Economics in a Post-Truth Nation 1

If a tree falls in a forest but nobody is there to hear it, did it make a sound? If we have a rapidly expanding economy but much of the electorate refuses to acknowledge it, is the country experiencing a boom?

Despite some growing pains, the U.S. economy is clearly on a vaccine-and-stimulus-fueled tear, with just about every measure indicating rapid recovery from the pandemic slump.

Yes, supply bottlenecks have caused some inflation, although recent data seems to validate the view that this inflation is transitory: Lumber prices have fallen sharply, industrial metals have also come down, and used car prices seem to have peaked. Yes, some employers seem to be having trouble hiring enough workers to keep up with surging demand, but this will almost surely be a temporary problem.

Overall, we’re clearly in a much better place economically than we were just a few months ago.

Yet according to the long-running University of Michigan survey of consumers, on average self-identified Republicans assess the economic situation much less positively now than they did before the 2020 elections.

You may be tempted to say that this was only to be expected. After all, almost two-thirds of Republicans believe, completely falsely, that the presidential election was stolen, and around a quarter agree that the world is run by Satan-worshiping pedophiles. Why be surprised to see the post-truth state of mind extend to the economy, too?

But claims about election fraud and the QAnon cult are conspiracy theories, assertions about secret actions by cabals. The state of the economy, by contrast, is right out there in the open. People, you might think, can judge it by their own experience or that of their friends and families.

And just to be clear, the Michigan number I’m referring to is the current economic conditions index rather than the index of consumer expectations. That is, it’s supposed to be about how things are now, not about what people think will happen. So this isn’t a matter of Republicans believing that Bidenomics will destroy prosperity in the future; it’s about them believing, in the teeth of lived experience, that it already has.

But hasn’t partisanship always colored perceptions of the economy? And doesn’t it happen on both sides? Well, yes — but not to this degree.

If you look back at Michigan surveys from a dozen years ago, you don’t see anything like today’s partisan polarization. In June 2009, Democrats and Republicans had similar views about current conditions, although Republicans were more pessimistic about the future.

Nor do the parties behave symmetrically. Democrats did mark down their economic views after the 2016 presidential election, but not that much. The real question about the 2016 election aftermath is why Republican assessments became so much more favorable, even though not much had changed. Indeed, there was no significant break in the economy’s performance, certainly nothing comparable to the current postpandemic boom.

One possibility is that Republicans’ views about the economy are driven by the belief that things are terrible for other people even when they themselves are doing OK. That is, it may be like the right-wing narrative on urban violence. Tucker Carlson and his ilk have been peddling the vision of a nation all “boarded up,” its citizens cowering in fear of riots and crime. People have to know that their own neighborhoods aren’t like that but may imagine that it’s happening somewhere else.

Whatever the explanation, post-truth politics has expanded its domain to the point that it overrides everyday experience. On the right, at any rate, the economy that voters perceive no longer bears much relationship to reality.

What does this say about the politics of economic policy?

A large body of research in political science says that the economy drives elections. Specifically, what seems to have mattered in the past was the rate of income growth in the six months or so before the election.

This was always a troubling result, partly because presidents usually don’t have much influence over short-run economic developments, partly because it suggests that there are no political rewards for good long-term performance. In fact, if you believe standard election models, the optimal political strategy for a president seeking two terms would be to start with a deep recession, so as to make room for rapid growth in the run-up to the next election. (This is more or less what actually happened during Ronald Reagan’s first term, although it wasn’t deliberate.)

Still, things could be worse — and they seem to have gotten worse. We appear to have become a country in which a large chunk of the electorate won’t even judge a president by short-run performance, because those voters’ perceptions of the economy are driven by partisanship unrelated to reality.

OK, maybe I’m being too pessimistic here. Elections are decided at the margins, so good policy may still be rewarded even if, say, a third of America’s voters refuse to believe good news if a Democrat sits in the White House. But I still miss the days when truth mattered.

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