SCOTT SIMON, HOST:
Consumer confidence is down, according to the business research nonprofit The Consumer Board (ph). It echoes similar findings from the University of Michigan. And yet, the unemployment rate is currently at 4%. That's considered healthy. Inflation rate is 3% - above the Federal Reserve's target of 2%, but far from the 7% we saw in 2021. Eugene Ludwig says the numbers we use often don't tell the true story. He is the former comptroller of the currency under President Clinton and author of the book "The Vanishing American Dream," and he joins us now. Thank you so much for being with us.
EUGENE LUDWIG: Honored to be with you, Scott.
SIMON: What's not captured in that 4% unemployment rate of which we ought to be aware?
LUDWIG: You are counted as employed, for purposes of that calculation, if you work as little as one hour in the previous two weeks. So you could want a full-time job but you only have a sort of piece of a job, but you're still counted as employed. The second thing is that the number doesn't tell us anything about, are you earning a living wage? So if you're earning even a poverty wage or below a poverty wage, you're still counted as employed. Now, if you filter the number you just stated - the 4% - by, yeah, I want a full-time job but I can't get one, and people who can't earn above a poverty wage - which today is $25,000 a year - the actual number of people who are functionally unemployed is about 23%.
SIMON: What about inflation? Is that something - economists and many Democrats claimed the inflation rate had slowed even as prices remained high, but they weren't drastically high. What about the consumer price index?
LUDWIG: Well, there are two things wrong with the whole inflation numbers that we're fed every day. No. 1, the CPI is a basket of 80,000 goods and services. But middle- and low-income Americans don't buy 80,000 goods and services, right? The goods and services that matter to us - it's food. It's transportation to work. It's health care. How much does it cost to rent or have a home? If you look at the numbers that really matter to you, they have been inflating over the last 20 years more than the CPI. The second thing that really is a fooler is when a political figure announces that the rate is coming down, that doesn't really matter if it already spiked so high that the goods and services we have to buy are at a price point we can't afford.
SIMON: Do we need different statistics to judge the economy, or just do we need to read the ones we have more sharply?
LUDWIG: The government collects the numbers reasonably well. But what we need to do is change the definitions we use - basically, what we report and how we report it - that really reflects reality for Americans.
SIMON: We've heard calls to look deeper into the unemployment statistics before, and we have some voices to remind us.
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MITT ROMNEY: So it looks like unemployment's getting better. But the truth is, if the same share of people were participating in the workforce today as on the day the president got elected, why, our unemployment rate would be around 11%.
RUSH LIMBAUGH: Eleven percent, not 8.1%. And if the unemployment rate were 11% today, what do you think the prospects of Obama's reelection would be?
LOU DOBBS: The true unemployment rate is 15%. Others, private economists, put the number much higher - anywhere from 17% to 20%.
JAMES FREEMAN: A bad economy. A high unemployment rate. A lot of people outside the labor force is a fact of the election now, so...
SIMON: That was Mitt Romney, Rush Limbaugh, Lou Dobbs and James Freeman of the Wall Street Journal editorial board. And yet, of course, President Obama easily won reelection in 2012.
LUDWIG: Well, obviously, getting elected involves a lot of complex decision-making on the part of the American people. But here's my guess - we came out of 2007. That crisis really led, in a lot of ways, to Obama's election. And things were genuinely getting better - slowly, but they were getting better. And my suspicion is the American people looked and said, well, the economy isn't what I'd hope it would be, and, yeah, I'm not as well off as I'd like to be. But you know what? It's better than when he came to office, and net net, I want to give him another chance.
SIMON: And what's different now, Mr. Ludwig?
LUDWIG: I do believe the economy is the single most important factor in electoral politics. The last 20 years have not been kind to middle- and lower-income Americans. Things for middle- and low-income Americans have, generally speaking, from an economic perspective, been getting worse, not better.
SIMON: When does a new administration begin to have to take the rap for the economic statistics?
LUDWIG: Well, Americans give any new administration a chance to show that what it's doing is really making things better. And I don't know the precise, you know, number of months it takes for people to sort of say, you know, hey, you've been there long enough and things aren't getting better. But, you know, my guess is you begin to feel it about six months, eight months. It may be as long as a year, but it will happen.
SIMON: Eugene Ludwig is chair of the Ludwig Institute for Shared Economic Prosperity. Thank you so much for being with us.
LUDWIG: Thank you, Scott. Honored to be on the show. Transcript provided by NPR, Copyright NPR.
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