Friends,

A few days ago, I had a long talk with my old friend Jared Bernstein, who chairs Biden’s Council of Economic Advisers. Jared worked for me 30 years ago at the Labor Department, and, as I reminded him, his career has been on a downward trajectory ever since.

The Council of Economic Advisers is now preparing its annual Economic Report of the President, so it seemed an especially good time to ask Jared for his take on the weirdest thing about today’s economy, which is rattling Democratic politics to the bone: The gap between the data showing a good economy and the public’s perception that the economy stinks.

Consider: The economy grew 4.9 percent over the last quarter. Unemployment has been under 4 percent for the last 21 months. Median household wealth has grown by 37 percent since the pandemic. Wages have been growing faster at the bottom of the economy than at the top. And inflation is way down from where it was a year ago. The Consumer Price Index slowed to 3.2 percent last month on a year-over-year basis, after peaking at just above 9 percent on an overall basis in the summer of 2022.

The economic data is about as good as it gets.

And yet the American public doesn’t see it this way. To the contrary, in the recent Times-Siena College poll, only 2 percent of Americans said the economy is excellent. Just 19 percent think it’s even good. Over 80 percent say it’s fair to poor. Other polls show much the same, or worse.

How to explain this discrepancy? Some economists, such as Paul Krugman, think the public is being irrational. But that’s no answer. The public can’t be irrational about its perceptions. The more Joe Biden tells Americans how great Bidenomics is, the more people report that Biden is “out of touch.”

Jared’s answer is more nuanced. He thinks questions about the economy are really understood by the public as questions about the state of the nation and the world, which most people find deeply worrisome. After all, the past few years have featured the deaths of more than a million Americans from COVID, the attack on the Capitol, double-digit inflation, Putin’s invasion of Ukraine, climate-induced floods, hurricanes, and wildfires, and now a horrific war in Israel. Most people are still deeply rattled.

Jared could be right, but I think he’s missing something else. Just as people don’t think about the economy in isolation, they also don’t think of the “economy” in absolute terms. They think about it in relative terms — relative to where it used to be, relative to where they think it should be.

Americans instinctively compare the economy they’re living in to the one their parents or grandparents lived in — one in which the middle class was growing, almost everyone was doing better than before, and housing was affordable.

Many of the young people I know are stressed by the high costs of housing and home repairs, child care, cars and car repairs, and health care. They don’t view the current economy as flourishing.

In fact, compared to the economy of the 1960s, the current economy is hardly terrific. If you lack a four-year college degree, it’s even worse. This is especially the case in so-called “battleground” states such as Michigan, Wisconsin, and Pennsylvania — places that 50 years ago provided millions of high-paying union jobs but are now economic backwaters.

Take a look at the following chart, which shows the share of battleground state voters who trust Biden to do a better job on the economy than Trump, and you see what I mean. For example, note that less than a third of the white working class with no college education trusts Biden to do a better job on the economy than Trump.

Why do they trust Trump to do a better job on the economy than Biden? Because they remember Trump loudly (and hypocritically) “fighting” for them — condemning the Chinese and other exporters to America, lashing out at Mexico and NAFTA, criticizing Europe for “taking advantage” of us, and going after “coastal elites” and the “deep state” for rigging the economy against average working people. (I say “hypocritically” because Trump was in fact the champion of the billionaire class, giving them the biggest tax cut they’ve ever had.)

In other words, it’s not that Trump did a better job on the economy than Biden. He didn’t. It’s that many people — especially working-class Americans in battleground states — had a sense he was fighting for them against their perceived “enemies.”

What does this suggest for Biden?

Biden should take on the CEOs of big corporations and Wall Street, which continue to be the real sources of wage suppression in America.

Biden has already walked a picket line and supported striking workers. He’s the most pro-worker and pro-labor president we’ve had in memory. And his administration is fighting corporate monopolies harder than any administration since the 1960s.

It would be a small and logical step for Biden to let loose on the denizens of the Street and C-suites who are demanding bigger profits and lower wages and are using corporate earnings to buy back shares of stock.

Biden is doing a good job on the economy, but that doesn’t matter if the public doesn’t believe it. For them to believe it, he has to show himself as a fighter.

What do you think?

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