Conflicting Views on the Economy Complicate Policy Decisions and Political Messaging

We soon will be heading into the homestretch of a year that historians almost certainly will judge to be a most consequential one for several reasons, notably our upcoming presidential election. It is widely recognized that our nation has become more deeply divided politically over the past decade or so, with that division reflective of highly polarized opinions and positions on a host of social, cultural, public policy and economic issues.

There was a time when most Americans could generally agree on whether the economy was performing well or not, at least directionally. This no longer seems to be the case. A Harris poll conducted in May indicated that 56% of respondents believed the U.S. economy was in recession — a belief belied by the preponderance of economic data — along with other misguided views on how the economy is doing.¹ The Biden administration’s attempts to tout the President’s various accomplishments on the economic front (“Bidenomics”) earlier in the campaign season mostly fell flat and weren’t connecting enough with likely voters, many of whom said they weren’t yet seeing its effects. Moreover, the various COVID-related financial relief measures for most Americans that ran into late 2021 got President Biden little love from likely voters prior to his exit from the race. Polling respondents continue to give President Biden low marks on his handling of the economy² despite abundant evidence that the United States is experiencing relatively healthy economic growth — far better than year-ago expectations and stronger than most other industrialized nations. The disconnect between economic statistics indicating resilience and public perceptions of a faltering economy is vexing, to say the least.

Americans may have starkly differing views on how the domestic economy is performing, and those perceptions are shaped more by income differences than by political party affiliation, though political leaning does influence economic perceptions for both Democratic- and Republican-identifying respondents. Higher-income households almost always have more upbeat views on the economy than lower-income households, but for decades, polling trends on economic matters by income cohorts at least could be counted on to move together directionally, more or less, albeit with a persistent gap separating them. However, today some of these economic polling trends are moving in different directions when broken down by income groups. Meanwhile, nearly all U.S. equity indices, a daily market “poll” of how the economy is doing, are near all-time highs. To paraphrase Dickens, it is the best of times, it is the worst of times — and figuring how it all shakes out is a challenge for policymakers. Meanwhile, political messaging about the economy can be a fraught path for our presidential candidates and down-ballot politicians who make broad generalizations that don’t consider these wide economic divides.

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