New data from Morning Consult shows Americans are feeling increasingly uncertain of the economy, yet continue to spend more and take on more debt because of it.
The new report said Americans spent more, on average, in September. That’s the eighth consecutive month there was a rise.
In October, the survey found consumer sentiment fell 0.1%, from 55.1 points in September to 55.
It’s a marginal decrease, but the third monthly decrease in a row and the seventh-lowest level since 1952.
Denver7 wanted to get some answers as to why, so we reached out to consumer spending expert Andrea Wororch.
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“People are maybe spending more, but they’re spending more on the necessities because things cost more,” Woroch said. “What we also know that is some consumers, with the holidays approaching, aren’t willing to give up the concept of giving gifts and creating that magical holiday moment for their children, and so they are willing to spend more, even if they’re not feeling very comfortable.”
Low and middle-income households are the ones driving the rise in spending, according to the Morning Consult report. It supports Woroch’s point that the increase isn’t so much discretionary spending on wants, but rather basic needs.
The report found higher earners pulled back on discretionary spending as economic uncertainty rose. Woroch said that can be tough as the holiday shopping season begins.
“If you’re not willing to give up certain purchases, you’re going to have to adjust your gift budget, and then you have to decide, would you rather give more presents but spend less per person,” she said.
Consumer confidence nears record lows, but data shows Americans
Woroch advises doing the difficult thing and having frank conversations with loved ones about your holiday budget this year. She said a little bit of transparency can go a long way in ensuring you and your loved ones feel comfortable.
“We know everything’s costing more and people are tighter budgets carrying debt,” Wororch said. “You should never go into debt to give a gift, and the reality is, no family member or friend wants you to do that, and so by having early conversations, that’s the best way to set gift expectations.”
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Let’s start with the obvious. The concerns about Joe Biden are valid: He’s old. He talks slowly. He occasionally bumbles the basics in public appearances.
Biden’s age is so concerning that many Biden supporters now believe he should step aside and let some other candidate become the Democratic Party’s presidential nominee. The New York Times journalist Ezra Klein made the best-available case for this view recently in a 4,000-word piece that garnered intense attention by arguing that Biden is no longer up to the task of campaign life. “He is not the campaigner he was, even five years ago,” Klein writes. “The way he moves, the energy in his voice. The Democrats denying decline are only fooling themselves.”
In one sense Klein is correct. As the political strategist Mike Murphy said many moons ago, Biden’s age is like a gigantic pair of antlers he wears on his head, all day every day. Even when he does something exceptional—like visit a war zone in Ukraine, or whip inflation—the people applauding him are thinking, Can’t. Stop. Staring. At. The antlers.
Biden can’t shed these antlers. He’s going to wear them from now until November 5. If anything, they’ll probably grow.
That said, there’s another point worth noting up front: Joe Biden is almost certainly the strongest possible candidate Democrats can field against Donald Trump in 2024.
Biden’s strengths as a candidate are considerable. He has presided over an extraordinarily productive first term in which he’s passed multiple pieces of popular legislation with bipartisan majorities.
Unemployment is at its lowest low, GDP growth is robust, real wage gains have been led by the bottom quartile, and the American economy has achieved a post-COVID soft landing that makes us the envy of the world. He has no major scandals. His handling of American foreign policy has been stronger and defter than any recent president’s.
Moreover, he is a known quantity. The recent Michigan primary results underscored that Democratic voters don’t actually have an appetite for leaving Biden. In 2012, 11 percent of Michigan Democrats voted “uncommitted” against Barack Obama when he had no opposition. This week, with two challengers on the ballot and progressive activists whipping votes against Biden, the “uncommitted” vote share was just 13 percent. Biden is fully vetted, his liabilities priced in. Voters are not being asked to take a chance on him.
This last part is crucial, because 2024 pits a current president against a former president, making both quasi-incumbents. If Biden was replaced, another Democrat would have her or his own strengths—but would be an insurgent. Asking voters to roll the dice on a fresh face against a functionally incumbent President Trump is a bigger ask than you might think.
But the biggest problem plaguing arguments for Biden’s retirement is: Who then? Pretend you are a Democrat and have been handed a magical monkey’s paw. You believe that Biden is too old to defeat Trump and so you make a wish: I want a younger, more vigorous Democrat. There’s a puff of smoke and Kamala Harris is the nominee.
Do you feel better about the odds of defeating Trump in nine months?
You shouldn’t. Harris’s approval rating is slightly lower than Biden’s. People skeptical of her political abilities point to her time as vice president, but that’s not really fair: Very few vice presidents look like plausible successors during their time in office. (George H. W. Bush and Al Gore are the exceptions.)
What should worry you about Harris is her 2020 campaign, which was somehow both disorganized and insular. She did not exhibit the kind of management skills or political instincts that inspire confidence in her ability to win a national campaign. Worse, she only rarely exhibited top-level-candidate skills.
Harris had some great moments in 2020. Her announcement speech and first debate performance were riveting. But more often she was flat-footed and awkward. She fell apart at the Michigan debate in 2019 and never got polling traction. (My colleague Sarah Longwell likens Harris to a professional golfer who’s got the yips.)
Some public polling on this question fills out the picture: Emerson finds Harris losing to Trump by three percentage points (Biden is down one point in the same poll). Fox has Harris losing by five points (it also has Biden down by one point). These are just two polls and the questions were hypothetical, but at best, you can say that Harris is not obviously superior to Biden in terms of electability. At worst, she might give Democrats longer odds.
So you go back to the monkey’s paw with another wish: a younger, more vigorous Democrat who’s not Kamala Harris, please.
I’m not sure how it would work logistically—would the Democratic Party turn its back on the sitting vice president?—but this is magic, so just roll with it. There’s a puff of smoke and Gavin Newsom walks onstage.
Newsom is one of those people who, like Bill Clinton, has been running for president since he was 5 years old. Also like Clinton, Newsom is a good talker with some ideas in his head. But Clinton was a third-way Democrat from the Deep South at a time when the Democratic Party needed southern blue-collar voters. Today, the Democratic Party needs Rust Belt blue-collar voters—and Newsom is a liberal from San Francisco. Not a great starting position.
Every non-Harris Democrat begins from a place of lower name recognition, meaning that there would be a rush to define them in the minds of voters. Republicans have convinced 45 percent of the country that Scrantonian Joe Biden is a Communist. What do you think they’d do with Newsom? In the Fox poll, he runs even with Vice President Harris at -4 to Trump. In the more recent Emerson poll, Newsom trails Trump by 10 points.
Then there’s the eyeball test. Look at Newsom’s slicked-back hair, his gleaming smile, and tell me: Does he look like the guy to eat into Trump’s margins among working-class whites in Pennsylvania and Michigan?
What about Pennsylvania and Michigan? You have only one wish left on the monkey’s paw, and Gretchen Whitmer and Josh Shapiro—popular governors who won big in swing states in 2022—are sitting right there. Maybe you should put one of them on the ticket in place of Biden?
Nationally, it’s a much different question. I haven’t found anyone who’s polled Shapiro-Trump nationally, but Emerson and Fox both have Whitmer polling worse than Biden. (Emerson has Whitmer 12 points behind Trump.)
Name recognition accounts for part of this gap, but not all of it. In 2022, Whitmer won her gubernatorial race by 11 points while Shapiro won by 15. But each ran against an underfunded MAGA extremist. In the Michigan poll pitting Whitmer against Trump, she leads by only six points; in the Pennsylvania poll with Shapiro, he leads Trump by 11. So even in states where everyone knows them, these potential saviors are softer against Trump than they were against their 2022 MAGA tomato cans.
Sure, Whitmer and Shapiro seem like strong candidates at the midsize-state level. But you never know whether a candidate will pop until they hit the national stage. Scott Walker, Ron DeSantis, John Kerry, Mitt Romney, Kamala Harris—all of these politicians looked formidable too. Then the presidential-election MRI for the soul exposed their liabilities. Always remember that Barack Obama’s ascent from promising senator to generational political talent was the exception, not the rule.
Let’s say that one of these not–Kamala Harris candidates is chosen at the Democratic National Convention in August. In the span of 10 weeks they would have to:
Define themselves to the national audience while simultaneously resisting Trump’s attempts to define them.
Build a national campaign structure and get-out-the-vote operation.
Unify the Democratic Party.
Fend off any surprises uncovered during their public (and at-scale) vetting.
Earn credit in the minds of voters for the Biden economy.
Distance themselves from unpopular Biden policies.
Portray themselves as a credible commander in chief.
Lay out a coherent governing vision.
Persuade roughly 51 percent of the country to support them.
Perhaps it’s possible. But that strikes me as a particularly tall order, even if one of them is a generational political talent. Which—again with the odds—they probably aren’t.
We’ve got one final problem with the monkey’s paw: It doesn’t exist. If Biden withdrew from the race, the Democratic Party would confront a messy, time-consuming process to replace him. Perhaps a rigorous but amicable write-in campaign would produce a strong nominee and a unified party. But perhaps the party would experience a demolition derby that results in a suboptimal nominee and hard feelings.
Or maybe party elites at a brokered convention would choose a good nominee. (This is the Ezra Klein scenario, and I’m sympathetic to it. Smoke-filled back rooms get a bad rap; historically they produced better candidates than the modern primary system.) But very few living people have participated in a brokered convention. It could easily devolve into chaos and fracture the moderate, liberal, and progressive wings of the party.
The point is: Biden has a 50–50 shot. Maybe a little bit worse, maybe a little bit better—like playing blackjack. Every other option is a crapshoot in which the best outcome you can reasonably hope for is 50–50 odds and the worst outcome pushes the odds to something like one in three.
Joe Biden is Joe Biden. He isn’t going to win a 10-point, realigning victory. But his path to reelection is clear: Focus like a laser on suburban and working-class white voters in a handful of swing states. Remind them that Trump is a chaos agent who wrecked the economy. Show them how good the economy is now. Make a couple of jokes about the antlers. And then bring these people home—because many of them already voted for him once.
Having a sure thing would certainly be nice, given the ongoing authoritarian threat we face. But there isn’t one. Joe Biden is the best deal democracy is going to get.
What was the worst moment for the American economy in the past half century? You might think it was the last wheezing months of the 1970s, when oil prices more than doubled, inflation reached double digits, and the U.S. sank into its second recession of the decade. Or the 2008 financial collapse and Great Recession. Or perhaps it was when COVID hit and millions of people abruptly lost their job. All good guesses—and all wrong, if surveys of the American public are to be believed. According to the University of Michigan Surveys of Consumers, the most widely cited measure of consumer sentiment, that moment was actually June 2022.
Inflation hit 9 percent that month, and no one knew if it would go higher still. A recession seemed imminent. Objectively, it’s hard to claim that the economy was in worse shape that month than it had been at those other cataclysmic times. But substantial pessimism was nonetheless explicable.
Over the next 18 months, however, the economy improved rapidly, and in nearly every way: Inflation plummeted to near its pre-pandemic level, unemployment reached historic lows, GDP boomed, and wages rose. The turnaround, by most standard economic measures, was unprecedented. Yet the American people continued to give the economy the kind of approval ratings traditionally reserved for used-car salesmen. Last June, the White House launched a campaign to celebrate “Bidenomics”—the administration’s strong job-creation record and big investments in manufacturing and clean energy. The effort flopped so badly that, within months, Democrats were begging the president to abandon it altogether.
More recently, consumer sentiment has improved. After falling for months, it suddenly rebounded in December and January, posting its largest two-month gain in more than 30 years—even though the economy itself barely changed at all. Yet as of this writing, sentiment remains low by historical standards—nothing like the sunny outlook that prevailed before the pandemic.
What’s going on? The question involves the psychology of money—and of politics. Its answer will shape the outcome of the presidential election in November.
The toll of inflation on the American psyche is undoubtedly part of the story. That people hate high inflation is not a novel observation: The Federal Reserve has long been obsessed with preventing another ’70s-style inflationary spiral; its patron saint is Paul Volcker, the former Fed chair who famously broke that spiral by jacking up interest rates, which plunged the economy into a recession. But although experts and political leaders know that inflation matters, the way they understand the phenomenon is very different from how ordinary people experience it—and that alone may explain why sentiment stayed low for so long, and has only now begun to rise.
When economists talk about inflation, they are often referring to an index of prices meant to represent the goods and services a typical household buys in a year. Each item in the index is weighted by how much is spent on it annually. So, for instance, because the average household spends about a third of its income on housing, the price of housing (an amalgam of rents and home prices) determines a third of the inflation rate. But the goods that people spend the most money on tend to be quite different from those that they pay the most attention to. Consumers are reminded of the price of food every time they visit a supermarket or restaurant, and the price of gas is plastered in giant numbers on every street corner. Also, the purchase of these items can’t be postponed. Things like a new couch or flatscreen TV, in contrast, are purchased so rarely that many people don’t even remember how much they paid for one, let alone how much they cost today.
The irony is that consumers spend a lot more, on average, on expensive, big-ticket items than they do on groceries or takeout, which means the prices we pay the most attention to don’t contribute very much to overall inflation numbers. (Less than a tenth of the average consumer’s budget is spent at the supermarket.) Some measures of inflation—“core” and “supercore” inflation among them—exclude food and energy prices altogether. That is reasonable if you’re a Fed official focused on how to set interest rates, because energy and food prices are often extremely sensitive to temporary fluctuations (caused by, say, a drought that hurts grain harvests or an OPEC oil-supply cut). But in practice, these measures overlook the prices that matter most to consumers.
This dynamic alone goes a long way toward explaining the gap between “the economy” and Americans’ perception of it. Even as core inflation fell below 3 percent over the course of 2023, food prices increased by about 6 percent, twice as fast as they had grown over the previous 20 years. “I think that explains a huge part of the disconnect,” Paul Donovan, the chief economist at UBS Global Wealth Management, told me. “You won’t convince any consumer that inflation is under control when food prices are rising that fast.”
Consumers say as much when you ask them. In a recent poll commissioned by The Atlantic, respondents were asked what factors they consider when deciding how the national economy is doing. The price of groceries led the list, and 60 percent of respondents placed it among their top three—more, even, than the share that chose “inflation.” This isn’t exactly a new development. In 2002, Donovan told me, Italian consumers were convinced that prices were soaring by nearly 20 percent even though actual inflation was a stable 2 percent. It turned out that people were basing their estimates on the cost of a cup of espresso, which had abruptly risen as coffee makers rounded their prices up after the introduction of the euro.
What’s more, most people don’t care about the inflation rate so much as they care about prices themselves. If inflation runs at 10 percent for a year, and then suddenly shrinks to 2 percent, the damage of the past year has not been undone. Prices are still dramatically higher than they were. Overall, prices are nearly 20 percent higher now than they were before the pandemic (grocery prices are 25 percent higher). When asked in a survey last fall what improvement in the economy they would most like to see, 64 percent of respondents said “lower prices on goods, services, and gas.”
What about wages? Even adjusted for inflation, they have been rising since June 2022, and recently surpassed their pre-pandemic levels, meaning that the typical American’s paycheck goes further than it did prior to the inflation spike. But wages haven’t increased faster than food prices. And most people think about wage and price increases very differently. A raise tends to feel like something we’ve earned, Betsey Stevenson, an economist at the University of Michigan, told me. Then we go to the grocery store, and “it feels like those just rewards are being unfairly taken away.”
If inflation is in fact the main reason the American people have been so down on the economy—and its future—then the story is likely to have a happy ending, and soon. My great-grandmother loved to reminisce about the days when a can of Coke cost a nickel. She didn’t, however, believe that the country was on the verge of economic calamity because she now had to spend a dollar or more for the same beverage. Just as surely as people despise price increases, we also get used to them in the end. A recent analysis by Ryan Cummings and Neale Mahoney, two Stanford economists and former policy advisers in the Biden administration, found that it takes 18 to 24 months for lower inflation to fully show up in consumer sentiment. “People eventually adjust,” Mahoney told me. “They just don’t adjust at the rate that statistical agencies produce inflation data.”
Mahoney and Cummings posted their study on December 4, 2023—18 months after inflation peaked in June 2022. As if on cue, consumer sentiment began surging that month. (Perhaps helping matters, food inflation had finally fallen below 3 percent in November 2023.)
There is another story you can tell about consumer sentiment today, however, one that has less to do with what’s happening in grocery stores and more to do with the peculiarities of tribal identity.
It’s well established that partisans on both sides become more negative about the economy when the other party controls the presidency, but this phenomenon is not symmetrical: In a November analysis, Mahoney and Cummings found that when a Democrat occupies the White House, Republicans’ economic outlook declines by more than twice as much as Democrats’ does when the situation is reversed. Consumer-sentiment data from the polling firm Civiqs and the Pew Research Center show that Republicans’ view of the economy has barely budged since hitting an all-time low in the summer of 2022.
Meanwhile, although sentiment among Democrats has recovered to nearly where it stood before inflation began to rise in 2021, it remains well below its level at the end of the Obama administration. It may never return to its previous heights. Over the past decade, the belief that the economy is rigged in favor of the rich and powerful has become central to progressive self-identity. Among Democrats ages 18 to 34, who tend to be more progressive than older Democrats, positive views of capitalism fell from 56 to 40 percent between 2010 and 2019, according to Gallup. Dim views of the broader economic system may be limiting how positively some Democrats feel about the economy, even when one of their own occupies the Oval Office. According to a CNN poll in late January, 63 percent of Democrats ages 45 and older believed that the economy was on the upswing—but only 35 percent of younger Democrats believed the same. To fully embrace the economy’s strength would be to sacrifice part of the modern progressive’s ideological sense of self.
The media may be contributing to economic gloom for people of every political stripe. According to Mahoney, one possible explanation for Republicans’ disproportionate economic negativity when a Democrat is in office is the fact that the news sources many Republicans consume—namely, right-wing media like Fox News—tend to be more brazenly partisan than the sources Democrats consume, which tend to be a balance of mainstream and partisan media. But mainstream media have also gotten more negative about the economy in recent years, regardless of who’s held the presidency. According to a new analysis by the Brookings Institution, from 1988 to 2016, the “sentiment” of economic-news coverage in mainstream newspapers tracked closely with measures such as inflation, employment, and the stock market. Then, during Donald Trump’s presidency, coverage became more negative than the economic fundamentals would have predicted. After Joe Biden took office, the gap widened. Journalists have long focused more on surfacing problems than on highlighting successes—bringing problems to light is an essential part of the job—but the more recent shift could be explained by the same economic pessimism afflicting many young liberals (many newspaper journalists, after all, are liberals themselves). In other words, the media’s negativity could be both a reflection and a source of today’s economic pessimism.
What happens to consumer sentiment in the coming months will depend on how much it is still being dragged down by frustration with higher prices, which will likely dissipate, as opposed to how much it is being limited by a combination of Republican partisanship and Democratic pessimism, which are less likely to change.
Will the place that it finally settles in come November matter to the election? How people say they are feeling about the economy in an election year—alongside more direct measures of economic health, such as GDP growth and disposable income—has in the past been a good predictor of whom voters choose as president; a healthy economy and good sentiment strongly favor the incumbent. Despite all the abnormalities of 2020—a pandemic, national protests, a uniquely polarizing president—economic models that factored in both economic fundamentals and sentiment predicted the result and margin of that year’s presidential election quite accurately (and much more so than polling), according to an analysis by the political scientists John Sides, Chris Tausanovitch, and Lynn Vavreck.
It is of course possible that consumer sentiment is becoming a more performative metric than it used to be—a statement about who you are rather than how you really feel—and perhaps less reliable as a result. Still, the story that voters have in their heads about the economy clearly matters. If that story were influenced solely by the prices at the pump and the grocery store or the number of well-paying jobs, then—absent another crisis—we could expect the mood to be buoyant this fall, significantly helping Biden’s prospects for reelection. But the stories we tell ourselves are shaped by everything from the news we read to the political messages we hear to the identities we adopt. And, for better or worse, those stories have yet to be fully written.
Jim Rogers expects a multi-asset bubble to burst and the American economy to run into trouble.
George Soros’ cofounder hopes to profit by shorting the “Magnificent Seven” stocks at the right time.
Rogers touted gold and silver, warned the inflation threat isn’t over, and slammed the Fed.
Jim Rogers expects asset prices to plunge and economic disaster to strike — and he plans to profit by betting against stock-market darlings like Tesla and Nvidia when the time is right.
“Bonds are a bubble, property in many countries is a bubble, stocks are getting ready for a bubble,” the veteran investor and travel author told Soar Financially in a recent interview.
Rogers has dumped many of his stocks and bonds in anticipation of a painful slump, but he’s “not shorting yet because often at the end there’s a blowoff and things get really crazy,” he said.
He flagged “warning signs” of an approaching collapse, including a handful of stocks dragging the major indices higher this year, and newbie investors boasting to all of their friends about how easy it is to make money trading stocks.
The markets guru, best known for cofounding the Quantum Fund and Soros Fund Management with George Soros, said he’s itching to bet against the “Magnificent Seven” stocks — Apple, Alphabet, Amazon, Microsoft, Meta, Tesla, and Nvidia.
“When the market comes to an end, the last high flyers are the best shorts,” he said. “The stocks that have done extremely well and are very expensive — that, I hope, is where I’m smart enough to short next time around.”
Rogers, 81, also predicted the US economy would run into trouble soon as a result of its ballooning debt pile.
“I would suspect that next year things are not going to look as happy,” he said. Rogers noted he wasn’t sure if a recession or mild downturn lies ahead, but he’s “worried” that there hasn’t been a prolonged economic slump since the 2008 financial crisis, and global debt loads have ballooned since then.
“The next problem has to be the worst in my lifetime because the debt is just unbelievable,” he said.
Rogers advised people to own precious metals, which tend to retain their value better than other assets during periods of panic.
“Everybody should have some silver and gold under the bed,” he said. “Look, all of us peasants know, when there’s a serious catastrophe, you better have some gold and silver in the closet, so I do.”
The “Adventure Capitalist” author also predicted inflation, which has cooled significantly in the past year, would reaccelerate to painful levels. Moreover, he accused the Federal Reserve of having no idea what it’s doing, and dismissed all but a couple of the central bank’s leaders over the last century as clueless “bureaucrats and academics.”
Rogers has a wealth of experience and a deep understanding of financial history, but it’s worth pointing out that he’s been predicting the worst downturn of his lifetime for several years now, yet both markets and the economy have defied his grave warnings.
