Macro Roundup

Ryan Enos“…College-educated whites, especially those with higher incomes, are not clear coalitional partners for anyone — they don’t favor economic policies, such as increasing housing supply or even higher taxes on the rich, that are beneficial to the working class, of any race. And many college-educated whites are motivated by social issues that are also not largely supported by the working class, of any race. It’s not clear that, with their current ideological positions, socially liberal and economically centrist or rightist college-educated whites are natural coalition partners with anybody but themselves. My sense is that much of the college-educated liberal political rhetoric is focused on social signaling to satisfy their own psychological needs and improve their social standing with other college-educated liberals, rather than policies that would actually reduce racial gaps in economic well-being, civil rights protections, and other quality of life issues….”

Thomas Edsall, "How Much Longer Can ‘Vote Blue No Matter Who!’ Last?,"New York Times, February 1, 2023, https://www.nytimes.com/2023/02/01/opinion/democratic-party-coalition.html

How Much Longer Can ‘Vote Blue No Matter Who!’ Last?

Over the past four decades, the percentage of white Democrats who identify themselves as liberal has more than doubled, growing at a much faster pace than Black or Hispanic Democrats.

In 1984, according to American National Election Studies data, 29.8 percent of white Democrats identified as liberal; by 2020, that percentage grew to 68.5 percent. Over the same period, the percentage of liberals among Black Democrats grew from 19.1 percent to 27.8 percent and among Hispanic Democrats from 18 percent to 41 percent.

This shift raises once again a question that people have been asking since the advent of Reagan Democrats in the 1980s: What does it mean for a party that was once the home of the white working class to become a coalition of relatively comfortable white liberals and less-well-off minority constituencies?

I posed this and other questions to a range of scholars and political strategists, including William Galston, a senior fellow at Brookings, who recently cited similar (though not identical) trends in Gallup data. In an essay last month, “The Polarization Paradox: Elected Officials and Voters Have Shifted in Opposite Directions,” Galston wrote: “In 1994, white, Black and Hispanic Democrats were equally likely to think of themselves as liberal. But during the next three decades, the share of white Democrats who identify as liberal rose by 37 points, from 26 percent to 63 percent, while Black and Hispanic Democrats rose by less than half as much, to 39 percent and 41 percent, respectively.”

Galston argued in an email that Black Democrats have assumed an unanticipated role in the party: “African Americans are now a moderating force within the party. It was no accident that they rallied around the most moderate candidate with a serious chance of winning the nomination in 2020, or that the leader of the pro-Biden forces took the lead in rejecting the “defund the police” slogan.”

The coalition of upper-middle-class liberals and minority voters, Galston wrote, “has been sustainable because the former believe in the active use of government to fight disadvantage of various kinds and are willing, within limits, to vote against their economic self-interest.”

Julie Wronski, a political scientist at the University of Mississippi, wrote back by email: “Underlying the liberal shift among white Democrats is their tendency to hold more liberal racial attitudes. In the Voter Study Group’s Racing Apart report, the percentage of white Democrats that hold the most liberal positions on the standard racial resentment measure has increased over the last decade to such a large extent that their racial resentment views match those of Black Democrats.”

The Democratic Party, Wronski continued, has become, “a coalition of racial minorities (especially Blacks) and whites who are sympathetic to the inequities and challenges faced by minority groups in America. Racial identities and attitudes are the common thread that link wealthier, more educated whites with poorer minority constituencies.”

The Democrats’ biracial working-class coalition during the mid-20th century, in Wronski’s view, “was successful because racial issues were off the table.” Once those issues moved front and center, the coalition split: “Simply put, the parties are divided in terms of which portion of the working class they support — the white working class or the poorer minority communities.” The level of educational attainment is the line of demarcation between the two groups of white voters.

By 2020, the white working class — defined by the Federal Reserve of St. Louis as “whites without four-year college degrees” — voted for Donald Trump over Joe Biden, 67 to 32 percent, according to network exit polls. In the 2022 election, white working-class voters backed Republican House candidates at almost the same level, 66 to 32 percent.

The shift of non-college white working-class support to the Republican candidates, Wronski wrote, “was driven by racial group animus. Trump was particularly able to attract members of the white working class on the basis of racial (and other) group sentiments — with those disliking minority groups being uniquely attracted to Trump, in a continuation of the division of the working class along racial lines.”

There are those who argue, however, that the contemporary Democratic coalition is more fragile than Wronski suggests. Ryan Enos, a political scientist at Harvard, emailed to say, “If you’re a Democrat, you might worry that the coalition is not stable.”

Over the long haul, Enos wrote: “College-educated whites, especially those with higher incomes, are not clear coalitional partners for anyone — they don’t favor economic policies, such as increasing housing supply or even higher taxes on the rich, that are beneficial to the working class, of any race. And many college-educated whites are motivated by social issues that are also not largely supported by the working class, of any race. It’s not clear that, with their current ideological positions, socially liberal and economically centrist or rightist college-educated whites are natural coalition partners with anybody but themselves.”

Enos went so far as to challenge the depth of elite support for a liberal agenda: “My sense is that much of the college-educated liberal political rhetoric is focused on social signaling to satisfy their own psychological needs and improve their social standing with other college-educated liberals, rather than policies that would actually reduce racial gaps in economic well-being, civil rights protections and other quality of life issues.”

Paul Begala, a Democratic strategist, is an explicit critic of the left wing of the party. “It is plain to me that the Democrats’ greatest challenge is the progressive left,” Begala wrote in an email: “Pew Research shows they are the most liberal, most educated and most white subgroup in the Democratic coalition. They constitute 12 percent of Democrats and those who lean Democrat — which means 88 percent of us are not on their ideological team.”

In contrast, Begala continued: “Black voters are both the most loyal Democrats and the most sensible, practical, strategic and moderate voters. This is why it was important, politically and even morally, for President Biden to move the African-American-rich South Carolina primary ahead of overwhelmingly white Iowa and New Hampshire.”

In the November 2021 study of the composition of the Democratic Party that Begala referred to, Pew Research reported: “The progressive left makes up a relatively small share of the party, 12 percent of Democrats and Democratic-leaning independents. However, this group is the most politically engaged segment of the coalition, extremely liberal in every policy domain and, notably, 68 percent white non-Hispanic. In contrast, the three other Democratic-oriented groups are no more than about half white non-Hispanic.”

This disproportionately white wing of the party, as I previously discussed, provided crucial support for Alexandria Ocasio-Cortez and Ayanna Pressley when they ran for Congress in 2018, putting them over the top in their first primary victories over powerful Democratic incumbents.

A variety of forces is straining the center-left coalition.

Bruce Cain, a political scientist at Stanford, replied by email to my inquiries: “Many white liberals live in enclaves of affluence, sheltered from the economic and personal insecurity of the low-income communities. They are more strongly motivated by identity issues around gender and race but are less concerned with poverty or economic insecurity issues than liberals in the sixties.”

As a result, in Cain’s view: “Parts of the Democratic coalition are talking past each other and sometimes clashing. In the case of climate change, white liberals want to accelerate the adoption of electric vehicles that most low-income nonwhites cannot afford. During Covid, affluent white liberals could work at home and have food delivered to them by nonwhite workers who left the food packages at their doorstep or who had to go to work and suffer higher rates of illness.”

When all said and done, “White liberals are still a better deal for nonwhites than the Republican Party,” Cain contended, “but it is revealing that the African Americans in South Carolina preferred Biden to Sanders or Warren.”

The liberalism of white Democrats cuts across a wide range of issues. Brian Schaffner, a political scientist at Tufts, cited data collected by the Cooperative Election Study: “In 2020 white Democrats scored similarly low on racial resentment as Black Democrats. And white Democrats actually have significantly lower levels of sexism than Black or Hispanic Democrats. In the 1980s and 1990s, the Democratic Party was indeed fairly divided on issues of race in particular, but that no longer seems to be the case.”

Now, Schaffner continued, “white Democrats appear to be the most liberal group in the party on a range of issues, including immigration, climate, crime/policing, abortion, health care, gun control and economic/social welfare.”

I asked James Stimson, a political scientist at the University of North Carolina-Chapel Hill, how the meaning of “liberal” changed over the past 40 years. He replied: “The term has become infused with racial content. That may be the key to the conversion of educated suburban voters into liberals and Democrats. Trump’s open racism must surely have added greatly to the new meaning of liberalism. Perhaps the L-word has become a way to say, “I am not a bigot.””

Along similar lines, Viviana Rivera-Burgos, a political scientist at Baruch College of the City University of New York, pointed out how much the liberal agenda has transformed in a relatively short time: “Issues like abortion, same-sex marriage and L.G.B.T.Q.+ rights and immigration have become important ideological cleavages in the past 40 years or so. Being a liberal today means you’re most likely pro-choice, pro-same-sex marriage, pro-expansion of L.G.B.T.Q.+ rights and anti-restrictive or punitive immigration laws. These issue positions couldn’t be inferred based on someone’s ideology alone 40 years ago.”

Lanae Erickson, a senior vice president at Third Way, a centrist Democratic group, argued in an email that there is a danger of overemphasizing the liberal tilt of the Democratic electorate: “Although the percentage of Democrats calling themselves liberal has grown over the past three decades, it still remains true that only about half of self-described party members identify that way — in contrast to Republican voters, about 80 percent of whom call themselves conservative. So Democrats have long had and continue to have a more ideologically diverse coalition to assemble, with nearly half of the party calling themselves moderate or conservative.”

Erickson did not hesitate, however, to describe the party’s educated left wing as, “overrepresented in the media, on Twitter and in positions of power. That group is loud and more culturally liberal, though they often purport to speak or act on behalf of communities of color. Meanwhile, the African American and Latino voters who deliver victories to Democratic candidates in nearly every race have remained much more ideologically mixed.”

“If we continue to let white liberals on Twitter define what it means to be a Democrat,” Erickson warned her fellow Democrats, “we are going to continue to alienate the voters of color who are essential majority makers in our coalition. While the Twitterati wants to ‘Defund the Police,’ communities of color want their neighborhoods to be safe — both from police violence AND violent crime.”

To build her case, Erickson cited that role of minority voters in the last New York City mayoral election: “They elected Eric Adams and rejected the far-left candidates whose voting blocs were made up primarily of white liberals,” noting that “Adams outpaced Maya Wiley by 23 points with Black voters and 10 points with Hispanic voters.”

In local elections in 2021, Erickson continued, Black voters “rejected a measure in Minneapolis, where George Floyd was killed, to defund the police: According to ward-level data, the predominantly Black Wards 4 and 5 rejected the Minneapolis ballot measure by wide margins (over 60 percent voted no), while predominantly white wards drove the measure’s support.

Erickson suggested that the culturally liberal tilt of the party’s left wing was a factor in declining minority support: “Case in point: Democrats dropped nine percentage points with non-college voters of color between 2012 and 2020, falling from 84 percent support in 2012 to 75 percent in 2020, according to Catalist. This was most pronounced with non-college men of color who went from 81 percent Democratic in 2012 to 69 percent in 2020.”

These losses reflect “a divergence in priorities and values,” Erickson wrote, citing poll data showing that, “while Democratic primary voters say hard work is no guarantee of success, Black voters disagree — saying most people can get ahead in America if they work hard — and that by a two-to-one margin, Black Americans say it is necessary to believe in God to have good morals. Democratic primary voters of all races disagree with that statement by similar margins.”

While the party is divided on values and priorities, Erickson pointed out that Democrats in Congress have reached general agreement on many issues that were highly divisive in the past: “There is only one pro-life Democrat left in Congress, and today’s moderate Democrats are loudly supportive of reproductive rights. There are no more N.R.A.-endorsed Democrats on the Hill, and if gun safety legislation were brought up tomorrow, every single Democrat in federal office would support it. Similarly, every Democrat not only supported the Respect for Marriage Act but would’ve likely gone further to explicitly codify marriage equality into law at the federal level.”

The major intraparty conflicts that remain, Erickson wrote, “are concentrated around two big questions. One is a process question: Do you believe progress is achieved by incremental steps or revolutionary change? The other is a values question: Do you believe that, with some basic policy reforms, our economic system can deliver a good life to those who work hard in this country, or rather that it needs to be torn down and fundamentally rebuilt from the ground up?”

The transition from a partisan division among white voters based on economic class to one based on level of educational attainment has had substantial consequences for the legislative priorities of the Democratic Party.

Frances Lee, a political scientist at Princeton, pointed out in an email that “the class base of the parties has atrophied” with the result that “the party system in the U.S. simply does not represent that ‘haves’ against the ‘have-nots.’ Both parties represent a mix of haves and have-nots in economic terms.”

Because the Democratic Party must hold down “a coalition of upper-income whites and minority constituencies across all income groups,” Lee wrote, party leaders, “are likely to prioritize issues that do not pit the well-off against the poor very directly, such as the rights agenda (e.g., voting rights, abortion, gays and lesbians) and climate/environment. Democrats in government are unlikely to genuinely prioritize the economic interests of low-income and working-class voters, because those voters simply do not represent a majority of their party’s coalition.”

As an example, Lee wrote, “Current Democrats are much more concerned about forgiving student loans than about the majority of voters who will not or did not go to college.”

What, then, is likely to happen in the Democratic ranks?

The reality, as summed up by Ryan Enos, is that for all their problems, “The Democrats are clearly the majority party and may be experiencing an unparalleled period of dominance: Since 1992, a period of 30 years, Republicans have only won a majority of popular presidential votes once, in 2004, and that was during the extraordinary time of two overseas wars.”

For the moment, the Democratic coalition — with all its built-in conflicts between a relatively affluent, well-educated, largely white wing, on the one hand, and an economically precarious, heavily minority but to some degree ascendant electorate on the other — remains a functional political institution.

“In this sense,” Enos told me, “it’s important not to overstate the damage that some perceive liberalism as having done to the Democrats’ electoral fortunes.”

The Economist reports that between mid-2020-2022 America's lower earners saw cumulative inflation of 13.5% whereas middle earners saw 15.5%. The difference was largely driven by car prices and fuel expenditures.

“…Middle-income earners, not the poorest, appear to have borne the brunt of America’s current bout of inflation. Research by Xavier Jaravel of the London School of Economics has yielded a distinctive shape—an inverted-U curve—that illustrates the distributional effects of inflation in America from mid-2020 to mid-2022. For the lowest earners, inflation was about 13.5%. For those in the middle of the spectrum, inflation was closer to 15.5%. The wealthiest faced inflation of about 14%. Since 2020 nominal wages have increased at an average annual rate of about 4.2% for Americans as a whole. The lowest-earning quartile, however, has seen the biggest gains, with their wages up by 5.3% on average during the same period….”

Economist Staff, "Inflation usually hits America’s poor hardest. Not this time," The Economist, February 2, 2023, https://www.economist.com/graphic-detail/2023/02/02/inflation-usually-hits-americas-poor-hardest-not-this-time

Inflation usually hits America’s poor hardest. Not this time

It is often seen as an axiomatic truth about the pernicious effect of rising prices: the lowest earners suffer the most. The calculation is straightforward. Those on low incomes must spend a greater share of their earnings on food and rent, so when the prices for those items soar, they have less left over for everything else. The rich and the middle class, by contrast, are better insulated. This pattern has been observed over many decades, in many countries (see left-hand chart). But America’s current bout of inflation may be an exception to the rule: middle-income earners, not the poorest, appear to have borne the brunt of it (see right-hand chart).

Research by Xavier Jaravel of the London School of Economics has yielded a distinctive shape—an inverted-U curve—that illustrates the distributional effects of inflation in America from mid-2020 to mid-2022. During that time consumer prices rose by an average of 15%. Yet that average masked considerable variation. For the lowest earners, inflation was about 13.5%. For those in the middle of the spectrum, inflation was closer to 15.5%. The wealthiest faced inflation of about 14%. That the rich suffered less is unsurprising. But why have the poor also been somewhat sheltered?

The answer is in large part down to Americans’ reliance on cars. Mr Jaravel used annual expenditure shares from consumer surveys to work out who spends how much on what. Middle-income earners, he found, spend more than others on both petrol and vehicles relative to their wages. That may reflect school runs, longer commutes by car to work, more frequent trips to shops and the like. In the two years that he examined, inflation was extreme for petrol (the price of which more than doubled) and cars (used-vehicle prices rose by about 50%). By extension that hurt the middle class most. A further breakdown of the data reveals even more nuance: at all levels of income, rural Americans faced higher rates of inflation than their urban compatriots because they spent more hours behind the wheel.

A difference of two percentage points in inflation over the course of two years may not seem like much. But it comes on top of a divergence in nominal wage growth that has also, unusually, benefited Americans at the low end of the income scale. Since 2020 nominal wages have increased at an average annual rate of about 4.2% for Americans as a whole. The lowest-earning quartile, however, has seen the biggest gains, with their wages up by 5.3% on average during the same period. Slightly lower inflation makes those gains even bigger in real terms.

This suggests that the combination of a tight labour market and unevenly distributed inflation has made America a little more equal over the past few years, a striking difference with how things normally play out. Unfortunately, it may also be a blip. Wage growth has started to soften as the economy slows. Food inflation has become more severe. On both counts low-income earners are the most vulnerable. The sorry old truth that inflation hits the poor hardest still applies—just not always.

Michael Spence and Belinda Azenui note that labor productivity between the tradable and non-tradable sectors started to diverge in 1998, and by 2021 per-employee value-added in tradable sectors was nearly double the non-tradable sectors.

“…Value-added per employee is a measure of labor productivity. In America’s tradable sector, it has risen steadily over the last two decades in both manufacturing and services, reaching roughly $185,000 (in chained 2012 dollars) in 2021. Over the same period, productivity growth in this sector averaged nearly 3%. The non-tradable economy is just 0.57% per annum over the last 20 years. This reflects below-average productivity levels and, in most cases, low-to-moderate productivity growth in the large-employment sectors. There was not always a large gap between the tradable and non-tradable sectors. On the contrary, as the chart shows, labor productivity was about $100,000 across the economy in 1998. But by 2021, after more than two decades of steady divergence, per-employee value-added in the tradable sector was nearly double the level in the non-tradable sector….”

Michael Spence and Belinda Azenui, "American's Widening Productivity Gap,"Project Syndicate, February 6, 2023, https://www.project-syndicate.org/commentary/us-productivity-growth-non-tradable-sectors-labor-shortages-by-michael-spence-and-belinda-azenui-2023-02

America’s Widening Productivity Gap

MILAN/GRANVILLE, OHIO - The United States has a productivity problem, though one would never know it from looking only at the industries producing goods and services that are traded internationally. Because these goods and services account for only one-third of GDP and slightly over 20% of employment, as is typical for a developed economy, it is important also to consider the non-tradable sector that comprises the remaining two thirds of the economy.

The economy’s tradable sector comprises agriculture, forestry, fishing, and manufacturing - the production of goods, as either final or intermediate products - which in 2021 accounted for one-third of tradable value-added. The tradable sector also includes services such as research and development, consulting, information, and much of finance. Taken together, services account for about two-thirds of tradable value-added - a share that has increased over the last two decades.

Value-added for a firm or industry is calculated by subtracting purchased inputs like energy and intermediate products - excluding labor and capital - from total sales in dollars. It can be understood as the value created by the combination of labor and capital. That value is then captured as income for the labor (forming the upper limit on the average compensation of employees in the sector) and returns for the owners of the capital.

Value-added per employee is thus a measure of labor productivity. And, in America’s tradable sector, it has risen steadily over the last two decades in both manufacturing and services, reaching roughly $185,000 (in chained 2012 dollars) in 2021. Over the same period, productivity growth in this sector averaged nearly 3%. If this had been true of the non-tradable part of the economy - including large-employment sectors such as government, health care, traditional retail, accommodation and food service, education, and construction - nobody would have to be worried about productivity.

There is no good way to measure government productivity, because markets do not price the value created by services that are generally not sold. For accounting purposes, value-added for the government is measured by the costs of labor and capital, the assumption being that democratic collective-choice mechanisms will eliminate services whose costs exceed the perceived benefits. But that approach does not provide much insight into productivity: the fact that value-added per government employee has grown very slowly - by 0.25%, on average, over two decades - just means that, on average, labor and capital costs grew at roughly the same pace as employment.

For the rest of the non-tradable economy, however, we can measure productivity growth, and the results - based on industry-specific data from the Bureau of Economic Analysis for employment and real value-added (in billions of chained 2012 dollars) - are very different than the tradable picture and far from rosy: just 0.57% per annum over the last 20 years. This reflects below-average productivity levels and, in most cases, low-to-moderate productivity growth in the large-employment sectors.

For example, in 2021, hospitality employs 12 million people, has value-added per employee of $41,355 - less than one-third of the $130,000 national average - and productivity growth of 0.26%. The health-care and social-assistance sector employs 20 million people, with value-added per employee of $73,624 and productivity growth of 0.71%. For construction, the figures are 7.6 million, $87,425, and -1.21%, respectively.

There was not always a large gap between the tradable and non-tradable sectors. On the contrary, as the chart shows, labor productivity was about $100,000 across the economy in 1998. But by 2021, after more than two decades of steady divergence, per-employee value-added in the tradable sector was nearly double the level in the non-tradable sector.

Today, however, many non-tradable parts of the economy - including all the large-employment ones - are experiencing labor shortages. This is partly because factors like stress, safety issues, low compensation, and lack of flexibility are driving workers away from these jobs. But skills gaps are also playing a role. Given this, removing barriers to the acquisition of higher-level skills and incomes is a critical component of any structural-transition agenda.

Demand for health care, hospitality, and construction services is not going to drop. So, labor-supply constraints may lead to higher wages and higher prices, raising incomes and measured labor productivity to some extent. But more must be done to boost productivity growth in low-productivity sectors, thereby mitigating supply constraints, which population aging is set to exacerbate.

Digital technologies have been an important driver of productivity growth in rapidly expanding industries. Given recent breakthroughs in robotics and artificial intelligence, there is every reason to believe this will continue. But progress in high-end services and manufacturing alone is not enough. These powerful technologies must also be applied in low-value-added, low-wage, and low-productivity-growth parts of the economy.

Given labor-supply constraints and economic shocks - linked, for example, to climate change and geopolitics - the case for productivity-boosting interventions is clear. Unless policymakers use a combination of investment and incentives to reverse negative productivity trends, the US will achieve modest growth, at best. Worse, the growth that it does attain will be highly uneven, excluding many from its benefits.

FRBSL researchers examined components of the CPI since 2000 and found wide differences by sector: the overall basket increased 1.8X from January 2000 to December 2022, while education prices grew to 2.6X and communication prices fell to 0.8X.

“…The figure below shows the U.S. consumer price index (CPI) for various expenditure types, as computed by the Bureau of Labor Statistics. For each series, the units are chosen to equal $1 in January 2000 so that their evolution over time can be compared. The “All” line (solid red) increased from $1 in January 2000 to about $1.80 in December 2022. This means that a person needed about $1.80 in December 2022 to purchase the same basket as he or she could have purchased with $1 in January 2000. One extreme case is that of education-related expenditures (solid gray line): Their prices have multiplied by 2.6 since January 2000. Another extreme case is communication-related expenditures (solid blue line): Their prices have decreased from $1 to about $0.80….”

Guillaume Vandenbroucke, “How Inflation and Relative Price Increases Differ,” Federal Reserve Bank of St. Louis, February 13, 2023, https://www.stlouisfed.org/on-the-economy/2023/feb/how-inflation-relative-price-increases-differ

How Inflation and Relative Price Increases Differ

Economists distinguish between the general price level and the relative price level. To understand the difference, consider a basket consisting of one apple and one orange, each costing $1. The basket’s price is $2, and an orange is just as expensive as an apple.

Relative Price Differences

Imagine a scenario in which the apple’s price decreases to 50 cents while the orange’s price increases to $1.50. The basket’s price is still $2, but an orange now costs three times as much as an apple. There is no inflation since the general price level, reflected by the basket’s price, is constant.

Yet relative prices are quite different, and consumers are likely to change their purchasing behavior in response to the increased relative price of oranges. They may purchase fewer oranges and more apples than before.

Introducing Inflation

Now, consider a second scenario in which the prices of apples and oranges each increase from $1 to $2. Then the basket’s cost increases to $4, up from $2. Yet, an orange is still just as expensive as an apple. There is inflation, but relative prices have not changed.

Again, consumers are likely to change their behavior, but for a different reason than in the first scenario. Since everything is more expensive, they might purchase less of everything, unless their income also increases in the same proportion as all prices.

Examining CPI since 2000

The figure below shows the U.S. consumer price index (CPI) for various expenditure types, as computed by the Bureau of Labor Statistics. For each series, the units are chosen to equal $1 in January 2000 so that their evolution over time can be compared.

The CPI represents how the dollars needed to purchase a particular basket of consumption change over time. The “All” line (solid red) represents a basket of all goods and services typically purchased by a consumer in the U.S.

The other lines represent components of that basket. For example, the “Medical” line (broken green) represents medical care services and commodities while the “Recreation” line (dotted blue) represents cable and satellite television, radio services, pet-related commodities and services, admission to movies and related services. Thus, the “All” line represents the general price level, and the other lines represent relative prices.

The “All” line (solid red) increased from $1 in January 2000 to about $1.80 in December 2022. This means that a person needed about $1.80 in December 2022 to purchase the same basket as he or she could have purchased with $1 in January 2000. This is inflation. The recent increase in inflation can be seen in the steepening of the curve since mid-2020.

The fact that other lines increased either faster or slower than the “All” line is an indication that some prices are increasing faster than others. In other words, relative prices are changing along with the rising general price level.

One extreme case is that of education-related expenditures (solid gray line): Their prices have multiplied by 2.6 since January 2000. Another extreme case is communication-related expenditures (solid blue line): Their prices have decreased from $1 to about $0.80. Between these two extremes, other prices have increased at similar rates, such as food and housing.

Examining CPI since 2020

The second figure reproduces the same calculation as in the first figure, but with January 2020 as the starting date. The key difference between the two figures is that, even though the price of education- and medical-related expenditures have increased faster than other prices in the long run (as seen in the first figure), transportation- and food-related expenditures (dashed green line and dotted orange line, respectively) are the fastest-growing prices since January 2020.

The two figures are reminders that, in trying to understand the effects of inflation (either in the short run or the long run), one must keep in mind that price increases are not even across different categories of expenditures.

In addition, inflation masks changes in relative prices, which may affect people’s spending decisions regardless of the changing general price level.

Jon Haidt cites the percentage of undergraduates diagnosed with a mental illness and argues that an epidemic of anxiety and depression started impacting young Americans in 2012, “…There was no sign of a problem before 2010, and the epidemic is well underway by 2015. You can also see that the rate of depression is much higher in girls, as is the absolute increase (since 2010 an additional 18% of girls suffered from depression in 2021, compared to an additional 6% of boys), however, the relative increase is similar in both sexes: around 150%. The rate had more than doubled before the covid epidemic. The 2020 data were collected in early 2020, just before covid restrictions, and the 2021 data were collected a year later before vaccines were widely available. You can see that covid accelerated the rise in depression in that last year, but it was already rising really fast….”

Jon Haidt, “The Teen Mental Illness Epidemic Began Around 2012,” After Babel, February 8, 2023, https://jonathanhaidt.substack.com/p/the-teen-mental-illness-epidemic

The Teen Mental Illness Epidemic Began Around 2012

From the first time I wrote about Gen Z in 2015 (with Greg Lukianoff, in our Coddling essay) through my most recent discussion in a December interview with Tunku Varadarajan in the Wall Street Journal, the main criticism I have heard is that I’m just another old man (I’m 59) shaking his fist and complaining about “kids these days,” when in fact “the kids are alright.” If that’s true, then the first half of the Babel project—on what social media did to childhood and to teen mental health—is fatally flawed. Is the criticism valid?

1. The Case Against Me

Two responses to that WSJ essay do us the favor of collecting quotations from previous generations complaining about the behavior of youth. First, see this Twitter thread from Paul Fairie, titled A Brief History of Kids Today Are Spoiled

Fairie includes this 1925 gem:

Remove the girl or boy of today from radio, the telephone, furnace heat, the automobile, the libraries, movies, and other forms of amusement and comfort––give them merely a jackknife and nature’s unchanging wonders for amusement, and how would they fare? … Ennui would claim them for its own and … they would fare ill until returned to their accustomed habitat of convenience and plenty.

Second, see this essay by Mike Males in LA Progressive, titled Enough Youth-Bashing, which includes this:

From Greek poet Hesiod to modern youth bashers led by psychology professors Jonathan Haidt and Jean Twenge and former first lady Michelle Obama, no one says anything new. Hesiod cornered the market with his “no hope for the future of our people” rant against the “reckless… frivolous youth of today” (700 BC).

And this:

Eon after eon, it’s the same float going by. Socrates thought books made the young mentally weak. Panics over coffee, witches, jazz, dime novels, comics, TV, backwards-masked lyrics, Ozzy, Eminem, Tupac, Grand Theft Auto, Harry Potter’s Hermione, Miley, cellphones, Facebook, sexting, social media… the endless ephebiphobic idiocies should be retitled, “I’m Superior!” and given their own dismal library shelf.

These critics make two valid points: First, you can find these criticisms in all recent generations and in some going back thousands of years.

1 Second, the criticisms are often part of a larger moral panic that arises in response to any new consumer product––and especially any new technology––that “kids these days” are using. Social media clearly fits this pattern. (Robby Soave explained the dynamics of tech panics well in his 2021 book Tech Panic.)

The critics also gain support from empirical studies by psychologists John Protzko and Jonathan Schooler, whose 2019 essay in Science Advances was titled Kids these days: Why the youth of today seem lacking. Protzko and Schooler summarize their many studies showing that older people suffer from a variety of cognitive biases, such as that we each have biased and self-serving memories of what we were like at that age, and so we older people always find current younger people inferior and declining.

In sum, it’s reasonable to start with skepticism of my claim (with Jean Twenge) that there is an epidemic of mental illness that began around 2012, and that is related in large part to the transition to phone-based childhoods, with a special emphasis on social media. It makes sense to embrace as a null hypothesis the skeptics’ view that there is nothing to see here, just another moral panic, and the kids are fine. I am in full agreement that the burden of proof falls on me.

But if you take that as your null hypothesis, then you should be open to evidence that the null hypothesis is false and this time is different. Anecdotes about kids who began cutting themselves the week after going on Instagram won’t do. You’ll want to see peer-reviewed studies and high-quality surveys showing 1) that there is in fact an epidemic of mental illness and 2) that phones and social media are substantial contributing causes. I am currently writing a book that makes both of these arguments: Kids In Space: Why Teen Mental Health is Collapsing.

In the rest of this Substack post, I offer a preview of the evidence that a mental illness epidemic emerged around 2012. I won’t directly address the issue of causality here. I’ll do that in many future posts, and in the book. (You can find a short version of the argument in my 2022 Senate testimony.) This post simply responds to the “kids these days” critics. I make the case that this time really is different. The kids have not been alright since the early 2010s.

2. The Collaborative Review Doc

I have been collaborating with Jean Twenge (author of iGen, and the forthcoming Generations) and Zach Rausch (my research assistant) on a pair of collaborative reviews that are open-source Google documents where we collect all the evidence we can find, on both sides of each question, and we invite critics to add comments and studies. In this post, I present our document titled: Adolescent mood disorders since 2010: A collaborative review. In future posts on this Substack, I’ll present many more collaborative review docs and explain why open-source Google docs are an essential adjunct to social science research, especially regarding social trends that are changing too fast for the slow gears of academic life to keep up with––phenomena like social media and its effects on teen mental health and on liberal democracy.

Here is the first half of the Table of Contents, to give you a sense of the layout. Please look around the doc itself. If you are a researcher or mental health expert, ask for commenting rights to add your own studies and criticisms. I am a devotee of John Stuart Mill who wrote that “he who knows only his own side of the case, knows little of that.” Help me get this right.

First, let’s look at what Gen Z says about its own mental health, compared to previous generations. After that, we’ll look at hard evidence about behavior, to address the criticism that the only thing that has changed is Gen Z’s willingness to report their mental health problems.

3. Increases in Self-Reported Depression and Anxiety

Section 1 of the Collaborative Review summarizes self-report surveys that have been conducted at regular time intervals since 2010 or earlier. Do members of Gen Z say that their mental health is declining? Yes, in every study we can find. We cannot find any studies on the other side. I will focus today’s post on data from the United States. I’ll have a future post on what’s happening internationally, showing that the same patterns are happening in largely the same way at roughly the same time in Canada, the UK, Australia, and New Zealand, and I’ll share with you what Zach and I are learning about other countries beyond the Anglosphere.

Here are two of the graphs you’ll find in section 1 of the Collaborative Review document:

As you can see in Figure 2, and in most of the Figures in the review doc, there was no sign of a problem before 2010, and the epidemic is well underway by 2015. You can also see that the rate of depression is much higher in girls, as is the absolute increase (since 2010 an additional 18% of girls suffered from depression in 2021, compared to an additional 6% of boys), however, the relative increase is similar in both sexes: around 150%. The rate had more than doubled before the covid epidemic. The 2020 data were collected in early 2020, just before covid restrictions, and the 2021 data were collected a year later before vaccines were widely available. You can see that covid accelerated the rise in depression in that last year, but it was already rising really fast.

Figure 3 comes from a very different source: the mental health clinics on hundreds of college campuses. You can see once again that there’s not much to see before 2010, but the epidemic is in full gear by 2015. You can also see that while rates of all disorders have increased, the increases are largest, in both relative and absolute terms, for mood disorders, a class of mental illness that is made up primarily of depression and anxiety disorders (which includes anorexia). In 2019, just before covid, one in four American college students suffered from an anxiety disorder, compared to just one in ten back in 2010. The rate may be higher today.

Section 1 of the collaborative review shows that according to the kids themselves, the kids are not alright. What happens when we ignore what they say and look at what they do?

4. Increases in Self-Harm

In 2019, when Twenge and I launched the document, there were still some skeptics who argued that the large increases you see in Figures 1 and 2 reflect only a change in Gen Z’s willingness to disclose their struggles, which is a good thing. Here is psychiatrist Richard Friedman, in the New York Times in 2018:

“Despite news reports to the contrary, there is little evidence of an epidemic of anxiety disorders in teenagers… There are a few surveys reporting increased anxiety in adolescents, but these are based on self-reported measures — from kids or their parents — which tend to overestimate the rates of disorders because they detect mild symptoms, not clinically significant syndromes.”

This argument is heard less often nowadays, but it was made by one critic recently in response to my WSJ interview. Here is Vicki Phillips, in Forbes, in an essay titled Gen Z: Hopeless Or Hopeful?

[Haidt] fails to note the remarkable truth. Gen Z is in fact embracing a new, more open and honest relationship with their mental health, one that destigmatizes the issue so that it can be addressed. This is leading to more people reporting their mental health challenges and seeking support, and contributing to the rising numbers of reported cases. More effective diagnoses and increased connection to care are both good by any measure. As an educator, I feel an obligation to support Haidt on his personal learning journey. And as someone who has actually worked with Gen-Zers, I can tell you, the kids these days are more than alright.

But if Phillips and Friedman were correct that “the kids are alright” and the appearance of an epidemic is an illusion based on Gen Z’s “more honest relationship with their mental health,” then we would not see any change in objective measures of mental health, such as hospitalizations for self-harm, or deaths by suicide. But in fact, we do see such changes, and the timing and magnitude of them generally match the changes in self-reported mental health problems. Sections 2 and 3 of the Collaborative Review doc report these findings.

Figure 4 shows the number per 100,000 older teens who are admitted each year to hospitals because they harmed themselves, mostly by cutting themselves with sharp objects. Once again there is no sign of a problem before 2010, and the epidemic is raging by 2015.

Figure 5 is the same as Figure 4 except that it shows what happened to younger teens, ages 10-14. Younger teens were very rarely hospitalized for self-harm before 2010, but by 2020 the rate for girls had nearly tripled, rising to exceed the rate at which older teen girls were hospitalized back in 2009. This is a clue as to what caused the epidemic. What could have changed right around 2012 that hit tween and young teen girls hardest? (I’ll answer that in a later post.)

5. Increases in Suicide

Section 3 of the Collaborative Review doc presents the most tragic data of all: a large increase in the number of completed suicides.

For suicide, the rates are always higher for boys and men. Girls and women make more suicide attempts, but they are more likely to use reversible means. Boys and men are more likely to use firearms and tall buildings, which are not reversible. Suicide takes a much larger toll on boys and men. But it is noteworthy that the relative increase since 2010 is larger for girls and women.

When we look at the change in suicide rates for tweens and younger teens, in Figure 7, we find three features that echo what we saw in the graphs for self-harm: 1) the percent increase is larger for girls than for boys, 2) the percent increase for young girls is much larger than the increase for older girls, and 3) even more than in Figure 4, there is a sharp increase for girls between 2012 and 2013. In fact, there was a 67% increase in suicides in that single year. This sudden and enormous spike, in a single year, once again forces us to ask: what changed in the lives of 10-14 year old girls in 2012?

6. Conclusion

I began this essay by taking the burden of proof upon myself. Given the long history of tech panics, you should come to this question and this blog with skepticism. Your default assumption should be the null hypothesis so often asserted by my critics: this is just one more unjustified freakout by older people about “kids these days.”

But as I have shown in this post, the evidence that this time is different is very strong. In 2010 there was little sign of any problem, in any of the long-running nationally representative datasets (with the possible exception of suicide for young teen boys). By 2015––when Greg Lukianoff and I wrote our essay The Coddling of the American Mind––teen mental health was a 5 alarm fire, according to all the datasets that Jean Twenge and I can find. The kids are not alright.

Please join me on the After Babel Substack to figure out why. In future posts I’ll cover topics including these:

What is happening to teen mental health in other countries? Is this just an American thing?

What is the evidence that the epidemic is caused in large part by social media?

What is the evidence that the loss of free play and risky play contributed to the epidemic?

What is happening to boys? They’re not on social media as much, so why is their mental health deteriorating too? I started this Substack to help me write two books, as explained in the About post. In many posts, such as this one, I’ll make a strong assertion in the title of the post in the hope of drawing criticism. Did the epidemic really start in 2012, or was it earlier? Was it gradual, not a sharp bend in 2012? I want to hear all of the counterarguments and find all of the contrary evidence now, rather than waiting until after the book is published. So please be (constructively) critical in your comments. It is so hard to find time to write the books that I won’t be able to respond to comments one by one, but I will read them all and I’ll pull out the best criticisms and respond to them in new text at the bottom of this post.

It is beyond the scope of this short post to go into variations by race, SES, ideology, and other factors, but I have done so in Appendices A through G of the collaborative review doc. TLDR: there are some variations, such as that the increases in depression and anxiety were larger among sexual minorities, and among girls who self-identified as liberal. But the general trends are similar across all groups.

The suicide rate for boys was higher in the 1980s than it is now. I believe those earlier levels, which used to rise and fall with the violent crime rate, were caused in part by the high and rising prevalence of lead in children’s bloodstreams from the 1950s until leaded gas was banned in the late 1970s and early 1980s. Rates of suicide and violence then plummeted 15 years later, and sociologists have not yet converged upon an explanation. You can see graphs of these changes, and find arguments on both sides, in my debate with Chris Ferguson, in section 3.2.1 of the Collaborative Review doc.

Robinson Meyer argues that Biden’s decarbonization based industrial policy faces three significant headwinds: spending money efficiently, coordinating across multiple government agencies, and making policy adjustments over time. “The U.S. financial system persistently struggles to fund projects that take a long time to turn a profit and that can expect to have only modest returns. Unfortunately, the biggest and most important physical infrastructure — factories, transmission lines — often fall under that category. Second, the government may lack the ability to coordinate its own actions. Late last year, the Biden administration declined to help reopen a “green” aluminum factory in Ferndale, Wash., that was exactly the kind of low-carbon industry it wants to champion. Never mind the right hand not knowing what the left hand is doing: The right hand couldn’t get the left hand to plug the cord in. Finally, the government may not understand enough about the companies it’s trying to help. In Taiwan and South Korea, industrial-policy agencies… constantly gather information from the private sector and use it to adjust goals and policies over time. The I.R.A.’s main incentives are tax credits, which are hard to repeal once they’re in place and hard to fix if they’re not working. They are an unusually mindless way to incentivize companies to change their behavior.”

Robinson Meyer, “A Huge, Uncharted Experiment on the U.S. Economy Is About to Begin,” New York Times, February 12, 2023, https://www.nytimes.com/2023/02/12/opinion/economy-ira-infrastructure-clean-energy.html

A Huge, Uncharted Experiment on the U.S. Economy Is About to Begin

If you want to understand the immense windfall the Biden administration is about to bestow on green industries, take a look at hydrogen. Engineers still aren’t exactly sure what role the gas will play in a climate-friendly economy, but they’re pretty sure that (contra the ridicule in “Glass Onion”) it will be useful for something. We might burn it to generate heat in factories, for instance, or use it to make high-tech chemicals.

And thanks to three laws Congress passed over the past two years — the bipartisan infrastructure law, the CHIPS and Science Act and the climate-focused Inflation Reduction Act — the industry will be very well taken care of. Over the next decade, the government is going to invest $8 billion on hydrogen “hubs” across the country, special zones where companies, universities and local governments can build the machinery and expertise that the new industry needs. Other hydrogen projects will qualify for a $10 billion pot of money in the I.R.A. or $1.5 billion in the infrastructure bill. Still others could draw from a new $6.3 billion program that will help industrial firms develop financially risky demonstration projects.

So that’s up to $25.8 billion before you get to the bazooka: an uncapped tax credit for hydrogen that could pay out perhaps $100 billion or more over the next decades.

Few Americans realize it yet, but the trifecta of the Biden-era laws amounts to one of the biggest experiments in how the American government oversees the economy in a generation. If this experiment is successful, it will change how politicians think about managing the market for years to come. If it fails or misfires, then it will greatly limit the number of tools to fight climate change or a recession. The story of the 21st-century American economy is being shaped now.

I say “experiment,” but, really, there are two. The first concerns the economy. Mr. Biden’s team believes that it can move the United States toward a more robust, high-capacity and even re-industrialized economy. Can it? And can it use policy moreover to make sure that innovative ideas don’t get lost in the research lab or patent office, but instead make their way to the factory floor and corporate showroom, generating jobs and economic value along the way?

The second experiment: Can the same economy — which has, virtually since the abolition of slavery, derived a good deal of its industrial energy from extracting hydrocarbons from the ground and setting them on fire — find a new primary energy source? Even today, America generates 79 percent of its energy from fossil fuels. The administration is, in a sense, trying to conduct a high-stakes heart transplant on the economy while the patient remains alive on the table.

Don’t get me wrong: Some kind of climate boom is now all but assured. The investment bank Credit Suisse predicted last year that the I.R.A. would put more than $800 billion into the economy by the end of the decade, galvanizing more than $1.7 trillion in climate-friendly public and private spending overall. The law will transform the United States into the “world’s leading energy provider,” the bank said. The American renewable industry alone could attract 78 percent more investment per year by 2031, according to the energy-research firm Wood Mackenzie.

But I worry that the federal government has started its experiments too haphazardly. The I.R.A. did not emerge from careful study and bipartisan consensus building, but from intraparty haggling and a harried legislative process. Even the bipartisan CHIPS Act was more of a crisis measure than a strategic intervention. These shortcomings are forgivable; in the I.R.A.’s case, it’s not like Republicans were ever going to help pass a climate bill. But these constraints have deprived the government of the strong institutions, internal expertise and administrative capacity that have made similar experiments successful in other countries.

For practical purposes, that means, first, that the government won’t be able to spend all this money in the right place. The U.S. financial system persistently struggles to fund projects that take a long time to turn a profit and that can expect to have only modest returns. Unfortunately, the biggest and most important physical infrastructure — factories, transmission lines — often fall under that category. In other countries, industrial policy has entailed creating an agile, entrepreneurial agency that can get money to the right companies in the right ways — as a loan, as equity, as a purchase guarantee.

Congress took some steps in that direction last year. The I.R.A. beefed up the Loan Programs Office, the Department of Energy’s in-house bank, and it established a new green lending office within the Environmental Protection Agency. But Congress has put these institutions on a short leash with a limited mandate. This means that the government can’t support as many risky investments as it should.

Second, the government may lack the ability to coordinate its own actions. Late last year, the Biden administration declined to help reopen a “green” aluminum factory in Ferndale, Wash., that was exactly the kind of low-carbon industry it wants to champion. The local union, electric vehicle makers and the state’s Democratic leadership all wanted to revive the factory. The project even has national-security relevance, since the United States currently imports aluminum from Russia. But Mr. Biden chose not to intercede with the local electricity provider, the Bonneville Power Administration, to supply the plant with enough cheap power to operate even though it is a federal agency ostensibly under the president’s control. Never mind the right hand not knowing what the left hand is doing: The right hand couldn’t get the left hand to plug the cord in.

Finally, the government may not understand enough about the companies it’s trying to help. In Taiwan and South Korea, industrial-policy agencies don’t only hand out money; they constantly gather information from the private sector and use it to adjust goals and policies over time. The I.R.A. contains very few mechanisms for this kind of in-flight course adjustment. Its main incentives are tax credits, which are hard to repeal once they’re in place and hard to fix if they’re not working. They are an unusually mindless way to incentivize companies to change their behavior.

And this points to a related concern: that we have underestimated just how hard decarbonization will be. One of the most cherished and widely held ideas in climate activism is that we could have solved climate change by now if only we’d had the “political will.”

This idea, once true enough, may soon outlive its utility. Mr. Biden and his successors will discover that decarbonization is an inherently difficult and complex societal challenge that cannot be solved with money alone. Some important activities will be legitimately hard to do without emitting carbon pollution; there will be some trade-offs that flummox even the most committed progressives.

Which is to say: Even if the U.S. had an agency that could finance or approve any industrial project in the exact right way at the precise right time, it would still be legitimately unclear which projects it should support. Will a new lithium mine create jobs and build political support for decarbonization, or will its local pollution effects provoke backlash? If a new hydrogen hub opens in your hometown, will you love the growth or hate the higher housing costs?

The Biden experiments bear the mark of a particular set of lawmakers and White House staff members who needed to meet a particular set of goals. They sought to stimulate the pandemic-depleted economy, reduce carbon pollution in a durable way, respond to what they saw as the Chinese manufacturing juggernaut and — perhaps above all — revitalize the American working class to prevent the next Trumpian crisis. They stumbled on a germ of an idea, a climate-friendly “industrial strategy,” and after 18 months of excruciating legislative wrangling, they have somehow made it the law of the land.

But the lawmakers who wrote that policy are not charged with carrying it out, and many of the officials who championed it most — like Brian Deese, the director of the National Economic Council — are now leaving the White House. Will the next crew understand what they’ve inherited? In order for Mr. Biden’s two experiments to have a chance of success, the officials must not go on autopilot or disarm the parts of the I.R.A. meant to build domestic political support. And they cannot assume that everything about the coming climate boom will work out in the end. More than just the country’s fate depends on it.