In the last US presidential election, in an economic context that apparently favored the party in power. The market was strong, with a rate of 5.9% in 2021, slowing to 1.9% in 2022 and 2.5% in 2023, and remaining positive in 2024. , and the stock market remained stable.
However, many voters did not view the country with the same optimism that macroeconomic data suggested. This disconnect between official numbers and popular sentiment raises questions about how
by Lawrence Summers and colleagues, offers a key to understanding this disconnect. The authors show that, although it is controlled, the increase in rates has a direct impact on voters’ perception of money. They explain that the official consumer price index (CPI) does not include the costs of loans — such as mortgages and car financing — which weigh heavily on the family budget. Thus, while economists see a solid economy, consumers experience a different reality, marked by the increase in the cost of credit.
In the 1970s, economist Arthur Okun included interest rates in his “misery index,” which better captured the effects of the cost of credit on the household budget. However, this methodology was revised in 1983 by the Bureau of Labor Statistics (BLS), which removed interest from the official inflation calculation, relying only on rental values to measure the cost of housing. Although more stable, this change made the index disconnected from the experience of consumers, who feel the impact of financing rates in their pockets.
So, for many voters, the cost of credit has become a central element in the economic assessment, influencing pessimism even in a low-growth scenario. After all, for the average American family, buying a home is their biggest lifetime investment. However, as interest rates have risen, mortgage payments have tripled from their 2021 lows, and monthly car loan payments have increased by more than 80% since the start of the pandemic. These costs, ignored by traditional indices, weigh on the budget and create a disconnect between the inflation index calculated by economists and the cost of living perceived by citizens.
The study shows that this disparity between official data and popular perception occurs in other countries where consumer credit is widespread and interest rates have risen, even with controlled inflation. Furthermore, rising interest rates impact the real estate market: financing becomes more expensive, driving away buyers and creating a “lock-in” effect, in which owners are stuck in their homes because they are unable to finance another property with higher interest rates. This imprisonment reduces mobility and worsens the negative perception of the economy.
In this scenario, the American voter votes with a vision that is not captured by the metrics. While economists monitor inflation and unemployment using traditional indices, voters feel the weight of the cost of money. For them, what matters is the cost of maintaining a home, financing a car and paying bills, that is, in times of high interest rates, conventional economic data may not be calibrated to reflect the real experience of ordinary people.
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