Reality Check: People getting worried about this economy

Voters this year will be treated to a pair of mutually exclusive pictures when it comes to the economy. What’s going to happen in the short term? What is coming our way further down the road? Obama will tell you that Bush wrecked the economy, but we are slowly but surely climbing back out of the hole. Romney will say that the “recovery” is stagnant and teetering on the brink of a relapse, largely due to current fiscal policy. So who is selling us the straight goods?
Business Insider tends to see things in a bit more of a dollars and sense kind of way, if you will. And they look at how investors are feeling on Wall Street. The current news is, to put it charitably, not good.

Having been writing about the economy for the last few years, one thing I’ve observed is this: The stock market tends to dictate the way people feel about the economy. When the market goes up, people get very good at telling stories about how the recovery is real. When the market goes down, they start believing the worst.
And so it goes that with the declines over the last few weeks, the worry is on…
Meet The Press had Jim Cramer as a guest. On the show he warned about imminent bank runs in Europe.

Is Europe’s situation that big of a problem for us, or is it all hype? If the nervous nellies on Wall Street are going into panic mode, does that mean that trouble is around the corner for us, or are we still somewhat insulated from their mistakes? I decided to ask the author, Joe Weisenthall, for his take on the optics.

The interesting thing is that the things people are talking about are completely not new: Greece, China, the expiration of the tax cuts and so on have all been on people’s minds for awhile. So in the sense that all these worries are real, yes, the concern is warranted. Still it’s a bit of a mystery what gets people to start taking seriously issues that aren’t new. Adding to the mystery is that some of the things people had been worrying about (like higher gas prices and imminent war) have been abating.
In terms of the real US economy, there haven’t been any particularly worrisome developments of late. Most of the data has been so-so, like it’s been for awhile.
So again, the big picture concerns are legitimate, but the increased intensity of worry over the past few weeks seems mostly to be about the undulations of the market.

So in economics, much like with politics, perception can often trump reality. If you give people something to worry about, they will worry about it and make real world decisions which can amplify the problem. If you scare the market enough, you can actually push the market downward.
But more to our point of discussion, how does it affect the political spectrum in the USA? If people believe the economy is doing worse, they will vote against the those they perceive as being responsible for it. Right now that’s the party holding the White House. It’s a tangled web to be sure.