Matt Bruenig and others have commented that the sunset of Covid-19 welfare policies is partially to blame for Biden’s low polling numbers, but you do not really discuss this. Do you think it is playing a factor?
I think it's something that happened, but a) other countries also sunsetted pandemic policies, and b) I don't see how it can have affected enough people by a big enough amount to make such a huge effect on the numbers or why the effect would have such a partisan split
I guess the thing to point out is that the vibecession thesis claims other countries haven't recovered and have poor sentiment so the sunsetting of pandemic welfare policies isn't inconsistent with their low sentiment. The second point could be cleared up with some detailed analysis I guess.
Their sentiment tracks with their economic situation though. If their economies were doing better/worse, it's reasonable to assume those sentiment numbers would also rise/fall in proportion to expected because they haven't really deviated from expectations so far.
I understand. I'm pointing out that it's possible the effect could only be noticed after a recovery if there has been some regime change. There's also the possibility that the effect might be stratified by prior degree of welfare support
Just anecdotal/more "vibes," but I personally have been more careful about discretionary spending lately, even though our income is up and my wife got a promotion this year. There's a psychological sensation based on not only of lack of agency, but the idea that hard times are coming and I had better have savings. Whether this is based on anything real or not is a good question, but around October 1st I became increasingly convinced that both the US and the world in general are headed for bad political times in the near term, with the attendant need for savings. The events in Israel and Palestine several days later were obviously coincidental, but not reassuring. There is a lot of tension and energy in the political system, and while I know almost nothing about economics (I enjoy this newsletter because it fills in part of that gap), I know enough about politics to be nervous that it's going to blow up. And that affects my financial behavior.
I also wonder about what hardindr said--the US briefly had a better welfare system during Covid including a fully refundable child benefit, which has now expired.
Inflation in the price of books has also definitely got me using the local library more (wholly discretionary, whereas the price of milk going up is noticeable but hasn't affected my choices--still need to buy milk.
Speaking as a 54-year-old US man: a *whole* lot of this can be explained by the fact that the biggest age group in the US is 32, with near-sized groups at late 20s-34. Despite "coastal elite" behavioral patterns, a lot of the majority are starting families and suddenly realizing how much boring stuff costs. (Note that the price of a beer "out" has effectively tripled in the past 20 years, but nobody's complaining about that.) Given that none of them were alive during the Cold War, the current geopolitical nastiness (which seems pretty Business as Usual to me--check out Africa and SE Asia in the 60s) also seems a lot worse than it actually is. Horrifying, absolutely. Likely to lead to global nuclear annihilation, absolutely not.
I think the current "mystery" of the inflation picture is that one of the most vital sectors of the economy doesn't see the mystery because they're just beginning to put pieces on the board in a serious way. They weren't alive in Christmas 1979 when my toy haul got hosed because of double-digit inflation. (I made the connection right quick, because I'd been pricing this stuff in regards to my own limited budget.) It's tended to be the older, more experienced heads who are baffled.
You pretty much nailed it: I'm 31, coastal, recently married, recently bought a home, thinking about kids--if people my age are the biggest age group in America, that's an interesting factor. Starting a family is another factor going into being more careful, and I don't even have the housing worries many friends have. Plus certain domestic US politics (anti-queer stuff and, even moreso, the post-Dobbs abortion stuff) has a more immediate negative impact on those of us of in the late 20's-early 30's age group. But that doesn't explain a partisan split where it's Republicans who are more worried about the economy...
Fair point about the Cold War stuff. Those of us who didn't grow up in the Cold War tend to take lack of global nuclear annihilation for granted, rightly or wrongly. The idea that things are bad and probably getting worse is not (for me) about fearing the world will be blown up.
What worries me the most is seeing the Reagan generation grow to adulthood--the one that grew up in an environment of "government bad, no tax good," in part because they literally don't understand what's possible...and why they should vote. Remember, government is made of us.
I’m not sure that either of these quite works for Americans.
Most home owners have either fixed rate mortgages, or mortgages that only change every 5 years. Maybe enough of the latter have had a cycle of rates going up for it to be part of the story. But the timeline seems wrong to me, and nominal wages have gone up by more I’d have thought.
Credit card interest rates have spiked hard and fast, and that could be part of the problem.
While there are a lot of little subscriptions these days, a huge number of people have got rid of one of their biggest - the monthly cable bill. That was $80+ per month. You get a lot of Netflix, mail order coffee, etc for that. Similarly for all the people who cancelled the local newspaper subscription.
Maybe I’m the weird one here, but I feel like having lots of tv packages gives more sense of control. Getting rid of the omnibus cable package is unthinkable. Going from having Netflix and HBO and Disney and Hulu to having one fewer seems more thinkable. It is more to think about, and that’s something not all people will enjoy, but it’s not the same as loss of control.
A different analysis is to take the low levels of sentiment globally as explained by COVID being a large negative shock to everything, and the anomaly is US economic growth despite that. In other words, people don't like the post-covid economy in ways not fixed by growth.
i believe that one source of the vibes in the USA is that the populace as a whole was very anxious under the Trump presidency, especially in the first year of the COVID pandemic, and neither the election of Biden nor the availability of the COVID vaccine was the magic cure that Americans have been conditioned to expect when they apply the "solution" to what experts are saying is a problem (see Laurie Anderson's song, "Only an Expert" for a treatment of that trope).
people at large were ready for things to get better quickly, and instead supply shocks continue, and along with prices, interest rates went up. for Americans who dealt with inflation of prices by buying on credit while rates were very low, the sudden increase in their revolving credit statements while prices were still high was extremely discouraging!
one should not underestimate the degreee to which decades of propaganda has convinced Americans that private home ownership is a foundation of any sense of security and prosperity -- quite a victory for the counterfactual! housing prices increased as institutions and people with money bought up housing stock during times of low interest on loans, and anyone holding off purchasing because of the insecurity of the pandemic is doubtless disturbed by the combination of lowered availability, higher prices, and much higher mortgage interest rates undoubtedly feels a negative vibe.
having daily use of a car or truck is close to essential for most Americans, and again man people undoubtedly postponed buying a vehicle during the peak of the pandemic: few new cars were available due to shipping disruptions, many people felt job and life insecurity, and even used car prices were quite high. again, after "ending" the pandemic, Americans have postponed purchases they desire to make, have been told the panaceas of vaccine and Biden will fix everything, and now arrive in a time of high interest rates, high prices, and very disgruntled vibes.
Your reference to the ‘debt management companies that used to advertise in the aughts’ made me realise I haven’t seen one of those ads for ages and they used to be on all the time (I’m in Australia, u seem to be saying they’re not on over there either)
basically, the same reason that "claims management companies" stopped being such a thing in the insurance sector - the business model was dependent on the industry not getting its act together, and the industry eventually got its act together. In the UK at least, in the 00s there was a long period in which the banks would just rubber stamp any Creditors Voluntary Agreement because they figured it wasn't worth the cost of checking. The management companies (set up by a small number of entrepreneurial solicitors) realised you could both industrialise the process and push the envelope in terms of how much of a write-off the agreement entailed. It took almost a decade for the banks to realise they needed to be looking at these things and occasionally objecting to them; this in turn destroyed the management firms' business model because it wasn't economic for them to take lawyers' time to argue them either.
now I think about it, that's probably an interesting enough story for a post of its own - basically one of those processes where everyone has lots of rights, but where the system is very dependent on nobody actually exercising them
Matt Bruenig has done some interesting posting on why Biden's economy isn't actually so good, and I think this on wages (median wages only started improving Feb 2023) is instructive.
In the US wage gains have been higher among the lower paid too, so there's is for once an actual middle getting squeezed where I think a lot of swing voters live.
The piece on "how much of you money you control" is interesting, because I think a lot of swingy opinion has been caught at both ends. Just 11 months to sort that out then. But if interest rates start declining early next year in the US and there's been a good 20 months of wage growth by the election the mood music might have really changed.
I bet there's a bit of "shellshock" from part of the economy as well. If you're under 35, you've only known a sluggish, low growth and low employment economy all your working life. If inflation just took off for a spell (and wages are lagging), it makes sense to tighten belts because the economy hasn't lifted your boat yet and there are no established expectations for it to do so (it didn't last time).
There's going to be a lot of mixed individual situations that leaves the personal economic situation in a much more interpretive zone. To borrow a phrase from the econs, I believe much of this sentiment is "transitory."
Interesting analysis, though the "more subscriptions" explanation still runs foul of the "mostly US, mostly since 2021” qualification.
I wonder how much is due to the sheer uncertainty/weirdness of the inflation shock, which played out over several quarters and followed a couple decades of low inflation PLUS the constant warnings of recession last year as the Fed started tightening. It you hear that a recession is imminent, the conclusion would be that the economy is in bad shape. And of course high interest rates, as you've pointed out, are a tangible negative for lots of people that isn't captured in GDP, employment, or real wages.
I think a key question might be how consumer sentiment lines up in other countries as inflation decreases. I think you might be onto something with discretionary spending. As a youngish person there was some truth to the "can't buy homes going to have nice food/nice things" motif if you're a city dweller. If I'm still grumbling over buying cinema ticket in the UK in a few months time Ill be pretty unhappy as I don't see myself living a particularly extravagant lifestyle.
Matt Bruenig and others have commented that the sunset of Covid-19 welfare policies is partially to blame for Biden’s low polling numbers, but you do not really discuss this. Do you think it is playing a factor?
I think it's something that happened, but a) other countries also sunsetted pandemic policies, and b) I don't see how it can have affected enough people by a big enough amount to make such a huge effect on the numbers or why the effect would have such a partisan split
I guess the thing to point out is that the vibecession thesis claims other countries haven't recovered and have poor sentiment so the sunsetting of pandemic welfare policies isn't inconsistent with their low sentiment. The second point could be cleared up with some detailed analysis I guess.
Their sentiment tracks with their economic situation though. If their economies were doing better/worse, it's reasonable to assume those sentiment numbers would also rise/fall in proportion to expected because they haven't really deviated from expectations so far.
I understand. I'm pointing out that it's possible the effect could only be noticed after a recovery if there has been some regime change. There's also the possibility that the effect might be stratified by prior degree of welfare support
Just anecdotal/more "vibes," but I personally have been more careful about discretionary spending lately, even though our income is up and my wife got a promotion this year. There's a psychological sensation based on not only of lack of agency, but the idea that hard times are coming and I had better have savings. Whether this is based on anything real or not is a good question, but around October 1st I became increasingly convinced that both the US and the world in general are headed for bad political times in the near term, with the attendant need for savings. The events in Israel and Palestine several days later were obviously coincidental, but not reassuring. There is a lot of tension and energy in the political system, and while I know almost nothing about economics (I enjoy this newsletter because it fills in part of that gap), I know enough about politics to be nervous that it's going to blow up. And that affects my financial behavior.
I also wonder about what hardindr said--the US briefly had a better welfare system during Covid including a fully refundable child benefit, which has now expired.
Inflation in the price of books has also definitely got me using the local library more (wholly discretionary, whereas the price of milk going up is noticeable but hasn't affected my choices--still need to buy milk.
Speaking as a 54-year-old US man: a *whole* lot of this can be explained by the fact that the biggest age group in the US is 32, with near-sized groups at late 20s-34. Despite "coastal elite" behavioral patterns, a lot of the majority are starting families and suddenly realizing how much boring stuff costs. (Note that the price of a beer "out" has effectively tripled in the past 20 years, but nobody's complaining about that.) Given that none of them were alive during the Cold War, the current geopolitical nastiness (which seems pretty Business as Usual to me--check out Africa and SE Asia in the 60s) also seems a lot worse than it actually is. Horrifying, absolutely. Likely to lead to global nuclear annihilation, absolutely not.
I think the current "mystery" of the inflation picture is that one of the most vital sectors of the economy doesn't see the mystery because they're just beginning to put pieces on the board in a serious way. They weren't alive in Christmas 1979 when my toy haul got hosed because of double-digit inflation. (I made the connection right quick, because I'd been pricing this stuff in regards to my own limited budget.) It's tended to be the older, more experienced heads who are baffled.
You pretty much nailed it: I'm 31, coastal, recently married, recently bought a home, thinking about kids--if people my age are the biggest age group in America, that's an interesting factor. Starting a family is another factor going into being more careful, and I don't even have the housing worries many friends have. Plus certain domestic US politics (anti-queer stuff and, even moreso, the post-Dobbs abortion stuff) has a more immediate negative impact on those of us of in the late 20's-early 30's age group. But that doesn't explain a partisan split where it's Republicans who are more worried about the economy...
Fair point about the Cold War stuff. Those of us who didn't grow up in the Cold War tend to take lack of global nuclear annihilation for granted, rightly or wrongly. The idea that things are bad and probably getting worse is not (for me) about fearing the world will be blown up.
What worries me the most is seeing the Reagan generation grow to adulthood--the one that grew up in an environment of "government bad, no tax good," in part because they literally don't understand what's possible...and why they should vote. Remember, government is made of us.
I’m not sure that either of these quite works for Americans.
Most home owners have either fixed rate mortgages, or mortgages that only change every 5 years. Maybe enough of the latter have had a cycle of rates going up for it to be part of the story. But the timeline seems wrong to me, and nominal wages have gone up by more I’d have thought.
Credit card interest rates have spiked hard and fast, and that could be part of the problem.
While there are a lot of little subscriptions these days, a huge number of people have got rid of one of their biggest - the monthly cable bill. That was $80+ per month. You get a lot of Netflix, mail order coffee, etc for that. Similarly for all the people who cancelled the local newspaper subscription.
Maybe I’m the weird one here, but I feel like having lots of tv packages gives more sense of control. Getting rid of the omnibus cable package is unthinkable. Going from having Netflix and HBO and Disney and Hulu to having one fewer seems more thinkable. It is more to think about, and that’s something not all people will enjoy, but it’s not the same as loss of control.
A different analysis is to take the low levels of sentiment globally as explained by COVID being a large negative shock to everything, and the anomaly is US economic growth despite that. In other words, people don't like the post-covid economy in ways not fixed by growth.
i believe that one source of the vibes in the USA is that the populace as a whole was very anxious under the Trump presidency, especially in the first year of the COVID pandemic, and neither the election of Biden nor the availability of the COVID vaccine was the magic cure that Americans have been conditioned to expect when they apply the "solution" to what experts are saying is a problem (see Laurie Anderson's song, "Only an Expert" for a treatment of that trope).
people at large were ready for things to get better quickly, and instead supply shocks continue, and along with prices, interest rates went up. for Americans who dealt with inflation of prices by buying on credit while rates were very low, the sudden increase in their revolving credit statements while prices were still high was extremely discouraging!
one should not underestimate the degreee to which decades of propaganda has convinced Americans that private home ownership is a foundation of any sense of security and prosperity -- quite a victory for the counterfactual! housing prices increased as institutions and people with money bought up housing stock during times of low interest on loans, and anyone holding off purchasing because of the insecurity of the pandemic is doubtless disturbed by the combination of lowered availability, higher prices, and much higher mortgage interest rates undoubtedly feels a negative vibe.
having daily use of a car or truck is close to essential for most Americans, and again man people undoubtedly postponed buying a vehicle during the peak of the pandemic: few new cars were available due to shipping disruptions, many people felt job and life insecurity, and even used car prices were quite high. again, after "ending" the pandemic, Americans have postponed purchases they desire to make, have been told the panaceas of vaccine and Biden will fix everything, and now arrive in a time of high interest rates, high prices, and very disgruntled vibes.
Your reference to the ‘debt management companies that used to advertise in the aughts’ made me realise I haven’t seen one of those ads for ages and they used to be on all the time (I’m in Australia, u seem to be saying they’re not on over there either)
Why have they stopped? Did something change?
basically, the same reason that "claims management companies" stopped being such a thing in the insurance sector - the business model was dependent on the industry not getting its act together, and the industry eventually got its act together. In the UK at least, in the 00s there was a long period in which the banks would just rubber stamp any Creditors Voluntary Agreement because they figured it wasn't worth the cost of checking. The management companies (set up by a small number of entrepreneurial solicitors) realised you could both industrialise the process and push the envelope in terms of how much of a write-off the agreement entailed. It took almost a decade for the banks to realise they needed to be looking at these things and occasionally objecting to them; this in turn destroyed the management firms' business model because it wasn't economic for them to take lawyers' time to argue them either.
now I think about it, that's probably an interesting enough story for a post of its own - basically one of those processes where everyone has lots of rights, but where the system is very dependent on nobody actually exercising them
Glad to be of service/apologies for assigning more work (delete one as appropriate) 🙂
And thankyou
Dean Baker also weighed in: https://econtwitter.net/@DeanBaker13/111615086271713361
Matt Bruenig has done some interesting posting on why Biden's economy isn't actually so good, and I think this on wages (median wages only started improving Feb 2023) is instructive.
In the US wage gains have been higher among the lower paid too, so there's is for once an actual middle getting squeezed where I think a lot of swing voters live.
The piece on "how much of you money you control" is interesting, because I think a lot of swingy opinion has been caught at both ends. Just 11 months to sort that out then. But if interest rates start declining early next year in the US and there's been a good 20 months of wage growth by the election the mood music might have really changed.
https://www.peoplespolicyproject.org/2023/12/20/what-about-wages/
I bet there's a bit of "shellshock" from part of the economy as well. If you're under 35, you've only known a sluggish, low growth and low employment economy all your working life. If inflation just took off for a spell (and wages are lagging), it makes sense to tighten belts because the economy hasn't lifted your boat yet and there are no established expectations for it to do so (it didn't last time).
There's going to be a lot of mixed individual situations that leaves the personal economic situation in a much more interpretive zone. To borrow a phrase from the econs, I believe much of this sentiment is "transitory."
Interesting analysis, though the "more subscriptions" explanation still runs foul of the "mostly US, mostly since 2021” qualification.
I wonder how much is due to the sheer uncertainty/weirdness of the inflation shock, which played out over several quarters and followed a couple decades of low inflation PLUS the constant warnings of recession last year as the Fed started tightening. It you hear that a recession is imminent, the conclusion would be that the economy is in bad shape. And of course high interest rates, as you've pointed out, are a tangible negative for lots of people that isn't captured in GDP, employment, or real wages.
I think a key question might be how consumer sentiment lines up in other countries as inflation decreases. I think you might be onto something with discretionary spending. As a youngish person there was some truth to the "can't buy homes going to have nice food/nice things" motif if you're a city dweller. If I'm still grumbling over buying cinema ticket in the UK in a few months time Ill be pretty unhappy as I don't see myself living a particularly extravagant lifestyle.