Objective This study sets out to examine the roles of party identification, political knowledge, education, and media use in citizens’ perceptions of changes in the economy, federal deficit, poverty, and crime rates between 2001 and 2008. It also tests the predictions of motivated reasoning versus Bayesian updating in seeing how (or if) perceptions of the economy changed as conditions worsened during 2008. Method This research used American National Election Studies (ANES) panel data in creating regression analyses for perceptions in January and November 2008, with the former as a control for the latter. A repeated‐measures analysis of variance tracked changes in partisans’ perceptions of the economy during the year. Results Partisanship was a robust predictor of perceptions. Political knowledge and education tended to promote perceptions that were in the same direction as actual trends, but political knowledge interacted with party identification to promote partisan polarization in perceptions. Television news exposure was the most important media variable, although it promoted pessimism on all trends. As economic conditions worsened throughout 2008, partisans’ perceptions of the economy converged, suggesting that citizens, especially Republicans, updated their perceptions. Conclusion The findings for partisanship and its interaction with political knowledge are consistent with the motivated reasoning literature, but the emergence of a bipartisan consensus about the worsening of the economy by the end of 2008 supports Bayesian updating, although it may take pretty undeniable facts for it to work.