"This seemingly simple question is prompting not-so-simple answers. For decades, public opinion about the economy tracked economic performance. When times were good, people said the economy was good. When times were bad, people said the economy was bad.
Lately, this equation has broken down. Despite fears of a recession, the economy has looked strong: GDP has increased in 13 of the last 15 quarters, the Dow Jones Industrial Average has reached record highs, the unemployment rate is a paltry 3.8%, and inflation has slackened.
Polls tell a different story. While public assessments of the economy are slowly improving, they still show profound dissatisfaction. As The Wall Street Journal reported earlier this year, U.S. consumer confidence is dramatically lower than would be predicted by traditional indicators.
Numerous factors affect people's opinions about the economy, especially whether their preferred political party occupies the White House. But even partisanship can't fully explain the current disconnect, since Democrats are notably sour on today's economy too. Nor can media coverage, which has been negative in part because so many Americans are telling journalists they're unhappy. And if inflation is the X-factor, then why has its decline had so little effect?
The problem is that the most prominent measures of the economy are not focused on the actual lives of Americans. Metrics like GDP and the Dow are the center of discussion, especially in the news. But they do not provide sufficient insight into American well-being. It is not time to discard these tried-and-true economic measures, but lawmakers, journalists and business leaders need to broaden the array of tools they use to assess the country's economic health.
Shortly after its invention in 1934, GDP became the go-to measure for determining the size of national economies. Since then, it has become nothing less than an all-purpose weather vane, a stand-alone indicator of which way the financial winds are blowing. Yet GDP was never meant to carry so much weight. Even its inventor, economist Simon Kuznets, acknowledged that "the welfare of a nation can. . .scarcely be inferred from a measurement of national income."
That's even truer of the Dow. Drawn from the stock prices of just 30 companies, the Dow provides a rough encapsulation of the state of American business. It is far less reliable as an indicator of the state of American family finances. After all, around 40% of households -- and nearly 60% of Americans under age 30 -- do not own any stock, including indirect ownership through retirement plans. (Dow Jones, the publisher of The Wall Street Journal, no longer owns the index but still has representatives on the committee determining its composition.)
Metrics like GDP and the Dow are generally seen as objective arbiters of the economy. But the choice of which metric to use says a great deal about what is worth measuring, whose voice is worth listening to, and whose well-being is considered important. Metrics also shape policy decisions. As the old adage states, "What gets measured, gets managed."
Over the last three years, we have been involved in a project with the American Academy of Arts and Sciences to broaden what gets measured and managed.
Composed of experts from a range of fields and political views, the Commission on Reimagining Our Economy (CORE) had one overarching goal: to shift the focus from how the economy is doing to how Americans are doing.
We talked with hundreds of Americans in almost every corner of the country. Again and again, they said their economy wasn't thriving, regardless of what the numbers looked like. As one woman in Kentucky told us, "When you watch TV or if you listen to people talk, they're like, 'Things are getting so much better,' and you have to really wonder, well, where is it getting better?"
In response, we created a new metric: the CORE Score, a multipart measure of well-being.
The central goal of the economic system, as one tribal services leader in Alaska put it, should be to improve "the wealth of our lifestyle, the wealth of how we live." Economic growth is important -- vital even -- for enabling a better future. But it is important to know who is benefiting from that growth and whose lives are being improved.
It is also important to know which places are benefiting. The American map has become so fractured between rich and poor communities that more granular analysis is needed. To that end, the Score is rooted in county-level measurements, making it possible to see differences within counties along lines of race and ethnicity, age, education, income and sex.
The CORE Score is broken down into four central elements: economic security, economic opportunity, health and political voice.
As compared with GDP and the Dow, our initial findings paint a very different picture of how the country is doing. Nationally, we see little improvement in American well-being since our data begin in 2005.
Health scores have climbed, mostly because health coverage has expanded, but these gains have been offset by a decrease in our measures of economic security, which include a trove of credit bureau data on household finances.
This helps to explain why many Americans are so dissatisfied with an economy that looks strong according to traditional metrics.
The District of Columbia has the highest state-level CORE Score for 2021, the most recent year for which data are available, followed by Rhode Island and North Dakota. The latter is no regional outlier. Buoyed by especially strong rates of economic security, states in the upper Midwest boast some of the highest CORE Scores in the country. Scores are also high in the Northeast. But there are huge differences within regions and states. The well-being of Americans very much depends on where they live.
The CORE Score is not based on opinion surveys. Yet early indications are that it tracks Americans' feelings about the economy more accurately than do metrics like GDP and the Dow. For the most recent years of the Score, the University of Michigan's Consumer Sentiment Index found that respondents in the higher-performing Midwest and the Northeast felt better about the economy than those in other regions.
As crucial as consumer sentiment is, citizen sentiment also matters. In a representative democracy, political voice is a central component of well-being. If people have no advocate in the halls of government, if they are not able to engage in their community, if they do not have recourse when things are not going right, how well can they truly be doing? "Sometimes I feel like we're not heard and decisions are being based on what [political leaders] think they know. And they actually don't really know," one Chicago woman said. "That's another barrier for us."
To incorporate political voice, the CORE Score tracks voter turnout and membership in civic groups, as well as a metric never before included in a scorecard like this: quality of political representation. We look at county-level polling on specific legislation and compare these polls to how members of Congress actually voted. Doing so allows for an assessment of how reliably lawmakers' decisions reflect the views of their constituents.
Overall, we find that citizens get what they want only about half the time. That might seem unremarkable, given voters' partisan differences, but citizens actually agree on a lot of what should be done. The low number is mostly a reflection of how often Congress fails to act in line with majority public sentiment on such issues as providing legal status to children of undocumented immigrants brought to the U.S. by their parents, increasing the minimum wage, limiting prescription drug prices and requiring equal pay for men and women doing similar jobs with similar qualifications.
Those least likely to be heard are often those whose economies most need a boost. As a cosmetologist and waitress in Kentucky told us, people once labeled "essential workers" are the ones who "keep the world moving and keep things going. And we're the ones that get the bottom of the barrel if there's anything left at all."
Look closer at our sunny findings about Washington, D.C., and you see what she means. In the District, Black residents have dramatically lower CORE Scores than white residents -- the largest such gap in the nation. In no state do Black Americans have higher average CORE Scores than do white Americans. Nor is there any state where lower-income Americans have higher average CORE Scores than do higher-income Americans (even though household income isn't included in the Score). And only in Alaska do women have a higher average Score than men.
Such persistent gaps offer a further reminder of deep disparities that cannot be ignored in conversations about the economy, but which are wholly missed by aggregate measures like GDP. Even if better metrics don't resolve the current disconnect between top-line indicators and public sentiment, they provide something far more important: a clearer picture of how, in our diverse and far-flung nation, Americans build not just wealth but also well-being.
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Jacob S. Hacker is Stanley Resor Professor of Political Science at Yale University. Jonathan D. Cohen is the Joan and Irwin Jacobs Senior Program Officer at the American Academy of Arts and Sciences." [1]
In the past, people worked for one company all their lives and received a guaranteed pension at the end of their work. GDP and the Dow were then good indicators of how both people and businesses were doing. Now we are each for ourselves. If companies are doing well, and this is reflected in the GDP and Dow figures, this doesn't mean anymore that rest of the people are necessarily doing well.
1. REVIEW --- GDP and the Dow Are Up. But What About American Well-Being? --- The standard ways of measuring economic growth don't capture what life is like for real people. A new metric offers a better alternative, especially for seeing disparities across the country. Hacker, Jacob S; Cohen, Jonathan D. Wall Street Journal, Eastern edition; New York, N.Y.. 27 Apr 2024: C.4.
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