It’s Still Inflation, Stupid
The Democrats succeeded last week in bringing America a complacency convention, a convention about almost nothing except fear and loathing of Donald Trump interposed with a substance-free celebration of their own joy. That might not be a winning formula in a political environment in which inflation is still the most pressing issue facing voters.
Certainly, the successful exile of Joe Biden from American politics has boosted Democratic enthusiasm about the election and the economy. The most recent polling by YouGov for the Economist shows that 71 percent of Democrats say they are extremely or very enthusiastic about voting for president this year, up nearly 30 points from July and above the 61 percent of Republicans who are enthusiastic.
Similarly, Democrats are much more optimistic about the U.S. economy than they were a month ago. The University of Michigan’s survey of consumer sentiment showed a big increase in the index of expectations among Democrats, from a score of 81.7 to 92.4. And that was before the Democratic National Convention.
While there is much to be said for the power of positive thinking in politics, in this case it isn’t shared more broadly, likely limiting its effectiveness. The index of consumer expectations among independents barely budged in August, and it has been range bound at around 62 since May. It began the year at 73.7, so the current reading shows a substantial decline in optimism among independents.
Americans Think Inflation Is Worse Than Official Figures Indicate
The Economist poll also showed that Americans are—at least on a subjective level—experiencing more inflation than the official statistics indicate. Twenty-six percent of Americans say inflation is the most important issue, followed by 12 percent who say “jobs and the economy” is the most important issue. That number has not changed very much in recent months—and it is in fact much higher than a year ago, when just 18 percent named inflation as the top issue.
Looking beneath the topline number, we can see that 25 percent of independent registered voters say inflation is their top issue, up from 18 percent a year ago. Among Democrats, inflation has risen as the top issue to 19 percent from 10 percent. Among Republicans, its up to 35 percent from 26 percent. Twenty-nine percent of Hispanic voters say it is their top issue, up from 23 percent last August. Nineteen percent of blacks say it is the top issue, up from 10 percent. Twenty-seven percent of white voters say it is the top issue, up from 19 percent.
This is not the way Democrat strategists hoped things would go. They convinced themselves that the decline in the rate of inflation would make it a far less important issue by election day. Many had hoped that an announcement by the Federal Reserve that it would cut interest rates would allow them to finally declare victory over inflation once-and-for all.
What went wrong? For one thing, inflation did not come down by all that much. In July of 2023, the consumer price index (CPI) was up 3.27 percent compared with 12 months earlier. The most recent reading from the Bureau of Labor Statistics showed CPI up 2.92 percent. So inflation has declined by just one-third of a percentage point over the past year, a very slow pace of improvement.
Many Americans do not feel like it has improved at all. The Economist poll shows that 36 percent of Americans say the rate of inflation is higher now than it was six months ago, even though official statistics show it was slightly higher—3.1 percent in January—at the start of the year. Twenty-four percent say inflation is about the same, which seems a fair assessment. Twenty-eight percent say it has declined, which it technically has.
There are, of course, the usual partisan gaps in the data. Among Democrats, 25 percent say inflation is up from six months ago, compared with 34 percent of independents and 49 percent of Republicans. Thirty-six percent of Democrats say inflation is lower, versus 26 percent of independents and 23 percent of Republicans.
But dividing voters up by race and ethnicity, every group is more likely to say inflation is higher. Thirty-five percent of white voters say it is higher, versus 31 percent who say it is lower and 24 percent who think it is about the same. Thirty-one percent of black voters say it is higher, 21 percent say it is lower, and 27 percent say it is about the same. Forty-nine percent of Hispanic voters say it is higher, with 18 percent saying it is lower and 19 percent saying it is about the same.
Similarly, Americans of most age groups are more likely to think inflation is higher than it was six months ago. Among 18 to 29 year olds, 37 percent say its higher, versus 15 percent who say it is lower. Among 30 to 44 year olds, 34 percent say it is higher and 26 percent say it is lower. Among 45 to 64 year olds, 37 percent say it is higher and 33 percent say it is lower. Only among older Americans does the pattern reverse, with 35 percent saying it is higher and 38 percent saying it is lower.
The Inflation War Is a Class War
The starkest division when it comes to views of inflation, however, runs along class lines. Forty-three percent of voters with less than $50,000 of annual income say inflation has gotten worse, while 20 percent say it is better. Among voters with incomes between $50,000 and $100,000, 41 percent say it is better and 30 percent say it is worse. Wealthier Americans, however, see inflation very differently: just 24 percent say inflation is up and 46 percent say it is down.
Given that, it is perhaps not surprising that the wealthy also are more likely than other Americans to say they trust the Democratic Party more than the Republican Party when it comes to inflation. Thirty-eight percent of voters with incomes over $100,000 say they trust Democrats, the same as the share who say they trust Republicans. In the middle-income group, just 32 percent trust Democrats versus 42 percent who trust Republicans. Among the lower income group, 27 percent trust Democrats and 34 percent trust Republicans.
The Republicans have an edge over Democrats on inflation—but not a very wide one. Thirty-six percent of voters overall say they trust Republicans, four points above the share who say they trust Democrats. Republicans probably need to be careful of being to complacent themselves when it comes to counting on voters to support them on the top issue facing American households.