Economists think people should be happy. They aren’t.
 

The above chart is easily explainable in two words. Before reading further, do you know what they are?

Americans Lose Faith

Please consider Americans Lose Faith That Hard Work Leads to Economic Gains, WSJ-NORC Poll Finds

America is becoming a nation of economic pessimists.

A new Wall Street Journal-NORC poll finds that the share of people who say they have a good chance of improving their standard of living fell to 25%, a record low in surveys dating to 1987. More than three-quarters said they lack confidence that life for the next generation will be better than their own, the poll found.

Nearly 70% of people said they believe the American dream—that if you work hard, you will get ahead—no longer holds true or never did, the highest level in nearly 15 years of surveys.

Economists have puzzled for several years over a disconnect between the nation’s widespread, sour economic outlook and traditional measures that show the economy to be robust. That problem bedeviled former President Joe Biden and contributed to his party’s loss in the 2024 election.

Now Trump is contending with a similar disconnect after being powered into office by Americans who thought that his economic policies would improve their finances.

Trump has said “we have the hottest economy on Earth,” and inflation and unemployment aren’t high by historic standards. But only 17% in the survey said the U.S. economy stands above all others in the world. Nearly 40% said other nations have better economies—a 15-point rise from 2021. America, in some ways, has lost its sense of exceptionalism.

When Mahoney, the Stanford economist, and colleagues Ryan Cummings and Benjamin Harris looked at how economic metrics compared with economic sentiment, they found that the two moved largely in tandem from 2005 until the pandemic. Then, the two diverged, with sentiment turning more negative than predicted by traditional measures of the economy.

“The gap is staggering,” Mahoney said of the separation of sentiment from the solid economic metrics. One factor fueling the gap recently, he said, has been the stock market boom—“which has historically translated into stronger sentiment. But not on this occasion.”

The economy’s ‘triple whammy’

Karlyn Bowman, senior fellow at the right-leaning American Enterprise Institute, said the sour public mood probably reflects that Americans have been buffeted by various economic forces for years, among them the financial crisis of 2008-09 and the Covid pandemic. Now they face inflation, labor-market concerns and tariffs—“a triple whammy,” she said.

Disconnect? What Disconnect?

Economists see a disconnect because none of them understand the real word or inflation.

Food prices are inadequately measured in the CPI and shelter is much worse.

Few can afford a home and prices have gone out of sight.

Economists do not count home prices in the CPI. They do not count property taxes in the CPI. And they do not even properly count homeowner’s insurance in the CPI, just replacement costs of contents of a home.

WSJ Poll – Concerns

Here’s the WSJ Poll. The link is public.
 

Interest rates are largely housing related. Food speaks for itself.

So if your two answers were food and shelter, you got my lead question correct.

Confidence in the US Economy
 

Looking Ahead
 

Housing Mess Entirely of Fed’s Making

The housing mess is entirely of the Fed’s making. And it’s what happens when the Fed, and economists in general do not count home prices as inflation.

Home prices are not directly in the CPI or PCE. The latter is the Fed’s preferred measure of inflation.

Economists consider home prices a capital expense not a consumer expense. The problem is simple: Inflation is not just a consumer price concern!

The Fed ignored obvious inflation in the Great Recession and did so again in the Covid recession.

The Fed does not know what to do now because there is no good answer.

For homes to become affordable again. mortgage rates need to decline and home prices need to fall dramatically.

Trump Does Not Understand Interest Rates

For discussion of what the Fed controls or doesn’t please see Chart of U.S. Treasury Yields Show Trump Does Not Understand Interest Rates

Trump wants the Fed to control more than it can.

Any guesses as to how much free money Trump will seek to give away to promote “affordable housing”?

Related Posts

August 11, 2025: Over Half the US Has Major Stress Over the Price of Food

Are you stressed out over food?

August 12, 2025: Where Do You Spend Money on Food? How Screwed Up Are the BLS Weights?

Does the BLS match your budget?

August 23, 2025: It’s Now Twice as Expensive to Buy an Entry-Level Home than Rent

Thinking of buying a starter home? Be careful!

Is Homeowners Insurance Understated in the CPI? Shop Around!

On August 11, I asked Is Homeowners Insurance Understated in the CPI? Shop Around!

If you own a home, what percent of your income is spent on your homeowners’ insurance?

Under 1/2 of 1 percent? [That’s what the BLS says. And it does not count property taxes at all.]

To food and shelters concerns, please add jobs. Things are going to get much worse.

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