There appears to be a dichotomy of opinion about the current state of the US economy, and it seems to result from the word “economy” being used to describe two different things: The statistical economy (GDP) and the reality of the economy for individuals. When you listen to, or read, the news, these two separate issues are often mixed as if they are the same thing, and they’re not. It becomes more confusing as the media pundits seemingly try as hard as they can to talk us into a recession. They sound disappointed when statistics show the numbers related to the economy (GDP) are quite buoyant. I don’t know whether the politicians are also deliberately trying to confuse the issue in an attempt to divert blame, or whether they don’t understand it either. My guess is the latter, flavored by the former.
Let’s look at this dichotomy of opinion a little closer.
The statistical economy (GDP) derives from actual measurements of employment, production, sales, inflation, capital investment, and profit reports of companies and corporations. I should add that all these statistics can be, and probably are, manipulated, particularly profit reports, but they are numbers and not just feelings or biases. The fact that the bases and scales of these reports are consistent over time lends them some credibility.
The individual economy is based on what happens in the street to the individual, and that may bear little, or no, resemblance to the statistical economy. How much money I have to spend to buy groceries, pay utility bills, pay credit cards, or buy gas, is very real, but might be disconnected from the national statistical economy; the two concepts are obviously connected in some way but not, in my opinion, directly enough to use the same word to describe them.
Today’s reports on the economy bear out this hypothesis. The national statistics show the economy is doing quite well, even better than expected (by the doom prophets). The general population is complaining that their budgets are shot, and they are worse off than before. That doesn’t make any sense, even allowing for partisan political bias. Hence the dichotomy of opinion.
It is difficult to argue with the national statistics, even though the actual numbers can be questioned. So, why does the general public report the opposite of what those statistics tell us. It has to be that the statistical economy is not filtering down to the individual, or at least to the majority of the individuals. Perhaps, that is the reason for the dichotomy. The statistical economy is not benefitting the majority of the population. Hardly a new thought, but one that should make us question how the word “economy” is used. We need another word to describe national customer satisfaction with the economy so that this dichotomy of opinion is clarified.
However, just stating that we need another word is probably the easy part. The hard part will be to reliably investigate and document the discrepancy between the two “economies”, so that the overall pictures makes some sort of sense.
My guess, is that the main reason for this discrepancy, is inequality of benefits, and by benefits, I mean base income and disposable income. The benefits of a growing economy must be going somewhere. They just aren’t getting to the majority of the population. If that’s true, then it’s up to the national politicians to do something about it. We can hardly expect the people who are benefitting from an increase in GDP, to stand up and shout for equality, so it’s the government’s responsibility to institute appropriate programs so that everyone benefits.
Depending on your politics, this could be a plus or a minus. If Joe Biden and the Democrats woke up to this opportunity they could substantially increase their chances of winning again in 2024. If the Republicans stepped up to the plate, from their perspective, and suppressed the opportunity to make the “un-equals” feel better, they might increase their 2024 chances. Of course, the moral decision is easy to make, but that’s the last thing current national politicians will consider.
Food for thought, and I would welcome ideas for the new name I need to describe customer satisfaction with the economy. A dichotomy of opinion on something so basic as the definition of the economy serves no-one.