Many things are going poorly, despite the headline figures.
The U.S. economy is “robust,” says the Wall Street Journal. Over the past few years, it has blown through the highest inflation in 40 years, higher interest rates, swings in regulatory policy between presidents, the highest tariff rates in almost 90 years, and now surging federal borrowing costs.
Despite it all, here’s a gauge of business activity hitting a five-year high. There’s the unemployment rate at 4.1 percent, lower than at any point during the 1980s or 1990s. And personal consumption breaking records, and private investment, too. Artificial intelligence is driving a lot of the action, but business across the board is doing well. Contrary to some claims, investment in AI wasn’t the biggest factor behind economic growth last year. It was just Americans producing and purchasing more stuff than ever before.
And yet, and yet. A surge in prices this year erased the modest wage gains Americans were experiencing since the post-pandemic inflation wave. Rates on Treasury bonds are reaching levels not seen in two decades, and they will have to be paid by taxpayers one way or another. Average mortgage rates are up to 7 percent — a historically moderate level now alien to most people after a quarter century of cheap money. The housing market is frozen in place; sellers are unwilling to sell, buyers are unable to buy. Pretty much everything is more expensive than it was last year, and inflation is still ongoing.
When people describe their sour moods on the economy, they’re usually not referring to a lack of jobs, or investment, or economic growth as they did in earlier periods like the Great Recession or the pandemic. We have all those things now. It’s not even about nominal incomes, which by any metric are rising. Americans’ reservations are, in my view, about (1) high and rising prices, above all else, (2) a diminished pathway to upward mobility, primarily through renting and homebuying, and (3) a pervasive feeling of economic uncertainty and thus insecurity.
In our current limbo economy, we don’t know what comes next. Another bout of inflation? Sudden job losses from AI or higher interest rates? A housing crash? Maybe even a debt crisis a ways down the road? These all feel like real possibilities. When most families don’t like their financials now, with the major costs of life outpacing incomes, and many fear where things are headed, we shouldn’t expect them to be sanguine about an economy that — on paper — is doing peachy.
Most fundamentally, I worry the nation has lost sight of ensuring the basic conditions for broadly and sustainably improving people’s well-being: sound money, stable incentives to save and invest, open and competitive markets (especially in calcified areas like housing), and sober spending both in the governmental and the private sphere. There is nothing inherent to America that makes whatever set of economic policies it chooses work out well. Get those wrong, and things go poorly.