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We Are the Economy

Inflation has cooled since the 9% Covid-related spike in 2022, to around 3.4 %, as consumer spending and supply chains have “normalized.” The Federal Reserve’s anti-inflation interest-rate hikes helped, too. 

            Though this rise in the ‘real interest rate’—calculated as interest rates minus the rate of inflation—could temporarily slow growth, North Carolina is one of the top five states where people are moving.


A flood of federal spending on infrastructure, microchips, and electrification boosted North Carolina’s construction sector, and the nationwide housing shortage hasn’t hurt either. Low inventory is keeping home values high and rising. This gives homeowners confidence to spend, which helps prevent recession.

            Weirdly, though this economic news these days seems “good,” national consumer polls show disagreement with the healthy assessment. Fewer than one-quarter of registered voters in a Wall Street Journal poll, for instance, agreed the economy was “headed in the right direction.”

            Ben Harris and Aaron Sojourner of the Brookings Institution designed a model to study this perception gap. Their findings suggest biased sources of information play a role— that it’s not the economy, it’s the economic news that’s to blame. That news has become systematically more negative, starting in back in 2018.

            The negative bias has grown over the past three years.

            But maybe the respondents’  circumstances haven’t changed.

            We the people are the economy. Our spending behavior drives economic health, but we need confidence in the elected officials who answer to voters. Those officials can’t set interest rates, of course, but they do make policy. Rules governing electoral systems—think about North Carolina’s recently gerrymandered election maps, drawn unfairly and in secret—can be manipulated to create an electorate that tilts policy to richer, whiter districts. Those rules can also create barriers to voting that disenfranchise low-wage workers, young people, and others who rely on absentee or voting by mail. Senate Bill 749 is another insult. The bill would change the composition of elections boards and lead to gridlock, even election chaos, and threaten early voting.

            Both are being challenged in court.

            Recent research shows that the Voting Rights Act of 1965 reduced the Black-White wage divide; conversely, the recent judicial decision rescinding parts of the act has aggravated economic inequality.

            Studies link smaller differences in the turnout rate between low and high income voters with more generous state income support programs, higher minimum wages, and lower income inequality.

            As economic inequality worsens, frustrated citizens see the economy as “rigged” and turnout lags, especially in poor communities.

            This may explain the way citizens are interpreting today’s news about the economy’s health. Maybe survey respondents are distracted by global events in Israel or Ukraine, or maybe they only watch biased news channels.

            Or maybe, nothing has changed for them. Their wages haven’t gone up, but inflation has eroded purchasing power. They still can’t find child care. They don’t own a house. The strong construction sector hasn’t put them into affordable housing.

            Maybe they’re not buying these reports of a strong economy because they’re not feeling that strength or seeing evidence that their elected officials are working for them, no matter what the numbers say. Or maybe they don’t believe the good economy is sustainable, given today’s political climate.         

            Since we are the economy, citizens’ beliefs will influence what we buy, literally, and figuratively, in our minds, and with our pocketbooks. That surely influences economic outcomes.



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