GDP Growth Signals Broad Prosperity
False Assumption: Rising GDP, consumer spending, wage growth, and low unemployment accurately reflect widespread economic prosperity and public satisfaction.
Written by FARAgent on February 09, 2026
In the post-World War II era, when America functioned as one somewhat unified economy tied together by housing finance and broad middle-class gains, policymakers crafted models hinging on aggregate indicators like GDP growth and consumer spending to gauge national well-being. These metrics made intuitive sense; higher output and spending correlated neatly with rising consumer confidence, as families felt the benefits in their pockets. Elites at the Fed, Treasury, and Wall Street nodded along, assuming that what was good for the aggregate numbers was good for the average Joe.
Fast forward to the mid-2010s, and the cracks appeared, accelerating post-COVID into a full 'boomcession.' Corporate profits soared, GDP hit 4.4% growth, unemployment dipped low, yet consumer sentiment cratered to record lows of 57.6 despite wages rising at the same 1.1% clip as in happier 2018. Invisible termites gnawed away: banks pocketing $600 billion in 'free' services by underpaying deposits, counted as consumer spending; non-discretionary hikes in healthcare, housing, and utilities bloating GDP without delighting anyone; CPI blind to borrowing costs that crushed households. Policymakers pushed buttons on mislabeled dashboards, celebrating a boom while families seethed over pinched dollars.
Today, a contested rethink brews, with critics like Matt Stoller highlighting spending inequality—poorer areas facing 0.46 points higher food inflation—and tiered economic bubbles where corporate parties rage amid public recession vibes. Mainstream economists on CNBC still dismiss sentiment polls as soft, clinging to hard data, but mounting questions arise as Trump's Fed pick faces the impossible task of aligning models with middle-class reality. The irony bites: experts who once scoffed at public intuition now grapple with why a scorching economy feels like a deep freeze to voters.
Status: Experts are divided on whether this assumption was actually false
People Involved
- In the corridors of economic policy, figures like Jason Furman played key roles in upholding the view that GDP growth meant broad prosperity.
- As an advisor to President Obama and a prominent Democratic economist, Furman pushed for Kevin Warsh as a potential Federal Reserve Chair.
- He described Warsh as an independent expert, ideal for managing the economy through orthodox models that tied rising GDP to public satisfaction. [1]
- This endorsement came amid growing debates, yet Furman stood by the indicators, seeing them as reliable guides.
▶ Supporting Quotes (1)
“Here’s Obama advisor and Democratic economist Jason Furman making the case for Warsh. Jason Furman @jasonfurman Kevin Warsh is well above the bar on both substance and independence to be Chair of the Federal Reserve.”— The Boomcession: Why Americans Hate What Looks Like an Economic Boom
Organizations Involved
Institutions like the Federal Reserve leaned on indicators such as GDP and consumer spending to shape their decisions. They nominated figures like
Kevin Warsh to lead, even as public discontent simmered below the surface.
[1] Critics argue this reliance masked deeper issues, with the Fed steering policy based on data that overlooked widespread frustrations. Meanwhile, the Bureau of Labor Statistics built consumer spending figures in curious ways. It counted underpaid bank deposits as 'Financial services furnished without payment,' which padded the numbers and suggested a prosperity that many did not feel.
[1] Growing questions surround how these methods sustained an optimistic narrative amid rising inequality.
▶ Supporting Quotes (2)
“Yesterday, Donald Trump nominated candidate Kevin Walsh to become Chair of the Federal Reserve. Warsh is mostly an orthodox Wall Street GOP pick”— The Boomcession: Why Americans Hate What Looks Like an Economic Boom
“The Bureau of Labor Statistics (BLS) assumes the $2k a year you send banks by receiving too little on their deposits is tallied as “buying” free check and banking apps.”— The Boomcession: Why Americans Hate What Looks Like an Economic Boom
The Foundation
The assumption that GDP growth signaled broad prosperity took root in metrics that once seemed solid. Consumer spending data included non-discretionary costs, like imputed banking fees amounting to $600 billion yearly, treating them as voluntary boosts to the economy.
[1] This approach held up in an era of unified growth but faced challenges as economic bubbles and inequality created tiers of experience. The Consumer Price Index added to the foundation by excluding borrowing costs, such as credit card and mortgage interest, leading to claims of low inflation at 2.6 percent.
[1] Mounting evidence suggests this ignored household pressures that stirred public anger. Aggregate wage growth, at 1.1 percent in both 2018 and 2025, bolstered the case for prosperity, yet critics point out it overlooked spending inequality, where poorer households dealt with food inflation 0.46 points higher than in richer areas.
[1]▶ Supporting Quotes (3)
“There’s an item in the personal consumer expenditure data called Financial services furnished without payment (107), on which Americans are going to spend roughly $600 billion this year, or $2k per person.”— The Boomcession: Why Americans Hate What Looks Like an Economic Boom
“In 2023, I noticed that the consumer price index, the typical measure of inflation, didn’t account for borrowing costs, so the Fed hike cycle, which caused increases in credit card, mortgage, auto loan, payday loans, et al, just wasn’t incorporated.”— The Boomcession: Why Americans Hate What Looks Like an Economic Boom
“from “2006 to 2020, poorer metropolitan statistical areas experienced annualized food inflation that was 0.46 percentage points higher than that of richer ones—amounting to a cumulative difference of 8.8 percentage points over the period.””— The Boomcession: Why Americans Hate What Looks Like an Economic Boom
How It Spread
The idea spread through media and academic channels that favored certain data over others. CNBC analysts and mainstream economists often dismissed consumer sentiment surveys as soft polls, elevating 'hard' figures like GDP and corporate profits instead.
[1] This preference persisted into the mid-2010s, even as signs of decoupling emerged. Policymaker models from an earlier, more unified economic period carried forward, influencing Federal Reserve nominations and decisions.
[1] They assumed growth would naturally lead to public happiness, but growing dissent challenges this propagation, highlighting how funding and social pressures sidelined alternative views.
▶ Supporting Quotes (2)
“On CNBC, analysts discount consumer sentiment indicators. They are just a poll of what people think, not “hard” data of pricing or profits.”— The Boomcession: Why Americans Hate What Looks Like an Economic Boom
“The fundamental dynamic is that those models were constructed in an era where America was one discrete economy, with Wall Street and the public tied together by the housing finance system.”— The Boomcession: Why Americans Hate What Looks Like an Economic Boom
Resulting Policies
Policies built on these indicators shaped major economic moves. Under President Biden, the Federal Reserve raised interest rates, guided by CPI and GDP data that critics argue were misleading.
[1] This led to bank overcharges climbing by $230 billion annually, without accounting for the non-discretionary burdens on households. Mounting evidence challenges whether such policies truly fostered the broad prosperity they aimed to reflect.
▶ Supporting Quotes (1)
“Under Biden, as interest rates jumped and banks took advantage by raising prices to consumers, Americans paid an additional annual amount of $230 billion a year, roughly more than $700 per person.”— The Boomcession: Why Americans Hate What Looks Like an Economic Boom
Harm Caused
The disconnect between indicators and reality brought tangible harms. Consumer sentiment plunged to a record low of 57.6 in 2025, despite GDP growth of 4.4 percent, which eroded political support and marked Trump's second term as the worst on this metric.
[1] Lower-income groups bore extra burdens, facing over $700 per person in additional bank fees and higher food inflation that squeezed affordability.
[1] Critics argue these effects highlight growing questions around the assumption, even as aggregate wages appeared to rise.
▶ Supporting Quotes (2)
“In 2025, when the sentiment indicator was at 57.6, the lowest ever recorded... Trump’s second term is not only worse than his first, it is the worst economic management ever recorded by this indicator.”— The Boomcession: Why Americans Hate What Looks Like an Economic Boom
“Rich people tend to get better deposit rates, so the answer is people with lower deposit amounts. That’s inequality, right there, and not income inequality, but spending inequality.”— The Boomcession: Why Americans Hate What Looks Like an Economic Boom