It’s a familiar scene in politics: just before an election, parties scramble to outdo each other with promises, painting a rosy picture of what they’ll deliver if elected. But Stephen Boyd, director of IPPR Scotland, offers a sobering reminder – it’s crucial that these promises are rooted in reality. He points to the perplexing situation in the US regarding their economy as a prime example of where the disconnect between grand claims and everyday experience can lead.
President Trump, ever the showman, loves to boast about the American economy, calling it “roaring like never before” and the “envy of the world.” While the first part of that statement is simply not true, there’s a kernel of truth in the second. The International Monetary Fund (IMF) projects that the US economy will outpace Germany, France, Japan, and the UK significantly this year. You’d think with such strong performance, people would be pretty happy. But here’s the twist: Trump’s popularity regarding the economy is actually quite low. One recent poll even put his net approval at a dismal minus 33 points, a worse showing than Biden’s lowest point. And the respected University of Michigan consumer sentiment index recently dipped to its lowest level ever recorded.
This huge gap between what the official economic numbers say and how people actually feel is incredibly puzzling. Part of the explanation is straightforward: comparing growth rates between countries doesn’t capture the nitty-gritty of how individuals are experiencing the economy in their daily lives. For instance, the Iran War has pushed up fuel prices, which hits everyone’s pockets. The job market is slowing down, especially for those just starting out, making it harder for young people to get a foothold. And imagine the stress for about 10 million Americans who are worried about losing their health insurance. These real-life concerns cast a long shadow, making those impressive growth statistics feel pretty irrelevant to someone struggling to make ends meet.
What’s unusual, though, is just how far consumer sentiment has strayed from those big-picture numbers on growth and employment. Even with a high employment rate and historically low unemployment in the US, people are still feeling down. This puzzle has sparked a lively, though surprisingly polite, debate between Nobel laureate Paul Krugman and Jared Bernstein, who chairs Biden’s Council of Economic Advisers. Bernstein and his colleagues argue that the main culprit is the elevated price level. People are still reeling from the post-Covid inflation that made everything so expensive. Even if the rate of price increases has slowed down, the overall cost of living is still much higher than it was in 2021. So, while things aren’t getting more expensive as rapidly, they’re still expensive, and that leaves a sour taste.
Krugman, however, isn’t entirely convinced. He points out that after previous periods of high inflation, consumer sentiment bounced back much more quickly. He believes the current disconnect is less about lingering inflation and more about how recent political promises have fallen flat. People are angry because the economic improvements Trump promised during his 2024 campaign simply haven’t materialized. Grocery prices didn’t magically drop “on day one,” and energy prices haven’t been cut in half. It’s not just the current economic struggles that are frustrating people; it’s the profound disappointment that the better economy they were promised during the campaign never arrived.
Krugman’s observations should be a serious wake-up call for Scottish politicians. Why? Because during the current Holyrood election campaign, every single party has been making economic promises that, frankly, sound too good to be true. Let’s look at a few examples. The Reform party’s manifesto, for instance, banks on the idea that cutting taxes will magically bring in more money. While it’s perfectly reasonable to argue that Scotland’s income tax system might need an overhaul and that some marginal rates are too high, it’s simply not credible to claim that cutting these rates will actually increase revenue significantly and quickly. There’s just no evidence to support this – it’s what George H.W. Bush famously called “voodoo economics.”
Then there’s the SNP, who understandably wants to show they’re on the side of struggling consumers. Their big idea to ease pressure on households is to put “statutory price ceilings on a basket of 20 to 50 essential food items” like bread, milk, and eggs in large supermarkets. While one can certainly criticize how supermarkets operate, often squeezing suppliers, these practices usually lead to lower, not higher, prices for consumers. The market for everyday items is incredibly competitive, with many of these products sold as “loss leaders” to attract shoppers. It’s incredibly difficult to see how simply slapping a price cap on these items would actually make a substantial difference to a family’s weekly grocery bill, especially considering the limits of devolved powers to even implement such a cap.
The Scottish Greens have their own ambitious wish list: significantly expanding subsidized childcare, making bus travel free for everyone, introducing a four-day work week in the Scottish public sector, substantially increasing the Scottish Child Payment, and “double-locking” devolved benefits, among many other commitments. These are undoubtedly legitimate long-term goals. However, presenting them as a ready-to-go package without a credible strategy for how to pay for them is not a serious approach. (Though, to their credit, the Greens do at least acknowledge that taxes would need to rise). The interesting moment came during their manifesto press conference when co-leader Ross Greer declared that the idea of a “costed manifesto” was “frankly misleading” and that comparing government budgets to household budgets was a “fallacy.”
While it’s true that the “household budget” analogy has often been used to mislead and obscure, as Cameron and Osborne did during the early years of austerity with their “nation’s credit card has been maxed out” rhetoric, the Scottish government isn’t a currency issuer and has very limited borrowing powers. Therefore, whether they like it or not, they do operate under very real, if not entirely fixed, budget constraints. Pretending that the next Scottish government, which already faces a projected gap of £4.7 billion between commitments and revenues by 2029-30, can finance all, or even a selection, of the Green manifesto commitments over the next parliamentary term is fundamentally unrealistic and unserious.
Scottish Labour also made bold claims, stating that their policies would boost growth by a significant 2.1% to 2.14% of GDP over the next parliament. These are very large numbers, and it’s incredibly difficult to see how they can be justified by the relatively small-scale “supply-side interventions” listed in their manifesto. Many of these interventions are desirable, but they are more likely to yield results in the very long run, not provide such a dramatic boost in a single parliamentary term.
In conclusion, if politicians tell people that tax cuts will increase government revenues, that supermarket prices will simply fall, that public spending can dramatically increase without a corresponding significant hike in taxes, or that small, pain-free economic tweaks will miraculously boost growth, they shouldn’t be surprised when the public reacts with anger when none of these promises actually come true. The electorate might not remember every single specific commitment, but they will undoubtedly retain a general sense that politicians promised to make their economic lives better. If the economy doesn’t improve – and whether it does or not will largely be decided by forces beyond Scotland’s borders – we will all face the consequences. This is likely to include a surge in the popularity of populism in all its forms. And, as Stephen Boyd rightly points out, populism is never good for the economy or, ultimately, for the people it claims to serve.