By Chris Satullo
The “misery index” is sinking. So, Joe Biden’s approval rating should be soaring.
But they decidedly are not. The latest New York Times-Siena College speculative poll has him running dead-even – 43 percent to 43 percent – with an adjudicated rapist and business fraudster who has been indicted for further serious crimes by three different grand juries this year, with at least one more round of indictments in the offing.
One of voters’ main gripes with Biden is his handling of the economy – a 37 percent approval rating in that one poll, with 65 percent saying in another poll that the economy is “bad.” Even though the “misery index” says the U.S. economy is in nearly as good shape as it’s been anytime since the oil shock of the 1970s.
All this is emblematic of how deep-seated and irrational America’s polarization has become.
What is the “misery index”? It’s a simple but meaningful measure invented by economist Arthur Okun in the 1970s, at a time when a plague called “stagflation” – high inflation combined with low growth – was making Americans anxious. Okun sought to create a single number that could be used fairly to compare American’s economic well-being at different points in time.
How do you calculate the misery index? Just take a given month’s Consumer Price Index percentage change and add it to that month’s jobless rate. Unlike, say, the Dow Jones Index, those numbers relate directly to the cost pressures and income prospects of the mass of ordinary Americans.
At this time last year, the misery index looked downright miserable. In August 2022, the index stood at a hideous 11.93. Biden’s approval ratings, particularly on handling the economy, were accordingly low.
But now, with inflation tamed and jobless rates near historic lows, the misery index sank in June (the latest tally) to 6.69. (See this historical chart from the St. Louis Fed.)
This level is lower than any registered any time during Ronald Reagan’s “morning in America.” George H.W. Bush never sniffed it, either. Bill Clinton had a nice little two-year run of achieving similar figures during the evanescent dot.com boom. George W. had a three-month flirtation with this kind of success, right before he stumbled headlong into the Great Recession.
Barack Obama, saddled with that collapse’s immense joblessness from Day One, finally got his misery rate down into the low 5’s toward the end of his second term and turned things over to Donald J. Trump in good form. And Trump didn’t screw things up until the pandemic hit, which sent the misery index soaring to 15.
Now, I should admit that the previous paragraphs are tainted by a fallacy I need to disavow:
Presidents get far too much blame and far too much credit for how the economy does on their watch. It’s not that they have no influence. But what they can do via fiscal, industrial, trade and regulatory policy just nibbles at the edges of an immense, infernally complex system. That system is affected as much or more by global developments in resource prices, supply chains, political stability, migration patterns and so on.
All that granted, presidents can and should be judged on how well they navigate these swirling currents. When it comes to Biden, most Americans don’t seem to grasp – or simply don’t want to admit – that he was dropped from the get-go into some heavy whitewater, from pandemic hangover to supply chain woes to the oil-and-food price shocks triggered by Russia’s invasion of Ukraine.
He’s actually done a pretty fair job of keeping the national kayak right-side-up.
No, I don’t have any kind of degree in economics. But Noah Smith has a doctorate, and he teaches the subject at Stony Brook University. In a recent post on his blog, Noahpinion – titled “If this is a bad economy, please tell me what a good economy would look like” – Smith makes clear that he absolutely detests the American habit of overestimating a president’s impact on macroeconomic trends. He also stresses he has no particular fondness for Biden. But hear what he has to say:
“I know lots of Americans still think the economy is doing poorly and are upset about that. But when I look at objective measures, I just can’t rationalize that negative viewpoint. Because as far as I can tell from the actual numbers, this economy is doing really, really well.”
Smith acknowledges that people may still be reeling from last year’s truly scary episode of inflation and haven’t adjusted their outlook yet, a phenomenon some have dubbed a “vibe-cession.”
Beyond that, in a point which Smith also notes, polarization has reached a level where, if a Republican were president, Democrats would find it hard ever to admit the economy is doing well – and vice versa for Republicans when a Dem sits at the Resolute Desk. It’s even harder for Republicans to be fair when their main news sources, from Fox News to various bloggers and podcasters, feed them a steady diet of damned lies and cherry-picked statistics.
But the real, unvarnished economic numbers are, in Smith’s estimation, not just good, but “great”:
“Together, the strong labor market and slowing inflation are delivering the third thing we want the macroeconomy to deliver: real income growth. Real GDP grew at 2.4% in the second quarter, which is a decent clip for an aging developed country, and represents a return to the pre-pandemic trend. But the Atlanta Fed’s growth forecast for the third quarter … is 3.5%. That’s pretty darn good!
And in case you’re wondering whether most of that income growth is flowing to the rich, well, let’s take a look at wage growth. Real wages fell during 2021 and the first half of 2022, but when inflation came down, they started rising again. Now, labor economist Arin Dube reckons that wages for production and supervisory workers — i.e., regular workers — are all the way back to their pre-Covid trend line.”
(By the way, hat tip to my old friend Jonathan Last for alerting me to Smith’s interesting post.)
As an academic blogger, Smith has a fairly erudite audience, but in the comments to this post you can see how hard it is even for well-informed people to shake free of their pet narratives.
It’s not just conservative commenters shouting, in defiance of the current numbers, “But … the inflation!!!! We can’t buy houses, cars, beef or beer anymore!!!!!!”
It’s also progressives claiming – while ignoring the charts and analysis Smith offers demonstrating that real wages for middle-percentile Americans are outpacing inflation – that the lower misery index is a mirage. It couldn’t actually be helping “working people” – because in their view it’s not possible for capitalism ever to provide benefits to ordinary folks.
Smith observes – and for what it’s worth, I concur – that Biden likely helped fuel last year’s inflation by piling more huge spending programs on top of the emergency stimulus relief that both he and Trump pushed for. The presidential foot might have been a little heavy on the gas pedal there.
But, as Smith also notes, if you are going to ding him for that, which is fair, then you should also credit him for: the dip in oil prices that occurred after he released some of the U.S. petroleum reserves and took other steps; the huge surge in industrial investment that followed the CHIPS Act and the green energy incentives in the Inflation Reduction Act; and his administration’s response to the Silicon Valley Bank collapse, which helped avoid the financial crisis many feared.
Of course, the independent Federal Reserve also deserves credit for being wiser in how it managed interest rates to cool inflation than many (raises hand) thought it was being, and for doing its part to fend off any run on banks.
In sum, as Smith puts it,
“This economy isn’t just good; it’s impressive … I want to point out how improbable and surprising it is, from a macroeconomic standpoint. The basic theory of macroeconomics is that when the government takes action to reduce inflation — raising interest rates, cutting deficits, etc. — it’s supposed to reduce real income growth and employment. There’s supposed to be a tradeoff there! And yet instead there seems to have been no tradeoff at all. This is a remarkable achievement.”
This “soft landing” – reduced inflation without recession – was something many big brains on Wall Street and in academe said wasn’t possible. Now it’s begun – though it’s fragile. As we’ve learned the painful way, stuff – pandemic, terrorist strike, foreign war, climate disaster – happens.
But if the misery index does continue its current delightful direction, more Americans may begin to notice the benefits rippling out to the communities where they live. And then, perhaps, the polarized fog that clouds their view of the job Joe Biden has done for them will finally begin to dissipate.
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Chris Satullo, a civic engagement consultant, is a former editorial page editor/columnist at The Philadelphia Inquirer, and a former vice president/news at WHYY public media in Philadelphia