In 2022, Republicans appeared to have an easy path to retaking the White House without the need for concrete policy proposals. All they had to do was compare Donald Trump's economic record – which they portrayed as outstanding – with the lousy economy under President Biden.
This rosy view of the Trump economy involved a lot of selective forgetting – more on that in a moment. But the Biden economy was actually in trouble for much of 2022, posting the highest inflation in 40 years. There were plenty of jobs and unemployment was near its lowest level in 50 years, but many economists predicted an impending recession.
Since then, however, two terrible things have happened—terrible, that is, from the perspective of Republican partisans. First, the economy has recovered: inflation has fallen without a major increase in unemployment. Second, Americans seem to finally be taking notice of the good news.
Before I get to that, though, let’s talk briefly about Biden’s predecessor. How can people claim that Trump presided over a great economy when he was the first president since Herbert Hoover to leave the White House with fewer Americans employed than when he took office?
The answer, above all, is that the Trumpists want us to give him a mulligan for 2020, when the economy was devastated by Covid-19. Oddly enough, however, they don't want to give Biden a similar mulligan for 2021-22 as ongoing disruptions from the pandemic played a big role in inflation. (These disruptions finally subsided in 2023, leading to “impeccable disinflation” last year.)
Nevertheless, Trumpists don't want to forget 2020 completely. They're still talking about gas costing less than $2 a gallon, which was true for only two months in 2020 – months when the unemployment rate was above 13 percent. Funny how that works.
But back to the Biden economy, real and perceived.
Inflation fell very quickly last year. For technical reasons related to the way housing is managed, the consumer price index is a lagging indicator; Other metrics suggest we are already approaching the Federal Reserve's target inflation rate of 2 percent. And as I mentioned, this drop in inflation occurred without a major increase in unemployment, which has been below 4 percent for almost two years.
Yes, the economy is still characterized by inequality and injustice. But things are looking much better: real wages are rising and inequality is falling.
Until recently, however, Republicans could take solace in the fact that the University of Michigan's most widely cited consumer sentiment indicator remained at levels historically associated with high unemployment, inflation or both. Other indicators showed some improvement but were still low.
Oddly enough, polls have consistently shown that most Americans feel pretty good about their own financial situation. But they insisted that bad things would happen to the economy – to other people. Commentator Kyla Scanlon coined the term “vibecession,” which is now widely used to describe a situation in which negative views about the economy do not seem to match the data.
But the vibecession may be coming to an end. The Michigan index has risen sharply over the past two months while expected inflation has fallen. Suddenly Americans are becoming more positive about the economy.
It's true that overall consumer sentiment still looks weaker than it did at the end of 2019, when both unemployment and inflation were at current levels. But much of that divide may reflect partisanship. Supporters of both parties tend to have negative economic views when the other party holds the White House, but the effect is much stronger among Republicans. According to the Michigan poll, Republicans on average rate the current economic situation today as about as bad as it was in June 1980, when inflation was above 14 percent and unemployment was above 7 percent.
From a political perspective, this means that overall consumer sentiment is largely depressed by people who would never consider voting for Biden anyway. What matters are the perceptions of persuasive voters and Democrats who might have stayed home in the face of a bad economy. And those perceptions are almost certainly moving in Biden's direction.
If vibecession ends, why? One answer is that good news takes time to penetrate the public consciousness. I mean, even some professional economists haven't caught up and are still talking about stubbornly high inflation; We shouldn't have expected ordinary people's perceptions to change in an instant.
Additionally, I suspect that economic perceptions are influenced by the stock market, which has recently reached record highs. The truth is that the market is a very poor guide to the future of the economy, but it is clearly visible. In addition, it affects the tone of coverage of the economy, which was very negative under Biden but may be improving.
Will economic perceptions actually end up being a plus for Biden? Probably not. But if Trump trusted that the perception of a poor economy would give him victory, reality appears unwilling to cooperate.
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