“It’s the economy, stupid,” a famous phrase coined by James Carville, has been a guiding principle for U.S. presidents seeking reelection since the 1990s. However, Joe Biden’s presidency may challenge this conventional wisdom, as polls consistently show that despite a robust economy, Americans remain pessimistic about it.
While economic indicators suggest a thriving economy, with growth and job creation, inflation has emerged as a primary concern among voters. Despite peaking about 18 months ago, price hikes continue to dominate public discourse. In a March YouGov poll, Americans identified inflation as the top issue facing the country, reflecting a widespread sense of economic anxiety. Business owners’ optimism has also plummeted to its lowest point in a decade due to inflation worries.
A recent study by the Brookings Institution sheds light on why inflation evokes such strong negative sentiments among the public. Unlike economists who attribute inflation to various economic factors like supply chain disruptions and government policies, ordinary people tend to blame the government for inflation while attributing their wage increases to their own performance or career progression.
The study revealed that while nearly half of the respondents reported receiving a pay increase, they were more likely to credit their own job performance rather than inflation for the raise. This disconnect between people’s perceptions and economic realities underscores the complexity of public attitudes toward inflation.
Dean Baker, a senior economist, highlighted the frustration economists face when people attribute inflation to government policies while crediting themselves for wage increases. This sentiment has been observed since the 1990s when economists like Robert Shiller first identified public discontent and mistrust regarding inflation and economic concepts.
The study also found that many respondents lacked a clear understanding of inflation and other economic concepts. Only half of the respondents could correctly define inflation, indicating a need for improved economic literacy among the public.
Furthermore, respondents exhibited partisan biases in attributing inflation to different factors, with Democrats more likely to blame “greed” and Republicans pointing to “Biden and the administration.” These divergent views reflect broader political divisions and highlight the challenges policymakers face in addressing economic concerns.
While economists emphasize the complex interplay between inflation, government policies, and economic fundamentals, public perceptions often diverge from expert analyses. This gap underscores the importance of effective communication and education to bridge the divide between economic experts and the general public.
In conclusion, while the economy remains a critical issue for voters, inflation has emerged as a dominant concern, shaping public perceptions and political discourse. Addressing these concerns requires policymakers to navigate complex economic dynamics while effectively communicating with the public to build trust and understanding.