I read this article after reading Paul Krugman's Substack today, and I find that both contribute to increasing understanding as to what is going on with consumer "sentiment." There was some substantial discussion in the comments by Krugman's readers, some of whom suggested that it is not just the high prices but the sense that we are actively being sabotaged by the current administration's policies. There is pessimism that our individual financial states are only going to get worse, not better. There are also people who have been repeatedly hit by these economic downturns. People who have accumulated debt see no way out, since there are fewer and fewer corners to cut.
I look forward to the continued investigation. If Democrats hope to win the House and the Presidency, and to hold it long enough to reverse the current seesaw trend, we are going to need good information.
Is there a way to measure sentiment about Trump's lies in correlation with consumer sentiment as a way to avoid seeming to attribute a (dubious) correlation between sentiment and standard economists' measures of economic health?
"who tell pollsters that “higher prices” are hurting them are possibly just repeating what they heard on cable news and social media." - or perhaps they are answering a different question like could this be a problem for you in the future, or, are higher prices a problem for other people. Pollsters may have to assume that people answer the question they asked but there is room for ambiguity.
>> "I just want to underscore something before concluding, and that is that we don’t really need to be doing all this fancy modeling to explain consumer sentiment. We can just ask people what they think, and believe them! Much of the discourse about the “sentiment gap” assumes that the economic statistical models are right and the people, in aggregate, are wrong in how they’re thinking about the economy. But what if we flip that on its head? What if the national statistics are just... missing something?"
OMG, THANK YOU! I really, really wish more folks who are talking about this issue took the time to include this point.
Unfortunately they havent updated March or April yet. This intuitively feels right compared to Michigan since people's budgets actually did better under COVID and crashed in the immediate post COVID world before stabilizing.
But I'm confused about your headlined non-suck model, which seems to be 25% food, 50% shelter, and 25% vehicles.
What about healthcare and childcare? They rank very high in polls of voters' concerns. Also homeowner insurance driven by climate change is crushing households across the South and is a major issue for David Jolly in the Florida Governor's race.
Unfortunately the health care CPI data don’t go back far enough that I could have used the data for testing the models. :/
I used those 3 because surveys show they are Americans’ biggest household expenses by far (accounting for ~60% of monthly spending), and in roughly that proportion
There is also the whole category of debt - both the cost of monthly payments and the harm to your balance sheet and ability to borrow for cars or homes or starting a business.
Major debt categories include college debt, medical debt and overdue taxes.
And given the explosion of sports, crypto, and other forms of gambling in recent years, those debts should also be considered, even if they are informal or fluctuating debts that are not tracked (or trackable).
When personal debt is reported on the business pages, it's mainly in the form of mortgage or credit card debt - but that is only part of the debt story.
The problem with this analysis, for policy-oriented people like me, is that it has no policy implications. There is no policy available that will actually bring prices down without catastrophic effects on the economy. So the policy implication of this is — lie. Do what Trump did in 2024. Lie about what you can do to prices. Rely upon the magical thinking of the electorate to believe in your lies. This is not a very hopeful view for American democracy.
Yeah, I agree with Bob Fertik, there are policy implications. Folks who do policy work may be overly pragmatic, to a fault, or perhaps insufficiently imaginative, if they throw their hands up.
Coming from a project management background and public admin, the three constraints on implementing any policy goal are going to be scope, schedule, and cost.
Project management says ya treat one as fixed, and negotiate around the other two, and that will actually determine what is or is not possible.
We literally went to the moon by fixing the scope (put a human being on the moon) and getting flexibility around cost and schedule. Well and then we were pretty limited on schedule, so it wound up costing *a lot*. But we did it!
The pushback I get when I bring this up is that the scope seems to either too big or beyond our capabilities (bring down prices), but these are really mostly a failure of imagination where we might be automatically fixing our cost or schedule. Unfix cost or schedule in our imagination and then we can shoot for the moon. If our scope is fixed (eggs must become cheaper), then we need flexibility on the schedule or cost to do something like make cheaper eggs.
We might not be able to bring down prices within a day, or a week, or a month, or a year, or a 2-year congressional term - so if we are actually describing schedule as our fixed variable, then yes, we need to reduce scope.
It also might be that it can't be done cheaply. Like we could pay the cost to vaccinate all of our chickens and create a program to fund the expansion of egg laying farms to increase capacity and reduce the price of eggs and prevent future avian flu price shocks. But if folks don't want to pay for that, then the fixed variable is actually cost. And if cost is your fixed variable, then yes, we need to reduce scope.
In fact there are lots of policies that can bring down prices in each sector - and that's exactly what politicians of all parties try to do.
When avian flu drove up egg prices, Trump made foreign deals to import eggs. When beef prices soared, Trump imported Argentine beef.
This isn't partisan - President Obama tried to reduce healthcare costs through the "Affordable Care Act." President Biden tried to reduce costs through the "Inflation Reduction Act."
If your only reference for "policy" is monetary or fiscal policy, you're missing most of what governments do on the economic front - even if this isn't taught in college textbooks. And if economists frown on such policies as "inefficient," economists don't run for office.
How could we tell if micro or macro price levels (or a combination) are driving sentiment? By micro I mean Americans monitoring their regular purchases of key items - milk, bread, eggs. By macro I mean monthly budgets - sum of prices is exceeding income and reducing purchases? The argument in favor of micro is that it is repeated price checking of items that don't change - milk is milk - shaping perception. Frequent repetition and comparability are important to perception. The argument in favor of macro is that doesn't matter if milk or eggs are up or down, if the number at the end of the month is bad, that's the key to sentiment. Index in the model is macro. Thoughts?
I am convinced that the prices are indeed the greatest part of the nation's discontent with the economy, and I think GEM has won the argument with the great Paul Krugman (if there was an argument). Some thoughts (I am not an economist nor a psychologist). First, the relative difference between how Reagan was perceived during the lousy economy of the Eighties and Biden in the 2020's was in no small part related to covid, but also to the very different treatments by the mainstream media. Reagan was treated like a movie star; Biden like a doddering old man. It's not surprising to me that those who are most attentive to the news are those now least bothered by prices. First, they probably are both educated and in well-paid jobs (or retired) to be able to have the time to be informed, so they can probably withstand the inflation a lot better than most. Then, they are being told (particularly by Fox) that things are actually sort of good, or at least not nearly as bad as they were during the awful Biden years. The press hasn't harped on inflation as they did in 2022-24. But there's a final reason why the country is so sour on the economy: Dashed expectations. A lot of people voted for Trump who might not have in prior years because they were convinced that this titan of wealth was going to wave his golden wand and happy days would be here again. Clearly things are worse. And when you think things are going to be a whole lot better because of your decision, and they are worse, well, it doesn't make you happy.
I agree. Based on my own five grown kids, who are all highly-educated, well-employed science professionals, it is absolutely more difficult for them to afford houses and healthcare and cars. They don't have the same sense of security and optimism that we did at their age. And based on my students, there is definitely a sense that they will never build as much wealth over their lifetimes as their parents did. I'm pretty sure statistics back up those claims.
Though I always appreciate Mr. Morris's research, I think it would be timely to do some studies on income inequality. Robert Reich has been showing for years that the amount of wealth controlled by the top 1% has increased significantly, leaving the bottom 90+ percent poorer, or at least feeling poorer.
I've tried doing the (elementary level) math of whether higher incomes compensate for today's costs in rent or mortgages (adjusted for inflation). I'm pretty sure that the price of healthcare has significantly increased even if one accounts for inflation. And I've also seen articles that show higher education costs have become out of reach for all but the wealthy (or those willing to go into debt).
Considering that these three things are probably the lion's share of most families' monthly expenses, it would be helpful to know if these perceptions are correct.
I read this article after reading Paul Krugman's Substack today, and I find that both contribute to increasing understanding as to what is going on with consumer "sentiment." There was some substantial discussion in the comments by Krugman's readers, some of whom suggested that it is not just the high prices but the sense that we are actively being sabotaged by the current administration's policies. There is pessimism that our individual financial states are only going to get worse, not better. There are also people who have been repeatedly hit by these economic downturns. People who have accumulated debt see no way out, since there are fewer and fewer corners to cut.
I look forward to the continued investigation. If Democrats hope to win the House and the Presidency, and to hold it long enough to reverse the current seesaw trend, we are going to need good information.
Is there a way to measure sentiment about Trump's lies in correlation with consumer sentiment as a way to avoid seeming to attribute a (dubious) correlation between sentiment and standard economists' measures of economic health?
"who tell pollsters that “higher prices” are hurting them are possibly just repeating what they heard on cable news and social media." - or perhaps they are answering a different question like could this be a problem for you in the future, or, are higher prices a problem for other people. Pollsters may have to assume that people answer the question they asked but there is room for ambiguity.
>> "I just want to underscore something before concluding, and that is that we don’t really need to be doing all this fancy modeling to explain consumer sentiment. We can just ask people what they think, and believe them! Much of the discourse about the “sentiment gap” assumes that the economic statistical models are right and the people, in aggregate, are wrong in how they’re thinking about the economy. But what if we flip that on its head? What if the national statistics are just... missing something?"
OMG, THANK YOU! I really, really wish more folks who are talking about this issue took the time to include this point.
I would recommend looking at this index https://www.primerica.com/public/household-budget-index.html.
Unfortunately they havent updated March or April yet. This intuitively feels right compared to Michigan since people's budgets actually did better under COVID and crashed in the immediate post COVID world before stabilizing.
I am hoping they backfill the trend pre 2014.
Thank you! Seems to match the 10% number I’m getting
Your analysis is brilliant as always.
But I'm confused about your headlined non-suck model, which seems to be 25% food, 50% shelter, and 25% vehicles.
What about healthcare and childcare? They rank very high in polls of voters' concerns. Also homeowner insurance driven by climate change is crushing households across the South and is a major issue for David Jolly in the Florida Governor's race.
Unfortunately the health care CPI data don’t go back far enough that I could have used the data for testing the models. :/
I used those 3 because surveys show they are Americans’ biggest household expenses by far (accounting for ~60% of monthly spending), and in roughly that proportion
Ah that damn lightpost.
There is also the whole category of debt - both the cost of monthly payments and the harm to your balance sheet and ability to borrow for cars or homes or starting a business.
Major debt categories include college debt, medical debt and overdue taxes.
And given the explosion of sports, crypto, and other forms of gambling in recent years, those debts should also be considered, even if they are informal or fluctuating debts that are not tracked (or trackable).
When personal debt is reported on the business pages, it's mainly in the form of mortgage or credit card debt - but that is only part of the debt story.
The problem with this analysis, for policy-oriented people like me, is that it has no policy implications. There is no policy available that will actually bring prices down without catastrophic effects on the economy. So the policy implication of this is — lie. Do what Trump did in 2024. Lie about what you can do to prices. Rely upon the magical thinking of the electorate to believe in your lies. This is not a very hopeful view for American democracy.
Yeah, I agree with Bob Fertik, there are policy implications. Folks who do policy work may be overly pragmatic, to a fault, or perhaps insufficiently imaginative, if they throw their hands up.
Coming from a project management background and public admin, the three constraints on implementing any policy goal are going to be scope, schedule, and cost.
Project management says ya treat one as fixed, and negotiate around the other two, and that will actually determine what is or is not possible.
We literally went to the moon by fixing the scope (put a human being on the moon) and getting flexibility around cost and schedule. Well and then we were pretty limited on schedule, so it wound up costing *a lot*. But we did it!
The pushback I get when I bring this up is that the scope seems to either too big or beyond our capabilities (bring down prices), but these are really mostly a failure of imagination where we might be automatically fixing our cost or schedule. Unfix cost or schedule in our imagination and then we can shoot for the moon. If our scope is fixed (eggs must become cheaper), then we need flexibility on the schedule or cost to do something like make cheaper eggs.
We might not be able to bring down prices within a day, or a week, or a month, or a year, or a 2-year congressional term - so if we are actually describing schedule as our fixed variable, then yes, we need to reduce scope.
It also might be that it can't be done cheaply. Like we could pay the cost to vaccinate all of our chickens and create a program to fund the expansion of egg laying farms to increase capacity and reduce the price of eggs and prevent future avian flu price shocks. But if folks don't want to pay for that, then the fixed variable is actually cost. And if cost is your fixed variable, then yes, we need to reduce scope.
In fact there are lots of policies that can bring down prices in each sector - and that's exactly what politicians of all parties try to do.
When avian flu drove up egg prices, Trump made foreign deals to import eggs. When beef prices soared, Trump imported Argentine beef.
This isn't partisan - President Obama tried to reduce healthcare costs through the "Affordable Care Act." President Biden tried to reduce costs through the "Inflation Reduction Act."
If your only reference for "policy" is monetary or fiscal policy, you're missing most of what governments do on the economic front - even if this isn't taught in college textbooks. And if economists frown on such policies as "inefficient," economists don't run for office.
How could we tell if micro or macro price levels (or a combination) are driving sentiment? By micro I mean Americans monitoring their regular purchases of key items - milk, bread, eggs. By macro I mean monthly budgets - sum of prices is exceeding income and reducing purchases? The argument in favor of micro is that it is repeated price checking of items that don't change - milk is milk - shaping perception. Frequent repetition and comparability are important to perception. The argument in favor of macro is that doesn't matter if milk or eggs are up or down, if the number at the end of the month is bad, that's the key to sentiment. Index in the model is macro. Thoughts?
I'm glad to see that you tested this on the 70s/early 80s.
I am convinced that the prices are indeed the greatest part of the nation's discontent with the economy, and I think GEM has won the argument with the great Paul Krugman (if there was an argument). Some thoughts (I am not an economist nor a psychologist). First, the relative difference between how Reagan was perceived during the lousy economy of the Eighties and Biden in the 2020's was in no small part related to covid, but also to the very different treatments by the mainstream media. Reagan was treated like a movie star; Biden like a doddering old man. It's not surprising to me that those who are most attentive to the news are those now least bothered by prices. First, they probably are both educated and in well-paid jobs (or retired) to be able to have the time to be informed, so they can probably withstand the inflation a lot better than most. Then, they are being told (particularly by Fox) that things are actually sort of good, or at least not nearly as bad as they were during the awful Biden years. The press hasn't harped on inflation as they did in 2022-24. But there's a final reason why the country is so sour on the economy: Dashed expectations. A lot of people voted for Trump who might not have in prior years because they were convinced that this titan of wealth was going to wave his golden wand and happy days would be here again. Clearly things are worse. And when you think things are going to be a whole lot better because of your decision, and they are worse, well, it doesn't make you happy.
I agree. Based on my own five grown kids, who are all highly-educated, well-employed science professionals, it is absolutely more difficult for them to afford houses and healthcare and cars. They don't have the same sense of security and optimism that we did at their age. And based on my students, there is definitely a sense that they will never build as much wealth over their lifetimes as their parents did. I'm pretty sure statistics back up those claims.
Though I always appreciate Mr. Morris's research, I think it would be timely to do some studies on income inequality. Robert Reich has been showing for years that the amount of wealth controlled by the top 1% has increased significantly, leaving the bottom 90+ percent poorer, or at least feeling poorer.
I've tried doing the (elementary level) math of whether higher incomes compensate for today's costs in rent or mortgages (adjusted for inflation). I'm pretty sure that the price of healthcare has significantly increased even if one accounts for inflation. And I've also seen articles that show higher education costs have become out of reach for all but the wealthy (or those willing to go into debt).
Considering that these three things are probably the lion's share of most families' monthly expenses, it would be helpful to know if these perceptions are correct.