feelings ... maybe it is the economy?
Ben Bernanke wrote a blog post on feelings this week. He argued that non-economic factors, such as political polarization, have made Americans less satisfied with "the way things are going." That may be, but I think he missed some signs of economic discontent in those surveys.
The divergence in Bernanke's first figure (copied below) began well before the Great Recession. General satisfaction from Gallup began falling steadily in the early 2000s and has held at a low level since the Great Recession. The relative improvement in attitudes toward personal finances from the Michigan survey may reflect the near-term focus--comparing just one year back or one year ahead--and miss a long-term level shift.
I was skeptical of Bernanke's emphasis on non-economic factors, so I dug a bit more into the data. The Michigan survey also asks opinions about government economic policy. Turns out there is no big "divergence" in how people feel about economic policy and how satisfied they are with the United States. Both have fallen noticeably since 2000.
Still, the shifting opinions about economic policy could be related to polarization. The specific question is: "As to the economic policy of the government -- I mean steps taken to
fight inflation or unemployment -- would you say the government is doing
a good job, only fair, or a poor job?" There are three possible responses and the index above only uses the percent of "good job" and "poor job." A shrinking middle of "fair job" could be another sign of polarization, but that appears to only be a small part of the change since 2000.
So why the greater disapproval of economic policy in the past 15 years? I don't know for sure, but meager income growth for many could be playing a role. In the Michigan survey, the percent who expect their family income to "go up less than prices" has risen from 30 percent in 2000 to 42 percent in 2016. And with no change, on net, in the percent expecting income to rise more than prices (only 23 percent in both years), the index of real income expectations is also below its 2000 peak.
I agree with Bernanke that the
divergence between general satisfaction and near-term measures
of consumer sentiment is puzzling and deserves attention. I am less
convinced by his claim that "social and political polarization" are a key driver. Of course, many, many factors are likely at play. Still it feels too soon to me to let the economy and economic policy off the hook.
**Opinions here are mine and should not to be attributed to anyone with whom I work.**