July 13, 2008 -- This week, former Sen. Phil Gramm, R-Texas, economic adviser to Sen. John McCain, R-Ariz., gave an interesting persepective on the nation's economic concerns by calling the U.S. a "nation of whiners."
While the comment ruffled feathers across the nation and prompted swift condemnation from presumptive presidential candidates Sen. Barack Obama, D-Ill., and McCain, according to consumer psychologist Kit Yarrow, Gramm was on to something.
"I think the way consumers feel about things is very emotional," Yarrow told "Good Morning America" today. "Those emotions are trumping reality, creating a snowball, which makes the economy worse. It's not as bad as consumers feel like it is."
Yarrow, who is also the Russell T. Sharpe Professor of Business at Golden Gate University, says that lack of consumer confidence has been caused by an negative overreaction to recent economic trends.
"We've had great prosperity for the last few years," Yarrow said. "We had very cheap gas. We've had a lot of increase in our home values. We've had it really pretty good as the stock market increases. Emotion is always caused by this mismatch between what we perceive and reality. It's really emotion, the psychology, that's contributing to our economy right now in a negative way."
According to Yarrow, consumers are more focused on problems on a larger scale, such as troubles in the housing markets. and the relative weakness of the dollar, because they have to deal with specific problems on a daily basis, such as rising gas and food prices. When consumers shell out more than $4 per gallon at the gas station, other economic considerations seem closely related and "very real."
In addition, Yarrow said consumers tend to feel threatened when growth is not extraordinary -- an unhealthy and unrealistic expectation.
"I think we've become entitled to a sense that we're going to have continued prosperity, and if we hadn't had it good for so long, I don't think there would be this level of emotion that's causing us to draw back on our spending," she said. "We expect great growth. Any sort of normal growth is considered a catastrophe now."
Yarrow told "Good Morning America" that this overreaction could be caused, in part, by the media and the preponderance of the term "crisis."
"It's described in anecdotal terms, as well," Yarrow said, "which causes consumers to be especially fearful."
In an interview with the Washington Times this week, Gramm agreed.
"We've never been more dominant; we've never had more natural advantages than we have today. ... Misery sells newspapers," he said. "Thank God the economy is not as bad as you read in the newspaper every day."
According to a Reuters report, both Obama and McCain were quick to show their opposition to Gramm's statements.
"Phil Gramm does not speak for me. I speak for me. So, I strongly disagree," McCain responded. "America's in great difficulty, and we are experiencing enormous economic challenges."
Since Gramm is one of McCain's top economic advisers, Obama used the comments to support claims that McCain is out of touch with the American economy.
"It's not just a figment of the imagination, it's not all in your head," Obama said at a campaign event in Fairfax, Va.