How You Feel About Inflation May Depend on Your Politics
Polarization is driving the way we view everything, even the economy
During his days as a US Senator, President Lyndon Johnson told a story of an unemployed schoolteacher’s job interview with a school board in Depression-era Texas. At one point during the meeting, a rancher on the school board asked the teacher the following question: “How do you teach it? Is the world round or flat?”
The teacher was desperate to get the job, so he scanned the room, looking at each board member for a clue how to answer the question appropriately. Finally, the teacher responded, “I can teach it either way.”
Whenever I opine on the economy, especially in writing, I do so with the following disclaimer: I am not an economist. But as any successful Wall Street trader will tell you, working in finance requires a high level of fluency on issues related to the US economy.
While I never met a trader who was also an economist, investors expect traders to digest and distill economic data and provide an informed opinion, which I did for many years. That’s why the litany of views on the current state of the economy over the last several weeks reminds me of that depression-era school teacher — especially when it comes to the subject of inflation. In addition to the experts, that is to say, actual economists, cable news pundits constantly register their opinions, not to mention politicians with their bad-faith agendas.
The reality is that while prices have risen for just about everything, they’ve disproportionately hit families at the bottom of the economy. As economist Claudia Sahm writes in her Stay-At-Home Macro blog, the necessities account for over 80% of all spending at the bottom quintile in terms of income versus 65% for families at the top quintile.