Paul Krugman Is Right About the Economy, and the Polls Are Wrong

I think it's a deeper disillusionment with the economy. Anyone who isn't truly rich is coming to the conclusion that it's becoming increasingly hard to get ahead in the economy over the long term, and the measures they use for economic health are becoming increasingly divorced from this reality. Things getting mildly better for some people over the recent past don't offset people's economic realities.

Food and fuel are both included in CPI, they're left out of core CPI because they're noisy. Food CPI alone for the past year is at 2.2, and gasoline is at 1.3.

Also for the latest release, core CPI is 3.8, while including food and fuel it's only 3.5. Because the cost of fuel oil and utility gas were both over 3 percent negative.

Food and energy costs fluctuate wildly, mostly due to external factors (OPEC, geopolitical landscape, global futures markets, etc), so they are excluded when making policy decisions because they would add too much noise. Nevertheless, energy costs affect the cost of nearly everything else, so it is indirectly reflected in the data.

I could be wrong, but I mostly agree with the premise of the article. All the data I've seen shows most people are better off compared to 2019 (which also excluded the same stuff). As the article states, consumer spending habits are also reflective of good economic conditions. Anecdotally, everyone I know is at least a little better off since 2019, financially (lower to upper middle class, and a few upper-class people). I see a lot of "help wanted" signs with wages higher than the 20% inflation since 2019. So, I'm curious why the polls and generally everyone says the economy is worse.

One bad indicator I've seen are the costs of home down-payments outstripping inflation (which would mostly affect would-be first-time homebuyers). That has been following the same trend for decades though. There have been a lot of tech mass layoffs, but that only affects a small percentage of people. Taxes have increased for very high income people ¯\(ツ)/¯.

I'm no Biden simp (though I prefer him to Trump). I think the economy is mostly outside the president's control. I just find the discrepancy in data, and what people say interesting.

For years there was a push by economists to include metrics on how people perceive the economy, because that will indicate their spending patterns.

Now, 'only look at this specific data point, that does not include rents, mortgages or food, and indicates that wages are just slightly above inflation, as long as you don't go back more than 6.2 months of data as proof that the economy is roaring!'.

Every central bank failed to predict inflation from covid stimulus, or thought that the risk of inflation was worth taking to prevent economic collapse.

More targeted stimuli might have helped the longterm inflation figures and it might have made more sense doing that in hindsight. However it is hard to tell what problems might have arisen if they had taken that route at the time.