Although many liberals deride President Trump as a polarizing figure who has made life worse for most Americans, the data tells a different story.
Despite recent rumbles in the stock market, the economy is booming: Year-to-year real GDP growth has been at least 2% since Trump was elected, the unemployment rate is at its lowest point since 1969, and year-to-year nominal wages are growing faster than they have since the 2008-09 Great Recession, especially among blue-collar workers.
Moreover, consumer confidence, at least according to The Conference Board, rebounded in July to a new high even amid some concerns about trade policy.
And yet, the country remains polarized. Between Aug. 1-14, Trump’s job approval was 88% among Republicans, 4% among Democrats, and 37% among independents, according to Gallup. How can people have such remarkably different beliefs about the president in response to the same information about the national state of the economy?
Many social scientists have documented a trend towards political polarization — see, for example, survey evidence from the Pew Center. One potential reason for this is the emergence of social media. As people create profiles and communities that increasingly cater to their tastes, they are less likely to consume information that is contrary to their preferences.
However, some of the latest economics research, led by Stanford University professor Matthew Gentzkow and Brown University professor Jesse Shapiro suggests that this is not the case, particularly because polarization increased the most in the early 1990s — before personal computers and internet use were widespread.
Whatever the reason, polarization has increased over the past few decades, meaning that this is not a Trump-specific phenomenon. And yet survey data on attitudes about future economic prospects since the 2016 Presidential election point towards a stark contrast across different political affiliations.
To study the link between political affiliation and economic sentiment, let’s draw on the U.S. Daily Poll from Gallup, which surveyed roughly 1,000 people each day between 2008 and 2017. I found that the fraction of Republicans or independents who think that the economy is improving has a -0.90 correlation with the fraction of Democrats who think the economy is improving after 2016. But, the correlation is 0.87 before 2016. In other words, while the two groups trended similarly before the election, since then, Democrats have formed totally different beliefs about the economy.
Democrats don’t have access to information that others don’t. In fact, to test the accuracy of their forecasts, we can correlate the fraction of Democrats who think the economy is improving with the St. Louis Federal Reserve’s “nowcast” for next quarter’s real GDP growth, which comes out to -0.39 between 2016 and 2017. This suggests that when the St. Louis Federal Reserve forecasts an increase in GDP growth, Democrats are simultaneously less likely to think that the economy will improve.
Moreover, between 2016 and 2017, I also find that independents and Republicans share very similar beliefs about the future state of the economy. For example, whereas the correlation between their attitudes about future economic growth was 0.57 between 2008 and 2015, it was 0.73 between 2016 and 2017. In this sense, economic confidence among Republicans and independents has increased as the economy has continued growing, while it has declined among Democrats.
These differences between hardcore Democrats and the rest of the country are remarkable. While time will tell who is right, the reality is that the vast majority of the population feels like their quality of life is improving and that a near majority think the economy is going to continue growing. Talks about trade wars and an inverted yield curve have a place in the conversation, but they shouldn’t dominate the headlines when there are other substantive economic indicators of vibrancy. If the media wants to avoid drifting into irrelevancy, they need to start reporting the data — not their partisan opinions.
Even if the media doesn’t change, we should at least be cautious, thinking critically about what we hear. We should remind ourselves that not having an opinion right away is okay — we can investigate issues in more detail, ask multiple people for opinions, and so on before arriving at a conclusion.
Christos A. Makridis, a senior adviser to Gallup, previously served as an economist on the White House Council of Economic Advisers.
