https://archive.is/2025.02.11-205302/https://www.politico.com/news/magazine/2025/02/11/democrats-tricked-strong-economy-00203464
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.
Take, as a particularly egregious example, what is perhaps the most widely reported economic indicator: unemployment. Known to experts as the U-3, the number misleads in several ways. First, it counts as employed the millions of people who are unwillingly under-employed — that is, people who, for example, work only a few hours each week while searching for a full-time job. Second, it does not take into account many Americans who have been so discouraged that they are no longer trying to get a job. Finally, the prevailing statistic does not account for the meagerness of any individual’s income. Thus you could be homeless on the streets, making an intermittent income and functionally incapable of keeping your family fed, and the government would still count you as “employed.”
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.
Perhaps the most prominent issue of the 2024 campaign — inflation — tracks much the same story. Democrats spent much of the campaign pointing out that inflation had abated by Election Day, even if prices remained elevated from pre-pandemic levels. Moreover, many noted that wages (according to the prevailing statistic that takes only full-time work into account) had risen at a faster clip. These claims were based on observations drawn largely from the Consumer Price Index, an indicator that tracks the prices charged for 80,000 goods and services across the economy.
But the CPI also perceives reality through a very rosy looking glass. Those with modest incomes purchase only a fraction of the 80,000 goods the CPI tracks, spending a much greater share of their earnings on basics like groceries, health care and rent. And that, of course, affects the overall figure: If prices for eggs, insurance premiums and studio apartment leases rise at a faster clip than those of luxury goods and second homes, the CPI underestimates the impact of inflation on the bulk of Americans. That, of course, is exactly what has happened.
My colleagues and I have modeled an alternative indicator, one that excludes many of the items that only the well-off tend to purchase — and tend to have more stable prices over time — and focuses on the measurements of prices charged for basic necessities, the goods and services that lower- and middle-income families typically can’t avoid. Here again, the results reveal how the challenges facing those with more modest incomes are obscured by the numbers. Our alternative indicator reveals that, since 2001, the cost of living for Americans with modest incomes has risen 35 percent faster than the CPI. Put another way: The resources required simply to maintain the same working-class lifestyle over the last two decades have risen much more dramatically than we’ve been led to believe.
The effect, of course, was particularly intense in the wake of the pandemic. In 2023 alone, the CPI indicated that inflation had driven prices up by 4.1 percent. But the true cost of living, as measured by our research, rose more than
twice as much — a full 9.4 percent. And that laid bare the oft-quoted riposte that wage gains outpaced inflation during the crisis following COVID-19. When our more targeted measure of inflation is set atop our more accurate measure of weekly earnings, it immediately becomes clear that purchasing power
fell at the median by 4.3 percent in 2023. Again, whatever anyone may have claimed from the prevailing statistics during the run-up to the 2024 election, reality was drastically more dire for the great majority of Americans.
Which brings us to the question of gross domestic product, a figure that stands perhaps as the most important single economic indicator because it is commonly viewed as a proxy for prosperity writ large. There is, to be sure, real value in tracking the sheer volume of domestic production, though GDP is an imperfect measure even of that. But as useful as the figure may be in the sense that it purports to track generalized national wealth, it is hampered by a profound flaw: It reveals almost nothing about how the attendant prosperity is
shared. That is, if a small slice of the population is awarded the great bulk of the bounty from economic growth while everyone else remains unenriched, GDP would rise nevertheless. And that, to a crucial degree, is exactly what has happened.