Americans should get used to being poorer under Biden
Why are Americans so gloomy about the economy? Jobs are plentiful and unemployment is back at pre-pandemic lows, yet sentiment is in the dumps. The obvious answer is that inflation is at a 40-year high and that wages largely aren’t keeping up. But there’s a deeper force at work that is fundamental to why Americans are so upset: scarcity.
Availability of products, or lack thereof, is as critical an issue as rising prices. The last time Americans experienced this phenomenon was in the 1970s, with long lines at gas stations. Today, more than two years into the pandemic, generations of Americans at a variety of income levels are encountering shortages across a much wider array of products. It is, in many ways, a new age of scarcity.
Look at the housing market. There are few homes for sale. Real estate inventory sits at record lows. A recent open house for an 1,800-squarefoot townhouse in Alexandria, Va., just outside D.C., drew more than 100 people. It was an end-unit that backed up to trees, but the bathrooms, among other things, needed updating. Ultimately, 13 offers came in, and the property, listed for just under $500,000, sold for $580,000. Stories abound of ever-increasing home values and prices, but as the Realtor who sold that property told me, the key question is where are the other 12 bidders going to go, let alone the other 99 people who toured it.
Shortages extend beyond housing. Many families feel that they still can’t get ahead, even if they saved diligently during pandemic lockdowns and landed higher-paying jobs or raises. Part of the reason is they want to buy things – homes, cars, dishwashers – but often can’t, even for a skyhigh price. Car inventories are at unprecedented lows, so people are paying more than the sticker price, yet the color or model they want isn’t always available. Similarly, grocery stores and restaurants are struggling to keep items in stock. Before the pandemic, the share of items unavailable on store shelves was typically about 5%. Most customers barely noticed. Lately, it’s been closer to 12 to 15%, sometimes worse.
“In many cases, Americans feel like somebody else got there first. Somebody with more money,” said Peter Atwater, president of Financial Insyghts.
Americans aren’t used to this kind of scarcity, and it compounds the frustration that politicians spent much of the past year saying supply chains would be fixed “soon.” Instead, the problems keep coming: as varied as baby formula shortages, Russia’s war in Ukraine triggering a food supply crisis, and China’s covid-19 lockdown shuttering factories and delaying shipments. It’s now taking manufacturers an unprecedented 100 days, on average, to get materials – the longest delay on record since the industry started keeping track in the late 1980s.
Some blame the media for Americans’ gloom, arguing that reporters focus too much on negatives such as high prices and the latest stock market thrashing. But reporters have covered the strong job news extensively, too, including the fact that this job recovery is much faster than after the 1990, 2001 and 2007 recessions. Yet, until supplies return to more normal levels, Americans are unlikely to feel much better.
Meanwhile, Americans have been primed to focus on negatives. The past two years have been a time of massive chronic stress, as communities feared the coronavirus and had to navigate ever-changing advice for workplaces, schools and even family gatherings. This kind of sustained stress makes people more likely to focus on negative news, psychologists say.
“Once we believe the economy is in bad shape, the information we tend to look for and the evidence we remember reinforces that belief,” said Anne DePrince, a psychology professor at the University of Denver. “It reinforces the view that we don’t have control.”
A lot of everyday life remains out of control. Consider: Americans were told that vaccines would largely bring the pandemic under control. Then, last summer, the delta wave hit. Then came the botched U.S. withdrawal from Afghanistan. Then omicron. And now the war in Ukraine, plus yet another variant is circulating. Challenges abound to reopen schools and child-care facilities. There are no vaccines yet for children under the age of 5, and the return to offices continues to be chaotic.
As long as the drama keeps coming, people will continue to feel a lack of control about their lives and options.
What can the White House do? President Joe Biden can’t magically make dishwashers come back in stock or create a surge of homes for sale. But the president can focus again on supply problems and talk frequently about what his team is doing to address them in the short and long terms, much as he did during the holiday shopping season. Releasing oil from the Strategic Petroleum Reserve was a good start this spring. Ensuring major West Coast ports don’t shut down this summer when union contract negotiations take place will also be key.
There is good economic news, but until Americans can easily get ahold of what they want, too many will still feel like they’re not able to get ahead.