Matt Yglesias directed me to this tweet:

If you looked at certain polls, you’d think the economy was doing poorly. On the other hand, if you looked at state economic performance polls, or polls asking about an individual’s personal financial situation, then things look far better. But one thing is clear—the US is outperforming the economies of other developed countries by a fairly wide margin. Why is that?

Let’s start with the macro. I think Pethokoukis somewhat overstates the supply shock and monetary headwinds. As you know, interest rates don’t matter. The thing that does matter (NGDP) has been a headwind, not a tailwind:

(Click on image to enlarge)

The growth rate has recently slowed but remains well above the pre-Covid norm.

There were some supply shocks in 2022, but the energy situation is now pretty good, and many other supply line bottlenecks have been resolved. On the plus side, a big surge in immigration has added substantial labor force supply (even with the recent downward revision.)

At the micro level:

1. We have less regulation in some key industries like fracking, and this has boosted our GDP relative to Europe.

2. We have gains from agglomeration and network effects. When combined with an inflow of many highly talented individuals, this has led us to vastly outperform our rivals in high tech.

3. We have our Nimby problems, but in much of America it’s still pretty easy to build. Densely populated Japan and Europe (especially the UK) probably have more restrictions on building.

Note that all three of these micro factors are things that have become much more important over the past 10 or 20 years. And this roughly corresponds to the period when Europe stopped catching up to us and began falling further behind.

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