Pirate's Cove

You simply un-appreciative peasants are grumbling after all the work of your betters

The elusive Fed ‘soft landing’ nears. Why are Americans so mad about the economy?

U.S. Federal Reserve Chair Jerome Powell said emphatically last week that people “hate inflation, hate it,” but he left another fact unspoken – they also punish the politicians in charge when prices rise.

They used to. Were politicians punished in the 2022 mid-terms? Will they be punished in 2024? I’m not sure that will happen much

The central bank’s quest for a “soft landing” of more slowly rising prices and continued economic growth looks increasingly probable. In fact, the U.S. may hit a sweet spot just as the 2024 presidential election campaign crescendos next year.

It’s the sort of benign outcome that academic studies and high-ranking economists had called virtually impossible after inflation hit 40-year highs in June of 2022. Some warned that millions of workers might need to be rendered jobless to reduce the pace of price increases in a flashback to the central banking experience of the 1970s.

Rather than cheering, though, after years of economic turbulence since the coronavirus pandemic erupted in 2020, Americans grumble, at least if you ask them about the economy.

What’s there to grumble about? The pace of inflation has slowed, right?

More than 40% of U.S. voters who backed Joe Biden in the 2020 presidential election say they think the economy is worse off than it was then, a Reuters/Ipsos poll published last month found.

That’s because things on the ground don’t feel as good as the positive inflation trend would indicate. With fast rising prices and the end of an array of pandemic-era government benefit programs, inflation-adjusted household income fell last year, and the poverty rate increased.

Borrowing costs also have risen sharply in the past 18 months as the Fed ratcheted up interest rates to tame the surge in inflation, adding to consumers’ sour mood.

(From NY Post article)

That’s just through 2022. Prices continued to rise in 2023, albeit more slowly. Interest rates are much higher than when Biden took office, and, in fairness, that’s the primary fault of China messing with coronaviruses, though, the Biden administration made things worse with their terrible policies.

The Biden administration has worked to lower costs by releasing stores of the country’s strategic petroleum stockpile, pushing down health insurance premiums, negotiating the cost of common prescription drugs, and trying to end monopolies in meat processing and battling “junk” fees paid by consumers.

None of those worked or will work. They just started negotiating on drug prices, and that’s only for 10 total. Junk fees? Nothing to do with inflation. Insurance premiums? I thought Obamacare was supposed to do that. Strategic petroleum? That was a fail, and gas prices have stayed high. You’re paying way more than in 2020, which helps keeps prices high.

In the 12 months through August, the CPI accelerated 3.7%, a sharp drop from its peak of 9.1% in June of 2022.

But that’s not what voters care about. Even as the pace of price hikes recedes, the sticker shock from previous increases remains. Just because inflation falls, in other words, it doesn’t mean prices fall back to where they were – only that they are growing less quickly.

Anyone in a grocery store is less likely to appreciate that meat, poultry, fish and eggs are slightly less expensive now than they were at the start of the year – inflation among those goods was negative for several months – than to grimace at the fact that those core sources of protein still cost about 24% more than they did on the eve of the pandemic in early 2020.

Cost less than the start of 2023? What are those products? None are mentioned. Surprise?

Read: With A Supposed Soft Landing Coming, Reuters Wonders Why Americans Are So Mad About Economy »