One of the more perplexing realities of the 2024 election is the seeming disconnect between voters and the "actual" state of the economy. Economists, pundits, and especially the president have all remarked on the so-called "great" economy and the voters' disbelief at how good it really is.
When pollsters ask voters why they are grumbling about an economy with low unemployment, improving inflation, including better prices at the pump, they point to the fact that prices are still rising.
What some pollsters are shocked to find out is that voters can remember more than a couple of months ago. In fact, voters easily recall the economy of 2020 before the shutdowns that the pandemic caused. They remember the zero inflation rate and minuscule interest rates.
No matter how much the rate of inflation comes down, prices will never be as low as they were in 2020. This was a reality that America discovered in the mid-1980s after a protracted bout of inflation. The United States was experiencing a roaring economy, interest rates were falling from their high of 21% in 1982 to a more reasonable 10% by the end of the decade.
But prices were never going to fall to where they were in 1975.
Today, we have a president who is jawboning big companies to cut prices. It's bad enough to have a president whose policies caused the inflation rate to spike to 9% in 2022. We also have a president who's an economic illiterate.
Repeat after me: Almost all prices will never come down to where they were in 2020. Biden's inflation has been baked into the cost of everything. Both regular employees and union workers received raises in the past three years. They weren't enough to cover the cost of living increase but it made prices for manufactured goods that much more expensive.
The cost of the materials to make things is more expensive. Shipping goods is more expensive. And despite assurances that the supply chain problems had been solved, there are still bottlenecks and slack in the system that need to be addressed.
Biden can't blame it on the pandemic anymore.
Also baked into the system are inflationary expectations. Everyone from consumers to CEOs is now living in an altered reality as far as prices are concerned.
Consider a 2-liter bottle of soda: In February 2021, before inflation began heating up, it cost an average of $1.67 in supermarkets across America. Three years later? That bottle is going for $2.25 — a 35% increase.
Or egg prices. They soared in 2022, then fell back down. Yet they’re still 43% higher than they were three years ago.
Likewise, the average used-car price: It rocketed from roughly $23,000 in February 2021 to $31,000 in April 2022. By last month, the average was down to $26,752. But that’s still up 16% from February 2021.
It would be great if prices could come down to 2020 levels. But why stop there? Why not return to the glory days of 2000? Or 1950 for that matter? If we can bring prices back down to where they were for years ago, why not 20 years ago? Or 50 years ago?
It's called "deflation," and it's bad for the economy. When prices deflate, it's not because the goods have gotten any cheaper. It's that businesses can't sell their goods at almost any price because people don't have the money to buy them.
The American voter doesn't care about concepts like "deflation" or "disinflation," which is when prices rise more slowly as they are doing now. They want their $1.80 a gallon gas back. They want eggs at 89 cents and a gallon of milk for less than $3.
Most of all, they want the sense that prices are under control and that they won't get blindsided every time they walk into the grocery store.
I don't think Biden can give voters that. And that's why his re-election bid is in terrible, terrible trouble.
