut with very little direction as to what to cut or why except to make logistics "more business-like" which no one knew how to define.
The big problem is that inefficiencies are marbled throughout the operation of the organization and there isn't a scalpel delicate or accurate enough to deftly slice those bits and pieces out while leaving the larger and more productive parts of it untouched. To cut out the fat, unfortunately, you wind up cutting out a lot of muscle too.
Cut procurement regs and the people who do compliance with them. Let people do what they want in procurement and contracting, and then if you catch someone doing self-dealing that actually harms the taxpayer (dishonest graft) throw the people involved in prison.
I've spent a good bit of time with procurement regs (for defense) as it appears you have as well. Any specific ones you want to get rid of?
Basically all the required contract clauses, all the “pro-competition” stuff on advertising, soliciting bids, protesting awards, the small business stuff, essentially everything that makes you have a “Procurement Office” full of specialists in the first place, and that makes it so only beltway-bandit specialists can successfully bid on government contracts.
Sure, that might make procurement more "efficient." But that's not the only value we put on use of tax funds. We also value equity, fair treatment, protection from abuse and fraud and on and on.
Basically every single regulation tracks its origins back to some scandal or outrage and, probably, an embarrassing Washington Post story.
I’m sure every individual bit of cruft was added with good intentions, but the entire edifice, taken as a whole as it exists now, is one of the purest concentrated examples of dysfunctional government waste I know of. It’s hard to believe anyone could look at the results the system generates and not think that something has gone terribly wrong.
I identify waste like pornography: I know it when I see it. YMMV!
And thus they banned OnlyFans on government computers.
Problem solved!
Those tax rates also had WAY more deductions.
The actual amount collected is pretty similar.
This is tangential to the main point of the post, but something I've wondered is whether there have been any studies yet to determine whether the increasing number of states and municipalities that have built automatic inflation adjustments into their minimum wages are making it harder to tamp down inflation by putting continuous upward pressure on wages.
ETA: First!
My suspicion is the automatic increases in minimum wages have a very, very small effect. Just not a large enough population of affected workers to matter.
On the other hand, the recent increases in federal salaries (5.2% in 2024) and the UAW automaker contracts (11% increase in 2024) are probably providing upward pressure.
Most workers are well above the minimum wage so minimum wage increases have a minimal direct effect as a price floor. Union contracts and contracts stipulating COLAs also are not as common.
One thing we have seen over the past few years is that incomes for top earners has not kept up with inflation (and thus it lowers income inequality.) It also has resulted in a bunch of people earning $100k a year to complain about “cost of living.”
The effect of the federal salaries and UAW contracts goes beyond the affected workers. Auto suppliers, for example, have to compete with the "Big 3" for labor and the increases at GM trickle down to their supply base, plus the non-union automakers increase wages to avoid unionization risks.
I'm not as familiar with the knock-on effects for the federal government employees, but with ~3 million workers, the direct effects are substantial enough on their own to move the needle.
Remember lots of Federal workers got less than 5.2% since there are locality adjustments to COLA.
It might move the needle, but automatic adjustments don’t seem to be the pusher for wage growths. It’s the tight labor market that is driving wages up, primarily at lower income quartiles.
Some may have received less, but some received more. The 5.2% is the average.
https://www.govexec.com/pay-benefits/2023/12/biden-signs-order-finalizing-52-pay-raise-feds-2024/392978/
https://www.govexec.com/pay-benefits/2023/11/opm-finalizes-new-locality-pay-areas-ahead-2024-pay-raise/392258/
It was 4.7% base and an average of .5% added in as adjustments to the locality pay scale. My increase was 5.7%.
Have you seen what a premium burger goes for these days?!
My reply to this would just be an AI-generated image of me screaming at my phone, spittle flying, saying, "THEN DON'T BUY A GODDAMNED CHEESEBURGER"
It’s not like premium crispy chicken sandwiches are much cheaper.
The whole discourse around the Five Guys burger and food delivery as a whole this past weekish led me to my new favorite tweet on the topic: "Anytime you ask anyone to lift a finger to do anything, someone will accuse you supporting genocide."
Wait until Vincent Vega finds out about the five dollar milkshake!
I can’t imagine he’d have a problem once he tasted the toasted brioche, nueske’s applewood-smoked bacon, ghost pepper cheese, fresno chili jam, mashed avocado, crispy onions, tomato, and spicy aioli.
Compared to any increase in your income or wealth? How are you doing on net?
I’m eating fewer premium burgers now. So…better?
I would also add automatic inflation-based increases in Social Security payouts. Those payments total $1.5 trillion (projected for 2024) and recent automatic increases included 5.9% in 2021, and 8.7% in 2022 before dropping to 3.2% last year.
I think aggregate federal wage increases since 2020 (~15%) have been lower than inflation over the same time period (~20%). If federal wages are falling in real terms, I wouldn’t say they’re exacerbating the problem?
There are only some tens of thousands of autoworkers at UAW factories. How is that number putting wage pressure on a workforce of 160 million?
I wonder if there is any minimum wage anywhere in the US that has a measurable macroeconomic effect.
I just looked up who Arnold Harberger is, and today I learn that he's still alive, and will turn 100 in July. A lot of economists know how to live long. We'll have to send him off with a ▶ symbol to honor his work on the subject when he finally dies.
EDIT: not thrilled that Substack is automatically translating what was just supposed to be a solid black triangle into an emoji, that's dulling the reference I'm trying to make there.
I see a solid black triangle, like the PLAY button on a remote.
Good, that's what you're supposed to see. I see a white triangle in a blue box. Maybe it's browser/device specific--although I see it on both Firefox and Chrome.
I have the white triangle in a blue box on Edge.
I’m using Safari on an iPad. Which is usually the worst browser.
I wonder if a 0.5% tax increase on every household making more than say 80,000 that is specifically for deficit reduction only would have popular support.
People like deficit reduction in the abstract. Only.
I'm very much in the minority, but I believe that any new taxes should go toward deficit reduction first before going toward new spending. I support your idea.
That’s $400 of GrubHub!
This is a useful data set in terms of housing affordability, which gets to the point of why views on the economy are more pessimistic than the macro stats like GDP and unemployment.
https://www.atlantafed.org/center-for-housing-and-policy/data-and-tools/home-ownership-affordability-monitor
As usual, this is a great post and I agree with all of it. And as a longtime MattY fan and reader, I remember you writing about this in 2011 (and 2013 etc etc) and thinking “well the Democrats are the party of Reason and Science, surely they’ll do the right thing when the time comes”.
Well I’m no longer a naive college kid who thinks the Democrats are “the party of Reason and Science”. But it has to be said that we’re accumulating a long list of instances where Democrats are simply refusing to do the right thing on the merits, according to the arguments they themselves made. Moreover they’re doing this in a way that harms them electorally against Donald Trump who is a threat to them, their agenda, democracy, humanity, rule of law, etc etc in basically every way.
How do you make sense of this complacency? Especially on the part of administration leaders who are supposed to be mature adults who know better (as opposed to Sunrise activists)?
Counterpoint: Years ago economist Charles Linblom wrote a seminal article on the art of "muddling through." You can't know the future and even the present is a tangled web to navigate so most often what you want to do is muddle through successfully and adapt in the future as conditions change.
Thus Biden's plan to stabilize the deficit. No drastic cuts or huge tax increases, but a more reasonable approach to staunch the bleeding. Get back on a better path and then adjust in the future as conditions become better known.
Joe's a very smart politician.
I tackled a version of this question in my book on early radiation therapy--a bunch of people who clearly articulated why a thing was bad while proceeding to do the bad thing, killing themselves in the process--and my conclusion was that humans are subject to (surprisingly predictable) cognitive errors.
To be clear, I'm not saying that anyone involved is "dumb"; it's more pernicious than that, which is what I try to capture by calling it a "cognitive error." Our minds just aren't well adapted to processing certain kinds of high-complexity inputs and tradeoff choices with a non-immediate temporal component, and those come up a lot in politics and public policy. It's the same thing that I was writing about in that other thread on Israel-Gaza politics that you asked about the other day.
It's really frustrating.
What's been a little surprising to watch is how the Jones Act, long a niche issue that a handful of nerds who read Cato white papers complain about, is getting more attention in the news as a hurdle for offshore wind energy-a big goal of the progressive left-and there's been no actual policy change at all to address the hurdle. I would have expected at least some Democrats to decide that fast deployment of offshore wind is better than protectionism, but the party has been amazingly unified in refusing to see a problem. And IRL I've been surprised that Green groups don't even seem to care about this.
So many environmental activists are used to weaponizing regulations to stop dirty energy developments that they end up being averse to disarming that same weapon when it comes to clean energy developments.
"And IRL I've been surprised that Green groups don't even seem to care about this."
this one is much easier to explain than the former. Green groups believe environmentalism means not doing stuff and the more stuff you do the less environmental it is
Did someone say, "the Jones Act"? Time for "It's Cabotage!": https://www.youtube.com/watch?v=k9-qPrOE_VM
New policy: "People waiting for asylum hearings can work in the US, but only on foreign-flagged vessels doing work on offshore wind farms adjacent blue states."
I suspect that at least some of electeds’ reluctance to take on the Jones Act stems from national security concerns. The protected cabotage market helps ensure that the US has plenty of guys with boats to move stuff from Point A to Point B whenever we next get embroiled in a WWII-scale conflict, and it also helps prevent foreign-operated domestic shipping from turning into a vulnerable point for smuggling or immigration violations.
I think there are probably better ways of achieving this set of objectives, but if I were a member of Congress, I’d recognize that when the domestic shipping industry hired some ex-military or ex-CBO people to make the case that I was hurting the US’s war preparedness or opening up a new vector for fentanyl imports, I would pay a political price for my choices.
"How big is the Jones Act fleet?
As of January 2023, there were some 56 tankers and 23 container ships in the Jones Act fleet. The Jones Act requires that all goods transported between U.S. ports by boat or ship must be U.S.-crewed, -owned, and -registered.Dec 8, 2023"
https://www.statista.com/statistics/646259/us-flag-oceangoing-privately-owned-jones-act-fleet-by-type/#:~:text=As%20of%20January%202023%2C%20there,%2Downed%2C%20and%20%2Dregistered.
I just don't believe that "56 tankers and 23 container ships" constitutes "plenty of guys with boats". There are 5,461 container ships worldwide, so we've got less than half of a percentage of them,
Whoa, glad to learn that. I’m genuinely surprised that waterborne US domestic freight doesn’t support a bigger merchant fleet despite Jones Act-inflated costs. I guess that trucking and rail just provide better cost/speed tradeoffs in most cases?
I think that's most of it, yeah. As I understand it, whatever our passenger rail lacks, our freight rail is excellent.
And river freight
I wonder how expensive it is to just keep ships mothballed in Jacksonville or Tacoma for that purpose?
In general, agree with the thrust of this post. We can debate the details for sure as to what should be cut or what taxes should be made, but it really does seem like this is the actual right time for deficit reduction.
However, I need to address something you wrote "If you look at contemporary polling, it’s still the case that voters want reassurance that Democrats care about the national debt...". Yeah going to stop you right there. Unless your "voters" are policy wonks at AEI or Brookings or economists at banks or colleges, there is no way this is actually a true statement. Vast majority of voters do not actually care about the national debt. In fact, vast majority of voters I doubt could tell you the mechanics of why bad debt is a problem in the public policy realm beyond associating with their own personal finances; which as you know is actually a terrible way of assessing national debt.
It's weird that this lesson was apparently only heeded by Bill Clinton who famously got a question at a debate in 1992 about the deficit and then pivoted because he (or someone on his team) understood that when voters worry about the deficit or debt, it's really general (to use the famous phrase from November, 2016) "economic anxiety".
Looking at pure politics, the reason to decrease deficits is that it should put downward pressure on interest rates which voters should notice in lower borrowing costs which should lead to less worries about the economy generally. But worry about the deficit and debt is just pure "serious people" stuff and saying the public wants debt reduction is just categorically incorrect.
What's weird is I'm pretty sure Matt is one of the people who taught me to not look at issue polling at face value but ask yourself what is the real thing public is worried about so odd to me he would sort of throw that line in.
Well said, Colin. Voters care about their deficit only until their taxes go up or their favored programs get cut.
There are good reasons for politicians to push deficit-reducing policies, but winning the affection of voters is not among them.
You can find the full results here but the poll Matt is referencing shows that voters' top concern (63%) about Biden after his age is that he would increase the debt. One of the most persuasive Biden messages mentions cutting the deficit by $1.8 trillion. https://blueprint2024.com/polling/key-voter-analysis-bidens-most-effective-attacks-against-trump/
I saw that poll. And I'll reiterate on the merits, I think Matt has a good argument for reasons Keynes originally laid out.
I think what I'll say is that issue polling in general should be taken with a grain of salt; especially on policy issues that are more esoteric to the general public. But even on issues that are simpler and/or voters have strong feelings about. This actually one of the reasons that Kevin Drum (somewhat) correctly notes to liberals that a lot of their favorite policies are not as popular as polls indicate. https://jabberwocking.com/surprise-surveys-are-unreliable-guides-to-actual-voting-patterns/
In fact we're seeing a real world example of an issue that people have extremely passionate feelings regarding; abortion. One reason GOP felt confident that overturning Roe vs Wade would be popular was due to polls conducted on the issue pre 2022. They took these polls too much at face value when a closer reading of the issue would suggest a lot of voters a) never really thought through the implications of overturning Roe and therefore didn't consider real world impacts b) never seriously thought Roe would be overturned given Democrats have been warning about this possibility for over 30 years which gave it a "boy who cried wolf" aspect c) mostly didn't like thinking about the issue more than having passionate feelings one way or the other.
The point isn't that issue polling is useless. The point is the top line survey results need to be interpreted correctly or less you will be left with wildly overestimating or underestimating actual public support for a particular policy.
I'm talking more about messaging than policy