Taking a Second Look at the Vibecession Argument

You may recall that back in 2023 President Joe Biden’s White House was pushing hard on the idea that Bidenomics had been great for the country and consumers mostly seemed not to be buying it. This eventually led to a popular discussion about what was called “the vibecession.” Simply put, it was the idea that the numbers showed the economy to be good but the failure of the public to agree with that assessment showed they were responding to something else, something irrational. It was bad vibes all the way down.

And there were some folks who took that argument a step further who said the real cause of the “vibecession” was conservative media which, by refusing to give Biden credit, was creating an alternate reality in which people felt bad even though things were objectively good.

Lots of people, myself included, were skeptical of this argument at the time, largely because the people blaming the conservative media were all lefties who had a pretty obvious partisan agenda.

The vibe explanation does have obvious implications for President Biden since how people feel about the economy is usually a major determiner of how they vote. Put another way, if the White House Bidenomics argument (things are good!) can be blocked by bad vibes, Democrats are in trouble..

It’s worth noting that this looming trouble is clearly on the minds of most of the people making this argument. That probably isn’t a coincidence. I’m not ruling out the possibility of vibes but some of these people seem to be working backwards from a desire outcome, i.e. that Biden win the election. Doing so, they find themselves arguing that anyone who threatens that end must be a partisan stooge. So they don’t see vibes as a generic malaise but more of a planned partisan one. It’s the “plandemic” version of the malaise argument.

Today, Politico Magazine published an article that effectively takes a second look at the whole vibecession argument. Businessman and former US Comptroller of the Currency Eugene Ludwig spent time analyzing the government statistics we rely on to give us a picture of the economy. He concludes that the people who say the economy isn’t great are usually right while the official statistics are often misleading.

For decades, a small cohort of federal agencies have reported many of the same economic statistics, using fundamentally the same methodology or relying on the same sources, at the same appointed times. Rarely has anyone ever asked whether the figures they release hew to reality. Given my newfound skepticism, I decided several years ago to gather a team of researchers under the rubric of the Ludwig Institute for Shared Economic Prosperity to delve deeply into some of the most frequently cited headline statistics.

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.

Here he looks at several key indicators including the U-3 unemployment rate, the measure of “weekly earnings” and of course inflation.

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.

In 2023, the CPI concluded inflation had raised prices by just over 4% but using his alternative method Ludwig concluded the actual increase experienced by most working class people was over 9 percent. And that might help explain why, near the end of 2023, many people were still badmouthing the economy and weren’t buying all the happy talk about Bidenomics. The rest of his argument is worth reading because it argues that most of these major indicators paint a rosier picture than what the bulk of the country is experiencing.

Of course arguments like this never really end and perhaps we’ll see some pushback to these arguments, but it’s noteworthy that you can make a good argument the people who said the economy wasn’t so great were not delusional morons being swayed by conservative vibes emanating from Fox News (and Hot Air). Maybe they were right all along and it was the people pushing Bidenomics and the vibecession (often the same people) who got it wrong.