Americans are unhappy about the economy. They report low self-confidence which they did at the beginning of the Covid pandemic, when unemployment was four times higher than it is now. Of them feelings towards the economy almost as low as during the depths of the Great Recession of 2008.
How is this possible, given the low unemployment rate and rapid economic growth of the past two years? The culprit is what Americans described as one of the most important problems today: high inflation.
Inflation stands out from other problems because it is inevitable. Unlike unemployment, it affects everyone. And people experience it every day — when they go to the grocery store, drive past a gas station, or buy almost anything.
Inflation also contributes to feelings of helplessness. Rising prices are more of a problem for people than a problem of their own. Without cutting their spending, there’s not much individuals can do about inflation.
And after decades of stagnant wages and salaries, inflation is yet another example of Americans’ livelihoods not keeping up with the cost of living.
“People are so rudimentary at this point, having spent two years in Covid, that anything new is going to upset them,” said George Loewenstein, a behavioral economist at Carnegie Mellon University. angered. “It just feels like it’s one thing after another.”
The problem is not getting better. The government reported yesterday that prices rose 8.3% in the 12 months ending April. High inflation hasn’t lasted this long since four decades ago – by the time Ronald Reagan was president, there were only two Star Wars movies in theaters and the internet was non-existent.
Effects of inflation
When things cost more, people make up for it by cutting back on spending – sometimes on necessities. “A lot of people are living on the edge,” says Loewenstein. “So an uncontrolled increase in any aspect of your budget can be quite disastrous.”
Some states have enact tax cuts and other stimulus measures to provide relief against rising prices. But those approaches could actually make inflation worse, by spurring more spending and demand.
Rising prices are a sign of an economy running too hot – too much spending leads to too much demand leading to limited supply. Policymakers can prevent this by deliberately slowing the economy; they can raise interest rates (increasing the cost of borrowing money), raise taxes or cut the budget.
The Federal Reserve has raised interest rates. The central bank’s chairman, Jerome Powell, has said he is aiming for a “soft landing” – essentially, avoiding going too far and causing a recession – but there is no guarantee that he will succeed. During the 1980s, the Fed boosted the economy to reduce high inflation.
Some economists worry that the US is now going down a similar path. Inflation fell in April compared to Highest in 40 years in March, but it’s still high. And April’s rate was higher than some experts expected. That could spur policymakers to be more aggressive — and increase the risk of future recessions.
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A rare Stradivarius
For the first time in decades, a Stradivarius from the early 1700s – considered the “golden age” of violin making – Will be auctioned.
The Stradivarius, known as da Vinci, was the instrument of choice for Toscha Seidel, who purchased it for $25,000 in 1924. (This sale caused front page of The Times.) Seidel was quite famous: He had a weekly broadcast on CBS in the 1930s, and he gave lectures to Albert Einstein. He has played da Vinci on a number of famous movie spots, including “The Wizard of Oz”.
Seidel, who died in 1962, treasured the violin and said he wouldn’t trade it “for a million dollars.” When the auction ends next month, it could raise $20 million.