That’s a bad headline by ABC news. I know it says POLL there, but it should simply read “record numbers of people SAY they are worse off.”
And after stating the facts, the second paragraph should ask WHY people feel that way, which is, after all, the real story.
Most other news organizations got the headline right.
GW being obsessed with the potus 2024 election two yrs out notwithstanding, voters have the memory of a peanut. And repeating, a day is an eternity in politics.
Let’s go back two mos. shall we when GW was obsessed with the GA senate run-off. How did that one work out, eh. Indeed, if you could say anything re: Biden currently he definitely wasn’t a drag on the Dem 2022 ticket!
btw, a poll, totally unreliable nowadays, is just a snapshot in time.
“Indeed, although 1983 began for Reagan with a 35% job approval rating — the worst of his administration — things started to look better.” ~ Gallup
Did I mention a poll is just a snapshot in time? Wake me up late Oct. 2024.
Yielding back the balance of my time …
This isn’t exactly profound. It’s not surprising that Americans would (correctly) think this given that for the past two 1 1/2 years inflation has been rising faster than wages. To put it simply, most Americans/American families are about 3-5% poorer than they were 1 1/2 years ago. This is hardly going to be offset by the comparitively small number of Americans who are working now but weren’t working 1 1/2 years ago.
If all goes well with inflation falling and wages rising, most people will probably catch up to where they were 1 1/2 years ago in say 3-5 years, although if they’ve taken on high interest debt in order to pay off bills, it will taken them longer.
I suspect politically if things are moving in the right direction, Biden should get more credit than blame, but just because the rate of inflation falls or even falls back to around 2% in a few months time, it doesn’t mean that prices have gone down or that people have gotten back to where they were.
Nobody wants deflation, so prices in general aren’t going to fall (obviously for some specific things they will) but price levels are nominal to an economist anyway. The way people catch up ultimately is through higher nominal wages.
Two things I’ll add to that:
(1) People today are not as measured as they were in the past. While the 41% of Americans who feel worse off is quite high historically, the 16% who feel better off is not especially low. The difference is that people used to say “about the same” to describe changes that they will now define as better or worse. In Clinton’s first term, for example, the proportions in the very same poll were: Better 13%, Worse 16%, About The Same 71%.
If I had to make a forced choice between better or worse, I’d have to go to worse, because I have no income and things now cost more. But given the three choices, i’d have to say “about the same” because I’ve managed to find a workaround. I drive less, I stopped buying eggs, etc. So it really depends on how people define slight fluctuations. Is “slightly worse” to be defined as “worse” or “about the same”? Since it seems that everyone is a drama queen now, they tend to say “worse.”
(2) Part of the reason for the phenomenon I just described (both “better” and “worse” have increased since 2010) is not the explanation I gave above, but reality. You would know this better than I, but it appears that the economy is not as fair as it used to be, in the sense that it doesn’t rain or shine on all equally. Thus the American economy, and people’s perception of it, has gotten fatter for the fat cats and leaner for the lean cats. In 2022, as compared to 2021, inflation-adjusted income dropped for those on the bottom rung of the ladder, but those already in the stratosphere soared even higher. In 2021, the polarization was even more dramatic, as inflation-adjusted income dropped from 2020 for all income ranges except (once again) the fat cats in the 89th percentile or higher, who essentially live within a separate economy.
Yes, people finding workarounds is the reason economists say that the inflation rate is higher than it really is. Essentially, the ‘basket of goods’ that is used to calculate the inflation rate (CPI) isn’t adjusted frequently enough to fit in with changes made by consumers. The other method to calculate inflation, which does so from the supply side, the GDP Price Deflator, has been lower than the CPI for months.
You probably recall that in the 1990s there was an attempt to partially deindex social security from the CPI in order to adjust for this presumed overstating of CPI inflation.
I agree that the economy has not been ‘fair’ since the 1970s but accalerated with the policies of Reaganomics. This is nothing new, the 1970s brought in automation which both suppressed wage demands for many workers but more importantly allowed companies to simply get rid of workers which concentrated the increase in corporate incomes at the top and to shareholders (who are mostly also people at the top.)
Then the 1980s brought Reagans’ anti union policies and tax changes as well as things like non compete agreements.
I leave out, as most economists would, free trade. There is no question that especially in the U.S the anti union policies and the nature of the high tech products and services that Americans export tend to be high revenue industries with fewer jobs that again, allow the executives and owners to concentrate the wealth, and that the ‘export’ of the ‘lower skill’ (and lower paying) manufacturing jobs from the U.S has also directly harmed those employees or would be employees.
However, as we should have all learned from the supply chain problems and inflation, free trade results in lower prices for every American and creates other jobs. So, what (some) American manufacturing worker loses in employment, every American consumer gains in lower prices.
So, when Americans call for both ‘bringing back jobs’ AND lowering inflation, it’s completely understandable why an informed politician is, at best, going to tear their hair out at voters not appreciating the contradiction, and, at worst, is going to be as cynical of the voter as most voters are of politicians.
There is always objective reality that gets in the way of what people say they want.
But the big question? Why are the price of eggs soooo damn high whereas bread/milk prices are back to “reasonable”?
Gas is $3.29 a gallon locally. During the height of covid gas was under a dollar in (13) states ~ supply and demand …
Really? Under a dollar? Wow. I didn’t know that gas was under $1 anywhere in the USA since about 1988, at a guess.
Actually didn’t know it either, but looked it up on the interwebs:
ABC7 News
Apr 20, 2020 — According to gasbuddy.com, gas prices have dropped to under $1 in at least 13 states as demand falls during the COVID-19 pandemic.
$1.19 where I live IIRC.
But on the up side Oil companies “appear” to have “rebounded” nicely. 😮
Yes, supply and demand, but that was an interesting situation…
The cited current price of $3.29 compares to a current cost of crude of $1.86 per gallon ($78 per barrel). The average cost to refine gas is about .60 a gallon, the cost of transportation and marketing is about .27 per gallon, and the average gasoline tax across all states is .33, so there is some 23 cents in gross retail profit, much of which gets eaten away by .16 in (estimated) labor costs and (actual) credit card fees, leaving maybe seven cents a gallon in net retail profit out of that $3.29.
They had to give even that little bit up during COVID. The April 2020 cost of crude per gallon was only fifty cents ($21 per barrel). But the other $1.36 per gallon did not magically disappear. The problems were: (1) retailers wanted to hold share during the hard months, so they would be in the same share position or better when the lockdowns eased; (2) they make a lot of profit on the coffee and beer inside that store, so the gas retail price went as low as necessary to avoid losing those inside profits, to the point where they could be losing money on fuel, sometimes a lot of money. The national average for that month stayed at $1.94, resulting in the same old gross and net profit levels as any other month, but that was “on average.” The prices went crazy temporarily in some states without “below cost” laws. Gas dropped to 87 cents a gallon in WI – meaning that dealers were losing a buck a gallon in that window.
So, yes, supply and demand, but complicated.
There’s an egg shortage because of an avian flu outbreak. 60 million chickens died.
Bird flu…ever hear of it…it’s rampant on the chicken farms.
Re: The cited current price of $3.29 compares to a current cost of crude of $1.86 per gallon ($78 per barrel). The average cost to refine gas is about .60 a gallon, the cost of transportation and marketing is about .27 per gallon, and the average gasoline tax across all states is .33, so there is some 23 cents in gross retail profit, much of which gets eaten away by .16 in (estimated) labor costs and (actual) credit card fees, leaving maybe seven cents a gallon in net retail profit out of that $3.29.
That’s not totally true. Of course, there is a time lag, and costs of production and the like don’t drop right away…
I like the Richard Feynman video where he’s asked about magnetism and he says he can’t answer the question because unless the person has a basis of understanding the underlying factors of magnetism, they aren’t going to understand magnetism without him going ‘back and back and back.’
Economics and the economy is much the same way, except it should be nothing more than common sense and shouldn’t require a lot incomprehensible science to understand.
The input costs of a gas station according to Scoopy here are refined gasoline, transportation and marketing.
But what are the input costs of the refined gasoline? The cost of the crude oil and labor. (There is also the depreciation of the equipment, but most of thae cost of the production of the equipment is ultimately labor as well.)
When you take everything ‘back and back and back’ there are essentially just four costs
1.labor (which is most of the cost),
2.raw resources which have their own value due to scarcity but is also obviously higher due to labor costs
3.profit, which can also be seen as the labor cost of the owner, or the cost of money of the shareholders
4.taxes
That actually has nothing to do with my point here, but I wanted to get this little economics lesson in, especially to show it’s real nothing more than common sense and ‘following the money.’
In this case, because there was a large drop in the raw resource or crude oil, the refining and transportation costs for a gallon of gasoline would also have declined. Of course there would have been a time lag (but gasoline prices at the pump didn’t drop immediately either), but the 60 cents in refining costs per gallon of gasoline and the 27 cents in transportation costs aren’t fixed either in the long run.
To complete my point on costs, leaving taxes aside, in the theoretical model, all costs of goods are ultimately labor or rent.
‘Rent’ has a broader meaning to an economist. When it comes to ‘profit’ economists argue that in the long run, the profit for a firm is zero. Leaving aside why economists argue that, this doesn’t mean that the revenue and expenses are equal,this refers to ‘economic profit’ which includes the opportunity cost of the next best use of the money that was put in to start up the business. So, the profit is the ‘rent’ on that money.
In the case of raw resources (think of the price of raw resources being set at an auction) the same thing should happen as well in the long run, baring barriers to entry of competition, which in economic theory don’t occur because they are usually political, so the cost of raw resources should be only the ‘rent’ on the invested money as well.
Of course, that is pure theory, but I think it is useful to remember if you look over the expenses on an income statement, that if you ‘go back and back and back’ ultimately all the expenses are either labor costs or rent.
Bringing back overseas jobs while decreasing inflation seems a lot more possible to me than saying you can balance the federal budget and not touch entitlements. Donald Trump promised he would do the latter if he served 8 years. That he wasn’t reelected is a national tragedy since we all know Donald Trump would donate his entire fortune to the taxpayers rather than break a promise. Right?
A little less than half my income comes from social security, but I still want Congress to make reforms. Social Security and Medicare will become insolvent in the not to distant future. The longer they wait to do things like raising the retirement age or decreasing the rate of increases the more painful future (automatic) cuts to those programs will be.
I know Adam and I are not going to agree about Ronald Reagan or his policies. But how is Reagan responsible for noncompete agreements? I didn’t begin practicing as an employment attorney until the late 90s. While I know the factors that will determine whether a non compete agreement is enforceable, I never did a deep dive into their history. But I am almost positive they existed prior to Reagan being elected president.
Also, were you saying that the economy was fair prior to the 1970s?
I wonder how people would answer if you asked them this:
Would you rather pay $1,000 for an iPhone made in China, or $2,000 for one made in Detroit
I don’t think people love American jobs or hate China enough to pony up the extra Benjamins.
Yes, non compete agreements existed before Reagan, but my understanding is that they greatly expanded along with the decline in private sector unions. You have situations in some states where it became a routine part of any contract to include a non compete agreement, no matter how extreme, like cooks in restaurant chains.
I understand that many of these non compete agreements were unenforceable, but the problem is that many of the workers who signed these agreements likely didn’t know that.
I said the economy was ‘fair’ prior to the 1970s, I was using Scoopy’s word but I put it in quotes. Economists are supposed to be positive and not normative, so, I prefer to not give entirely subjective opinions like what is “fair” and what isn’t. The point of an economist is to explain an economic process and where powerful people might be gaming the system to their advantage, and not to say if that made it ‘unfair’ or not.
Obviously there was a lot of racism (and sexism) prior to the 1970s, so for many people, in no way did they have equal opportunity. However, it is also accurate that the share of revenue that went to labor was higher prior to the 1970s in the United States.
In regards to social security and medicare, this does show how long standing the Republicans being an increasingly unserious and dishonest party is.
In the 2000 election, when there were ‘surpluses as far as the eye can see’ Al Gore said that the ‘surpluses’ needed to be placed in a ‘lock box’ in order to have a pool of funds to pay for social security and medicare.
When there were ‘deficits as far as the eye can see’ prior to President Clinton (especially under President Reagan, but Republicans blamed Congress for the deficits then) Republicans called deficits ‘generational theft.’
So, in the 2000 election, did candidate Bush run on ‘rather than this lock box we need to pay down the debt rather than leave it to our children’ (effectively the ‘lock box’ and paying down the debt would be the same thing except for the potential campaign rhetoric.) No. Republicans instead argued that surpluses were ‘over taxation’ that needed to be returned to the taxpayer, and mostly to the wealthiest taxpayers. Effectively, Republicans claiming that deficit spending was ‘generational theft’ was an unserious rhetorical claim from them.
So, I agree on raising the age further to receive full social security, but other than that, since most of the surpluses at that time were taken from payroll tax social security surpluses and most of it went to the wealthiest in tax cuts, I think the wealthiest should pay it back.
Scoop, my answer to that question is I’d rather pay $1,200 for a Samsung phone made in South Korea. I have never purchased an iPhone in my life. But I imagine most people would rather buy an iPhone from China. But to be perfectly honest, I have bought several iPads over the years because I have never liked any of the android tablets. I imagine they are made in China and that never stopped me. The problem is that if we think inflation is bad now, just imagine what ending trade with China would do to consumer prices. Add to that all the people employed by businesses exporting to Chinese markets and we would probably be looking at the worst recession since the Great Depression. I imagine it wouldn’t be pleasant for the Chinese economy either. That is one reason so many people thought increasing trade with China was so good for world peace. Countries that trade with each other, historically, have never gone to war against each other. But lately it sounding more and more like China is willing to go to war to retake Taiwan. The problem with totalitarian governments is that they don’t have to do what’s best for their country/popular with their people.
Adam, I completely agree that Republicans have absolutely no credibility on deficits. Maybe the only way to get the economy under control is for us to go on electing Democratic presidents and Republican congresses. I was taking a class on medieval European history in 1994 when the GOP captured the House and Senate for the first time in 40 years. I remember thinking at the time that, historically in England at least, it had been the executive/King that wanted higher spending, but the nobles through Parliament that wanted lower taxes and lower spending. But for the 12 years, prior to Clinton being elected it had been Congress that generally wanted higher spending/taxes and the presidents that wanted lower spending/taxes. The 1994 midterms had, in a manner of speaking, restored the natural order. The budget balanced and started running surpluses because the GOP held spending just enough for the economic growth created by the PC revolution to increase tax receipts. I just doubt that is going to happen again even with divided government. I am not all that optimistic about the future. Anyone know what Elon will be charging for a ticket to Mars?
The income inequality is extreme in the US compared to most western countries.