American Voters Were Right About The Economy: The Data Was Wrong.
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Before the presidential election, many Democrats were puzzled by the seeming disconnect between “economic reality” as reflected in various government statistics and the public’s perceptions of the economy on the ground. Many in Washington bristled at the public’s failure to register how strong the economy really was. They charged that right-wing echo chambers were conning voters into believing entirely preposterous narratives about America’s decline.
What they rarely considered was whether something else might be responsible for the disconnect — whether, for instance, government statistics were fundamentally flawed. What if the numbers supporting the case for broad-based prosperity were themselves misrepresentations? What if, in fact, darker assessments of the economy were more authentically tethered to reality?
On some level, I relate to the underlying frustrations. Having served as comptroller of the currency during the 1990s, I‘ve spent substantial chunks of my career exploring the gaps between public perception and economic reality, particularly in the realm of finance. Many of the officials I’ve befriended and advised over the last quarter-century — members of the Federal Reserve, those running regulatory agencies, many leaders in Congress — have told me they consider it their responsibility to set public opinion aside and deal with the economy as it exists by the hard numbers. For them, rigged government statistics are thought to be as reliable as solid facts.
These numbers have time and again suggested to many in Washington that unemployment is low, that wages are growing for middle America and that, to a greater or lesser degree, economic growth is lifting all boats year upon year. But when traveling the country, I’ve encountered something very different.
Cities that appeared increasingly seedy. Regions that seemed derelict. Driving into the office each day in Washington, I noted a homeless encampment fixed outside the Federal Reserve itself. And then I began to detect a second pattern inside and outside DC alike. Democrats, on the whole, seemed much more inclined to believe what the economic indicators reported. Republicans, by contrast, seemed more inclined to believe what they were seeing with their own two eyes.
Within the nation’s capital, this gap in perception has had profound implications. For decades, a small cohort of federal agencies have reported many of the same economic statistics, using fundamentally the same methodology or relying on the same sources, at the same appointed times. Rarely has anyone ever asked whether the government's figures they release hew to reality.
What we uncovered shocked us. The bottom line is that, for 20 years or more, including the months prior to the election, voter perception was more reflective of reality than the incumbent statistics. Our research revealed that the data collected by the various agencies is largely accurate. Moreover, the people staffing those agencies are talented and well-intentioned. But the filters used to compute the headline statistics are flawed. As a result, they paint a much rosier picture of reality than bears out on the ground.
I don’t believe those who went into this past election taking pride in the unemployment numbers understood that the near-record low unemployment figures — the figure was a mere 4.2 percent in November — counted homeless people doing occasional work as “employed.” But the implications are powerful. If you filter the statistic to include as unemployed people who can’t find anything but part-time work or who make a poverty wage (roughly $25,000), the percentage is actually 23.7 percent. In other words, nearly one of every four workers is functionally unemployed in America today — hardly something to celebrate.
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