How did the economy influence voters?

S1: Hey there , San Diego , it's Andrew Bracken in for Jade Hyneman. On today's show , after years of planning , San Diego City Council approves the Midway Rising redevelopment plan. This is KPBS Midday Edition. Connecting our communities through conversation. From the rising cost of living to record breaking gas prices and slow wage growth , economic strain is coming from multiple angles for a lot of San Diegans. Last month , US inflation rose for the third straight month to levels higher than expected. Joining me to talk about the state of our economy and the role it played in this year's election is Daniel and Mark. He is the chief economist at the Policy Innovation Center. Daniel , welcome back to midday. Thanks for having me. So , you know , it's been a while. We got a lot to catch up on here. But before getting into the economy and the role it played in the election. I wanted to start with inflation. There are some new federal numbers released for October. What are the latest numbers? Tell us.

S2: Um , the latest numbers tell us that we still have elevated inflation. It's not what we want. 2% is the target. 2% is the level of inflation at which you don't really notice it over the short term. Um , and unfortunately , it's been higher than that. The latest print that I saw was 33.7%. Um , that's a lot more than 2%. Right. So these are small numbers , but compounded over time. This is what makes you feel like you are falling behind and you can't afford a burger.

S1: And yeah , kind of trickles down to all these different parts of our lives. Right. Yeah. And , you know , one kind of way that folds in is just the state of wages. What do we know about just wage stagnation? We've been hearing a lot about that recently. Yeah.

S2: Yeah. There's been a few different periods of , um , inflation and wages growing at different rates. Right. And the truth is , if you start at the pandemic and say until today , they've been about equivalent wages have actually slightly outpaced inflation. But that's not been true for the last half year or so. Right. And so that's where people find frustration. You know , inflation is this thing that a lot of people hate. But under ideal circumstances if wages keep up with inflation it's not actually that bad. And particularly if you have debt including if you have a mortgage. Inflation reduces the real value of that debt. Or in other words , the value of that debt compared to the the wages that you're likely to earn. And so for a lot of people , it can be a beneficial thing in small doses. And as long as wages keep up. But lately they haven't been keeping up. Mhm.

S1: Mhm. And what about unemployment particularly here in San Diego. What does that picture look like. Yeah.

S2: Yeah. You know we've had this very extended period of very little movement around unemployment. So you've had a pretty low unemployment rate , a rate that's close to what economists would call like a natural rate of unemployment. And that's just going to arise no matter what. From the friction of people losing and gaining jobs. Right. Um , so unemployment's not that high. And so that's kind of why it's sometimes a bit of a head scratcher for a lot of economists about why people feel so pessimistic about the economy. Because unemployment's low. GDP growth is pretty robust and inflation is a little elevated. But it's not terrible. And particularly in comparison to wage growth. Right. So like why is it that people are feeling so bad about the economy. That's it. That's a big question. Mhm.

S1: Mhm. And on the unemployment rate there's also just this like participation piece. Right. Because to be part of the unemployment rate you kind of have to be actively looking for work. What is the I don't know what is the picture like that. Yeah.

S2: Yeah. Well um , it's actually especially low among women here in San Diego County. In fact , if we had the same rate of labor force participation among women as , say , Minneapolis , we'd have another 90,000 workers in the workforce. Right. And that would be a huge driver of economic growth. And one of the reasons that we don't have that , I mean , one of them clearly is the high cost of child care. You know , child care responsibilities in our society still fall disproportionately on women and in unaffordable child care makes it really hard for moms to go out back into the workforce , because for a lot of them , it's like , hey , I'm not sure I'm getting ahead by working all these hours when I have to pay so much for childcare. The average family of four with two kids of childcare age spends more on childcare than on rent in California , and we know how expensive rent is , right?

S1: We're both parents. I think we both live this as well. And , you know , the state has kind of made some progress in terms of like adding universal tech , which wasn't a thing when my kids were that age. But you said , yeah , the childcare costs are just so well.

S2: And the universal tech thing is a double edged sword , right. Because the 4 to 5 year olds are the most profitable segment of that market for the private childcare providers , right? Because they have the lowest ratios , meaning they don't have to have quite as many teachers for every student. And so for a lot of child care centers , having those 4 to 5 year olds is what kept them afloat. When the state said , oh , we'll come in in the Superman and rescue you by taking on child care for these young kids. Well , that really was a gut punch for the private child care market. And , you know , of course , in a lot of cases , these TK programs aren't the same breadth of hours that parents need in order to stay true , to be able to work a day. Right. I mean , thank God I have a flexible schedule. Um , I don't know what parents do when they've got to work on 9 to 5. And what are they supposed to do?

S1: So much in this cost of living question. So I want to move on , you know , now to the election and kind of what it what it what role it played and these things we're talking about. Can you walk us through the main ways that just economic frustration impacted how you feel? People voted.

S2: Well , there are three leading things that voters said in exit polls about why they voted for the Democrats , right? Like , why did they not vote for the party in power? And the three things were concern about the economy , about corruption , and a general opposition to the direction that the Trump administration is leading the country. And so , you know , on the front of the economy , which was the number one response , right. Like that we all know from the 90s , it's the economy , stupid , right? Like that's the thing that everybody cares about. And and on the economy front , like I said , you know , often we look at these initial statistics like inflation , unemployment , GDP growth , that's like when the nurse takes you into the doctor's office and checks your weight and your blood pressure. Right. Like those are the the key early indicators. But there are more in-depth questions that we have to ask about the economy. Just like the doctor , when they come in , they're not going to just ask you about your blood pressure , right. And in our case , the real challenge is a slipping away of the American dream , the definition of middle class. It's not a certain salary , it's the ability to afford a specific set of things. And those things are to buy a home , to buy 1 or 2 cars , to send your kid to college , to have health care , to save for retirement , and to take one family vacation a year. That is the definition of middle class. And for a lot of people , and I'm sure a lot of people listening today , especially in San Diego County , that feels out of reach. Yeah.

S1: Yeah. Um , you know , another just topic that comes up a lot is just the price of gas. Another thing that kind of came the average price of gasoline in the US now dipped below $4 a gallon today for the first time in a few months. Um , and here in San Diego , we know $4 is not the reality here. I think our average is about $5.83 right now. But , um , you know , they're still higher at record high for this time of year. What should we expect with gas prices?

S2: I mean , in the long run , my hope is that we see them fall in the reporting that I've seen on the current administration. You know , it seems like there's a lot of people who are arguing within the administration for putting an end to the Iran war. Right. And that a lot of people in the administration feel that that may have been part of what led to these historic shift in , in , in the vote for the midterm election. So , you know , if that's the case , if we really do get to a closure of the Iran war , that's not we're not sailing free and clear at the moment that it ends. Because , of course , as part of this war , many countries have been bombing each other and particularly destroying production and distribution infrastructure for oil. And so , you know , we expect to see some level of elevated prices long term , six months to a year. But with the ceasing of hostilities , we could we could see a significant decrease. Now I want to caution. You know , gas prices are this lightning rod. They're. They're the most salient form of of. Inflation because we see them on giant 30 foot signs with bright lights. You know , on our drive to work we see gas prices right in front of us every day. Uh , there are a lot of other drivers of , of prices that we don't think about. I mean , the average family spends about ten times as much or I will say , not spends , but the cost of health care. Health insurance is about ten times what we spend on gas , but many.

S1: Get the same level of attention.

S2: It doesn't get the same level of attention you're not seeing on a big sign. And for most families , an employer is covering most of those prices. But when we say an employer is covering it , that could be wages for the individual , right? And so just because your employer pays 80% of your premiums doesn't mean that you're not. That's not costing you something or.

S1: The cost to it. Yeah.

S2: Still cost because you could be making more money if they didn't have to spend so much on health care.

S1: You know , talking about these cost of living issues. One interesting thing from , you know , here in San Diego County from the election is despite those concerns. Voters in the county did choose some issues that were worth spending more tax dollars on. Particularly , I'm talking about measure B. It adds a countywide half cent sales tax , you know , for revenue around health care , like you've been talking about child care as well as solutions around the Tijuana sewage crisis , among other things. But , you know , I don't know , as an economist , how do you square those two things with hearing these concerns? And yet voters saying , hey , we're willing to pay this , this extra tax here?

S2: Yeah , I'll say first , as a resident , more than as an economist , I find it really heartening because as an economist , I see the investments that were singled out for measure B to be ones that could lead to long term sustained economic growth. Right. So we talked about how there's so many people who are not in the workforce because of childcare. Well , if we can make childcare more affordable and accessible , that means more people joining the workforce. And and our GDP really just is the number of workers times their productivity. Right. And so when we're increasing the number of workers , we're driving economic growth more than almost anything else we could do. Another way to look at this is , you know , the Tijuana sewage crisis , which is massive , massive , sustained impact on the economy of South County. Right. And so if we can if we can make progress on these issues , that's really great. And then I would say as an economist , I look at a comparative perspective. I would say , how does San Diego compare to other similar regions. And and you know the answer to that when it comes to sales taxes that were massively below comparable cities LA , Oakland , San Jose , Long Beach all have over twice the local tax sales tax that we do. Right. So so 6% of all sales tax goes to the state. Our rate is 7.75 right now. And what that means is that only 1.7 $0.05 on a dollar goes to the local government. It's two and a half times as much as that in a place like San Jose. Right. And so , um , you know , we're just playing catch up here and , um , I think it's even after the addition of this half cent sales tax for most of the major cities in this area. You know , in this state , it's twice as it's we are still collecting only half as much sales tax as other regions. Yeah.

S1: Yeah. And yet voters still did choose this , right? I mean , it is interesting. Um , they also , you know , passed several school bond measures. Similarly , um , you know , majority of those I think are likely to pass at this point. What does that tell you about voter priorities?

S2: To me , it seems that it seems that voters understand that you have to invest to make money , right? You got to if you want to grow your economy , you have to invest in the drivers of growth. And in our case , that's education. It's employment , it's child care. It's , you know , a healthy environment. You know , those kinds of things are crucial to the value proposition that we have as San Diego. I mean , think about San Diego is the most attractive climate in the country , and then we're squandering that with a sewage crisis. You know , like , come on , we just I think there's a , there's a , there's a to me , you look at the voters and you see a pretty rational desire to invest in what makes us grow.

S1: Well , I can have a lot more in my head , but I think we're going to have to leave it there for now. I want to thank Daniel and Makis , chief economist at the Policy and Innovation Center. Daniel , thanks so much for being here.

S2: Thanks for having me.

S3: That's our show for today. I'm your host , Jade Hindman. Thanks for tuning in to Midday Edition. Be sure to have a great day on purpose , everyone.