If there is one thing upon which people seem to agree, it is a troubled economy. I humbly note that they are wrong. 

There was a time in this fair land that we aimed for 3% inflation, 5% unemployment, and 3% real (inflation-adjusted) GDP growth. That time is gone. We believe we can better manage inflation, the ability to use the Internet to match the supply and demand for labor and hence lower unemployment, and an acceptance that a more mature economy can barely muster moderate GDP growth means that we have come to expect 2%-2.% inflation, 4%-4.5% unemployment and 2%-2.5% GDP growth. 

Guess what? We are meeting all these targets, and mostly toward the better side of them. In other words, the economy is proving strong and resilient. 

So, why do I believe we may follow the recent massive .5% Federal Reserve discount rate reduction with another .25% reduction? Because people are fickle and consumer confidence needs some shoring up.

But economists are fickler. Almost a century and a half ago the economics discipline embarked on a fork in the political economics road that was inspired by the great advances of hard sciences, especially in their use of calculus to optimize analyses. The result is what economists called the “rational man hypothesis.” 

This notion states that we assess the resources available to us and make decisions for their use that optimize our happiness or productivity, much as a robot or computer might do. I don’t know if I have ever actually met such a “homo economicus” subspecies. But, it is argued that, even if such beings don’t exist in the wild, we nonetheless make good decisions at least consistent with uber-rationality, especially those very important decisions that result from sufficient research because the stakes are high. 

The stakes are certainly high going into Tuesday’s national election in the U.S., but voters seem to remain woefully uninformed, or misinformed, about issues as important as the health of the economy. Despite a surprisingly strong economy, most people still fret about the state of the economy. 

There are a number of gauges, but the University of Michigan Consumer Sentiment Survey is often quoted as a measure of the health of the U.S. economy. Because consumers represent upwards of 70% of this economy’s spending, with government and investment in new productive capacity essentially making up the balance, how consumers feel is incredibly indicative of future economic trends. 

We see from today’s graph that periods of high inflation and/or high unemployment, the sum of which creates the “misery index”, sours our sentiment. When economic misery rises, sentiment falls. And, when people are in a sour mood, our fear flames are fanned by forces willing to manipulate us for political advantage. 

We are in such a troubled time. People are not looking at the economy rationally. Consistent, strong, and positive economic data has swayed few heads, while the (presumed) weakness of the American economy is listed as the single most shared concern in this election. The homo un-economicus among us may well determine an election that may equally well set us on a course of high tariffs, trade wars, global political irrelevancy, and, yes, high inflation. 

In fact, most economists are now united on perceived weaknesses in both candidates’ economic policies, but especially in those that would unwind decades of efforts to attain global cooperation in trade policy.

There have certainly been missteps in the negotiation of such policies, and one could argue, for instance with our two closest trading partners, that Canada and Mexico both benefited more than the U.S. in trade agreements. But, the fact is that all nations benefit eventually when we can ally with each other in meeting the needs of consumers and producers. Just because one entity benefits more than another does not invalidate the advantages from an apolitical international trade regime, at least for the community of nations that respect property rights and human rights. 

Under the right leadership, I believe consumers and voters can be educated, global trade treaties can be perpetuated, and even such vexing issues as migration, economic refugees, and global hunger can be solved. Such may require leadership beyond the capacity we can currently muster in this increasingly polarized world, but it has to start with the aspiration of enlightened leadership and education. The media has to also stop following every false scent in the interest of profits for deep-pocketed corporate owners and start discerning issues that are truly in the public interest. We have seen the problem and it is us. 

Franklin Delano Roosevelt realized this when he ran a particularly nasty campaign against Herbert Hoover as the Great Depression worsened in 1932. At his inaugural address on Saturday, March 4, 1933, he noted that “we have nothing to fear but fear itself.” He went on to softly berate consumers for failing to keep the consumption machine going, banks for not following prudent practices especially in the need to continue to lend to fuel production, and corporations who close their factory doors when we most need their jobs. He then concluded that, if each of us looks so narrowly at our perceived self-interest and becomes perplexed with pessimism, the economy is doomed to fail, unless government can pull ourselves up by our bootstraps, kick us in the rear, and jumpstart the economy. 

Looking again at today’s graph, something changed recently. We are not seeing consumer sentiment improving as the misery index declines. Despite the improvements in the economy, and a sum of inflation and unemployment that is now almost as low as it has been since 2011, consumer sentiment has just not improved as the political dialog has gone toxic. 

I realize government is the “G-bomb” in today’s society, and I am sure our leaders at all levels have done their best to co opt and corrupt the political process, especially in its essential educational role. A Consumer Sentiment Index that is reluctant to improve is a mere reflection of our dysfunction, personally and collectively, and bodes poorly for the economy. But, it does not need to be that way. Peoples willing to be informed and educated and politicians with the credibility to tell us what we need to know, not what will placate our worst fears, are the essential ingredients of prosperity and peace. 

Let’s see if we get that on election Tuesday, followed closely behind by Fed Wednesday, even if we may not be able to draw election conclusions until Friday, or later.