Thursday, August 11, 2005

The boom nobody notices

I’ve often wondered how it is that polls show that Americans continue to think that the economy is not doing so well, despite an avalanche of evidence to the contrary (while paradoxically about 3 in 4 say that their personal financial situation is improving, but I digress). It is easy to blame big media, because obviously with a Republican in the White House they are going to attempt to paint things in a negative light, but that can’t fully explain it – it’s not like they were ever positive with Reagan or Bush 41 in office or negative with Clinton in office, but it is now that the polls are most strongly out of touch with economic reality. There’s got to be some underlying reason.

Enter one of the blogosphere’s newest members and for my money the most knowledgeable political mind in the country, Michael Barone. He puts forth that, after 22 years of mostly uninterrupted prosperity, Americans are simply spoiled and miss the forest for the trees:

“For 22 years, from 1983 to 2005, we have lived in mostly good economic times: The American economy has had low-inflation, nontrivial economic growth during at least 90 percent of the quarters during that period. (I don't have the figures in front of me, but I'm pretty confident that I'm right.) So, my theory goes, Americans have come to take low-inflation economic growth for granted. It is the norm. The default condition. It's what we expect as a bare minimum. By 1999-2000, we may have come to expect bubble growth as the norm.

So we reacted with historically unprecedented negativity to any negative economic factor (and there's always something negative about the economy). The mild 2001-03 period of recession and slow growth evokes a response much like that of the deep recessions of 1979-83 or 1958-61. High gas prices today evoke a negative reaction similar to the much higher prices (in real dollars) of the early 1980s or the much sharper increases of 1973-74.

It has not always been so. From 1970 to 1982, there were relatively few periods of low-inflation economic growth. (Perhaps I'll check the data later and update this.) Liberal economists wrote that low-inflation economic growth was no longer possible and that we had better start acting like adults and getting used to the weak economy that was the best they could give us. When the Reagan tax cuts produced that condition suddenly in 1983, voters were immensely grateful, and Reagan was reelected with 59 percent of the vote in 1984.

More recently, voters who have come to regard low-inflation economic growth as the default condition have shown much less gratitude to presidents with plausible claims to have produced that growth. Bill Clinton was reelected with 49 percent of the vote in 1996 and George W. Bush with 51 percent. Preoccupied with minor economic problems and unappreciative of the historically unusual era of growth that has come to seem the norm, we feel free to cast out votes on cultural issues while we carp all the while about an economy our forebears would have killed for.”


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