John Sides and I posted something yesterday on the yawning gap between economic perceptions of Democrats and Republicans, to which we received some interesting comments (see also here and here) that I’d like to reply to.

In short, we presented anecdotes and referred to evidence that Democrats and Republicans are increasingly divergent in their perceptions of the economy and are biased based on which political party happens to be in power. Some commenters replied: Sure, that makes perfect sense: if you’re a Democrat it’s perfectly logical to think the Democrats are doing a better job on economic policy, and conversely if you’re a Republican. Thus, the commenters argued, what we were presenting as bias is really nothing but legitimately different views on economic policy

First I’ll excerpt our story, then I’ll say why I disagree with the “rational perceptions” argument. We wrote:

in mid-September, John McCain notoriously said, “The fundamentals of our economy are still strong.” But then in early March, he said that the American people “want to know how we got into this ditch–the worst economic crisis since the great Depression.” Based on these two statements, the slide into the ditch apparently occurred sometime between September 16 and March 3.

Similarly, University of Chicago economist Casey Mulligan spent the end of 2008 arguing that the economy is just not that bad, but then changed course in March, writing that “the crash of 2008 did not bother me” but “the crash of 2009 is more worrisome . . .”

Joseph Bafumi in his Ph.D. thesis on “the stubborn American voter.” He found that voters are less willing to vote based on past performance but more willing to offer evaluations that, even if inaccurate, fit their partisan predispositions and vote choices.

Larry Bartels analyzed a 1988 survey that asked “Would you say that compared to 1980, inflation has gotten better, stayed about the same, or gotten worse?” Amazingly, over half of the self-identified strong Democrats in the survey said that inflation had gotten worse and only 8% thought it had gotten much better, even though the actual inflation rate dropped from 13% to 4% during Reagan’s eight years in office. Republicans were similarly biased about the Clinton-era economy: in 1996, a majority of Republicans thought that the budget deficit had increased.

20% of Republicans and 8% of Democrats were “satisfied with the way things were going in the United States.” Immediately after Obama’s inauguration, the parties flipflopped: 18% of Democrats and 14% of Republicans expressed satisfaction.

The same pattern emerges in consumer confidence. ABC News surveys surveys show that the views of Republicans became 19 points more negative between October and mid-April. Meanwhile, the views of Democrats improved by 10 points, even as the economic news became grimmer.

Now let me consider the argument that people are not actually biased, that they just have different perspectives. This is a line of reasoning that we thought a bit about when putting some of this material into Red State, Blue State, and which Joe Bafumi thought a lot about when writing his Ph.D. thesis. The short answer is that we see these partisan discrepancies in so many different areas.

Probably the cleanest example is Larry Bartels’s cited above, where only 25% of Democrats (compared to 70% of Republicans) surveyed in 1988 thought that inflation had improved in the previous 8 years. Another interesting question is why only 70% of Republicans knew about the trend in inflation, but in any case we’re seeing huge partisan differences about an essentially factual question. (Yes, you can argue about the details of the definition of inflation, but by any measure it seems pretty clear that inflation declined between 1980 and 1988. My best guess at why people got this wrong is based on a conversation I had with Eric Snowberg and Rod Kiewiet, who conjecture that, when asked about the rate of inflation, people often respond by telling you about prices. From 1980 to 1988, prices went up, so it might be natural for some people to think this meant that inflation had gone up. Again, though, the point is that there are big differences between Democrats and Republicans in how they responded to the question.)

Beyond this, sure, in any particular case there could be a reason for people’s views. I think it’s clear that John McCain decided that we are in “the worst economic crisis since the great Depression” sometime after he lost the election–and from John McCain’s perspective, it makes perfect sense to assume that things would be going better if only he were president. Casey Mulligan is an an expert on macroeconomics, and so maybe it misses the point to use his partisan affiliation to evaluate his claims about the stock market and the economy. And, yes, it makes a lot of sense for Democrats to approve of the direction the country is going, now that Obama is president.

That said, given the evidence that people do have biased perceptions about the economy–and the evidence that this bias has increased over the past half-century–I think it makes sense to conclude that much of people’s judgment and expectations about the economy are clouded by partisanship, with Democrats too eager (on average) to see improvement shortly upon Obama’s accession to power and Republicans too eager (on average) to switch their view from “fundamentals are strong” to “worst crisis since the Depression.”