Biden’s True Misery Index

Former Enron adviser Paul Krugman keeps demanding to know why the plebs of America don’t appreciate just how awesome the economy is under Joe Biden’s brilliant economic management. In his latest column, “Why Are Americans Still Down on the Economy?,” the Krugster says:

It’s true that most Americans have a negative view of the economy. But people don’t directly experience the economy. What they directly experience are their own financial circumstances — and most Americans are feeling relatively positive about their own finances.

Pay no attention to those pesky “consumer sentiment” surveys that say otherwise. They are fake news, or at least fake statistics—as fake, you might say, as Enron’s bookkeeping, which managed to fool Krugman, though that seems not a difficult task.

Anyone remember the “Misery Index” from the 1970s—the combination of inflation and unemployment that Jimmy Carter used with great effect against Gerald Ford in the 1976 election (only to have it be deployed with even greater effect against himself by Ronald Reagan four years later)? The Misery Index was the brainchild of the late economist Arthur Okun. Right now, because the official unemployment rate remains very low and inflation has come down from its near 9 percent high last year, the Misery Index is fairly modest compared to the 1970s.

But not so fast. Lawrence Summers, the liberal economist, former Treasury Secretary, and former president of Harvard, combines with three other economists on a new Working Paper from the National Bureau of Economic Research (NBER), and it blows Krugman to smithereens. In one sentence, the paper notes changes since the 1970s in the methodology by which inflation is calculated that vastly understates the real inflation rate for many American consumers—especially anyone using credit or buying a house or car. And this is the reason many consumers are sour on the economy.

Here’s Summers explaining the most eye-popping finding of the paper:

If we make an effort to reconstruct the CPI of Okun’s era—which would have had inflation peak last year around 18%, we are able to explain 70% of the gap in consumer sentiment we saw last year.

Here’s the chart:

In other words, if we used the old methodology, Biden’s Misery Index would be in historically bad territory. This also explains why to many consumers, inflation seems so much higher than the official rate—because it was so much higher—at least in places where it counts, like the grocery store and your bank card statements. No wonder Biden’s approval ratings on the economy are in the tank. Maybe American consumers are smarter than Krugman.

A few more excerpts from Summers’ Tweet-thread explaining the paper:

Prediction: The Biden regime will blame it all on the Federal Reserve, even though Summers warned in 2021 that Biden’s economic plan would be highly inflationary.

But at least Biden is going to make sure we get three more potato chips in each bag. The only real “shrinkflation” going on is Biden’s economic record.