For over a year, economists and the public appear to have been living in alternate realities. Preliminary numbers from the University of Michigan’s Consumer Sentiment Index show April to be the most dismal month since the survey started in 1952. But why? By almost every conventional measure, the U.S. economy is doing well. Economic growth is solid. Despite tariffs and the recent conflict with Iran, inflation is largely under control. Unemployment is a full percentage point below its 2012–2019 average. Median inflation-adjusted household income is at its highest point on record. The data say that things are looking good.

But Americans disagree. The University of Michigan’s April preliminary reading of 47.6 is lower than readings in early 1980 when we were in the first of two back-to-back recessions, inflation topped 10 percent, and mortgage rates exceeded 15 percent. Today’s consumer sentiment is not merely low. It is bizarrely low. The bizarre part is that Americans have seen worse economies than today’s, and have liked them more. In 1970, 1982, 1990, and 2007, economic growth was weaker than it is today, while inflation and unemployment were worse. Yet consumer sentiment was much higher than it is now.

Seeing no explanation in the data, I took an informal survey of some actual people: my six adult children. I posted the economic data on our family chat and asked how, in the face of this, Americans could be so down on the economy. What followed was a blizzard of complaints that the data are wrong, that economists are out of touch, and that I was being “a boomer.” Finally, my son cut through the noise: “You keep comparing today’s economy with the economies of generations past,” he told me. “I don’t care about that. People my age are worse off than we were a few years ago.”

And that was the key. It turns out that the reality people are feeling is reflected in numbers that don’t typically make the headlines.

Because the public, press, and politicians demand fresh numbers, economists usually gauge well-being by before-tax, inflation-adjusted income. After-tax income is what really matters, of course, since the IRS gets paid before we do. But after-tax data often don’t arrive until a year or more after the fact. And since the two measures usually move together, before-tax income has always been a decent proxy.

Until Covid.

Remember all those “free” checks the government gave to households? Much of that stimulus money was structured as tax credits. And that means it showed up in the after-tax income numbers, but not in the before-tax numbers. And that means the before-tax numbers economists typically examine are largely ignoring the Covid stimulus checks.

From 2019 to 2024, middle-income consumers saw their before-tax income grow 6.9 percent faster than inflation. Among the poorest fifth of consumers, before-tax income grew 12.8 percent faster than inflation. Those figures suggest that the poor and middle class are significantly better off today than in 2019.

But the after-tax numbers tell a different story. Things initially looked great: In a single year, the Covid stimulus checks boosted the median consumer’s after-tax purchasing power by 7.8 percent. For the poorest fifth of consumers, the boost was a staggering 22 percent. Up and down the income distribution, from the poor through the middle class and beyond, Covid relief significantly and immediately raised Americans’ standards of living — and held it there for over a year. The income boost lasted long enough that people got used to it.

And then the rug was pulled out from under them.

By 2023, the stimulus checks had dried up, eviction moratoria had ended, student loan payments were resuming, and inflation was coming off a 40-year high. The result was that many households experienced a sharp decline from the elevated lifestyle they had come to regard as a new normal.

From 2021 to 2023, middle-income consumers saw their after-tax purchasing power decline by almost 3 percent, and poorer consumers saw theirs fall by almost 10 percent. This is the smoking gun that explains the disconnect between the public’s mood and the economy’s fundamentals. While economists see before-tax income steadily rising since 2019, Americans are looking back longingly to their after-tax incomes in 2020 and 2021, when all that free money made them feel richer than they really were.

If current trends continue, we’ll be into the 2030s before more than half of households recover the purchasing power they enjoyed at the height of the Covid stimulus. Economists can keep pointing to solid fundamentals, but people will continue to be unimpressed. The stimulus showed them a better life that they have yet to recapture. That this better life was an illusion built on unsustainable government borrowing is of little comfort.