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Opinion Matters: How are Americans Thinking About Economic Recovery?

Posted by Nick Adams on January 12, 2009 at 9:55 PM

January 12, 2009,

Introduction
A broad inspection of public opinion data on the state of our economy reveals that Americans are worried about the future, less than optimistic about government's ability to face down the crisis, and ambivalent about Keynesian approaches to recovery. Furthermore, as they imagine future possibilities, they seem to be relying upon traditional partisan and ideological understandings of the economy. Thus, Democrats are more likely to support government spending as a stimulus strategy while Republicans are more likely to support reduced taxation. However, the high incidence of "don't know" and contradictory or otherwise ambivalent responses suggests that Americans may be open to bold leadership.

This report consists of three parts. The first summarizes the current state of public opinion regarding the economic crisis and its implications for Obama's proposed stimulus plan. Here, we draw on surveys by CNN, Politico, Rasmussen, Gallup, and NBC/WSJ. The second part of the report summarizes longitudinal data from the General Social Survey culled together by our research team. These data reflect Americans' longstanding ambivalence regarding public spending and taxation. The third offers some broad recommendations for approaching economic recovery given the current state of public opinion.

The Current Situation
Right now, Americans are feeling the pinch. Fully eighty-nine percent of Americans report being dissatisfied with the current economic situation (63% are "very dissatisfied") (Politico). Sixty-eight percent report that they are changing their habits to reduce their overall household spending (Gallup 12/14/2008). Of those who have money in the stock market, 87% report losing money. Almost half of them (47%) say they have "lost a lot of money in the stock market" in the past year (ibid.). According to Rasmussen polling released in early January 2009, half of Americans (50%) say their personal financial situation is getting worse while only 19% say their situation is improving. As a result of the paired housing and financial crises, Americans are much more worried about their ability to "maintain the standard of living [they] enjoy" than they were prior to April 2008 when the housing crisis came to a head (Gallup).

Americans are also absorbing media's assessments of the situation. While few are probably qualified to independently evaluate the economy, when asked how they would "rate economic conditions in this country today" fewer than 5% answered "Good" or "Excellent," down from an average of ~30% since 2002 (Gallup 12/14/2008). Since February 2008, survey respondents have also expressed that the economy is "Getting Worse" at the highest rates (~80%) since Gallup has asked the question (starting in 2002). Americans are also settling into the notion that the economy is in recession or depression. When asked in February 2008 whether the economy is growing, slowing down, in a recession, or in a depression, 6% said it was growing, nearly half (46%) said it was merely slowing down, a third said it was in recession, and only 12% agreed that we were in a depression. Seven months later, in late September, 2 out of 3 Americans reported that the economic funk was more than a mere "slowing down." One third said we were in a recession and a third said we were in a full blown depression (Gallup).

There appears to be fairly widespread agreement among the public that we should be bracing for a serious economic downturn. Three out of four Americans (74%) agreed that we are at least "somewhat likely" (on a scale with a range of very likely, somewhat likely, not too likely, not at all likely) to experience a depression lasting "several years" (Gallup 12/14/2008). But there is far less agreement about what to do about the crisis. A third of Americans believe that the economy can recover on its own, and only a relatively bare majority (54%) believe that "a major government economic recovery plan is necessary to restore the U.S. economy to good health (Rasmussen, 1/2009). Americans' doubts about the ability of government to help the economy are reflected in their discomfort with the bailouts of financial institutions and the auto companies. Equal percentages (46%) said the financial bailout was a bad thing vs. a good thing. And 51% opposed a bailout of the Big Three auto companies in early December (Gallup.)

Americans' ideas about what exactly is to be done seem largely determined by their longstanding ideological aversion to government involvement in the economy. While 56% of Americans said they supported Obama's stimulus plan in a recent CNN poll, they still seem to prefer individualized spending approaches. For instance, a December 2008 NBC/WSJ survey finds that the two most popular components of Obama's stimulus plan are tax cuts for middle- and lower-class Americans (30%) and tax cuts for businesses that create new jobs in the U.S. (27%). Only one in five (21%) of Americans prioritized investment in alternative energy sources like wind and solar power, 11% preferred federal aid to the states, and only 7% chose infrastructure spending as the highest priority. Also, more Americans (56%) expressed concern that the government would spend TOO MUCH money boosting the economy than worried about it spending TOO LITTLE (36%) (ibid.).

Patterns of support and opposition to government intervention in the economy tend to follow traditional party lines. Democrats are much more likely than Republicans to want the government to do more (60% to 25%) (CNN). Similarly, Rasmussen reports that "77% of Democrats say a major government recovery plan is needed" while just 34% of Republicans and 46% of Independents agree with that statement.

But a survey by Politico seems to reveal the potential of a third way between the traditional individual- and government-centered approaches to economic growth: responsible business growth. They found that 81% of Americans agreed that providing good, stable jobs should be a higher priority for businesses than maximizing the return for stockholders. Two thirds of those polled expressed strong agreement with the statement that "business corporations have an obligation to pursue actions that will improve the overall economy." Only 5% strongly disagreed with that statement. But, at the same time, 73% agreed that "government alone cannot solve our problems; we need the active involvement of the private sector to really get things done." These findings may exaggerate the degree to which Americans want to see business and government cooperation. (The Politico survey appears to have slightly oversampled Democrats and Liberals compared to the U.S. population.) But there appears to be an opening, nonetheless, for initiatives advancing more responsible business practices.

Any such initiative, though, would have to avoid being framed as classic government regulation of business. CNN reports that the electorate is evenly divided on whether government regulation is the prescription for our economic ills. Thirty-nine percent say there is too much government regulation while 39% say there is too little. Gallup opinion data are similar. Since 2001, though, they show a slight increase in the number of people believing there is too much regulation. Their figures show that 38% thought there was too much regulation in September of 2008 while 27% thought there was too little and 31% thought we had about the right amount of government regulation.

One might want to be cautious, though, about imputing too much inertia into these polls. The specific nature of the recent bailouts pose some contradictory challenges to the orthodox positions of both parties. It was, after all, the Democrats who came to the rescue of Big Finance over the objections of some Republicans. Populists Democrats, while used to the notion that government can play a positive role in the economy, may have been confused by the party's willingness to bail out the fat cats of Wall Street who have traditionally been allied with the economically conservative Republicans. Many rank and file Republicans, too, must have been confused to see their leaders support a nationalization of financial institutions. With traditional party rules and allegiances being upturned so recently, a somewhat befuddled American followership may be fairly moveable in the coming months.

Indeed, many Americans freely admit that they do not know how to proceed. Twelve percent (12%) report not being sure how to address the deficit during our economic crisis (NBC/WSJ). Thirteen percent (13%) admit they are not sure whether the economy can recover on its own (Rasmussen). Nearly one in four Americans (24%) are undecided about whether or not an economic recovery plan should include tax cuts (ibid). Seventeen percent (17%) say they don't know whether or not it is wise to spend on roads, bridges, and other infrastructure projects (ibid). And nine percent can't say whether or not increasing government jobs is a good idea (ibid).

The Past as Prologue
The ambivalence of the public on economic matters is nothing new. Obviously, conservatives and liberals have disagreed on how to organize economic activity since the beginnings of democracy and capitalism. But even individuals are conflicted about how to balance and prioritize government spending and taxation. The General Social Survey, a nationally representative survey conducted by social scientists since 1973, documents this ambivalence (see Appendix). Over the last three decades, sizeable majorities of Americans have consistently expressed a desire that the government spend more on protecting the environment, investing in the nation's health, solving the problems of big cities, reducing crime rates, treating drug addiction, improving our education system, shoring up social security, and offering better child care services. But at the same time, large majorities have also, without fail, complained that they are paying too much in taxes.

This seeming contradiction could point to an underlying desire of Americans for a more progressive tax code - "we need more spending, but I shouldn't be covering the expense." But it more likely reflects an oft-cited disconnect between Americans' socially progressive values and their willingness to manifest those values through self-imposed government tax-collection. In any case, Americans' desire to have something for nothing probably bodes well for any stimulus plan relying on deficit spending.

Recommendations: A Window of Opportunity/Failure
Most Americans' responses to our economic situation are largely prefigured according to decades-long debates about the role of government in the private sector. However, a significant number of "unsure" Americans are waiting to see what happens. These "unsure" Americans are probably being more honest with themselves about their lack of economic knowledge than the typical survey respondent. And the size of the group (again, a quarter of respondents don't know if tax cuts are a good idea) suggests that our incoming President may be able to sway many Americans to support his plan if he is able to project confidence in his proposals. As most Americans seem to be taking cues from the chattering classes and media, it will be especially important for his team to be seen by those elements as confident and competent in the run-up to any vote on stimulus legislation.

But getting a stimulus plan passed may prove to be the easy part. As any plan evolves, its success or failure will likely define economic debates for the next several years or even longer. The enormity of this moment cannot be overstated. And unfortunately, failure is an option. The left needs to be careful and thoughtful. That does not mean they cannot be bold where necessary. But, like "unsure" Americans, they need to admit when they don't know what they think they know. Also, they must be cognizant of events on the political front. Ultimate success is not likely to come without compromises that test the political maturity of the public and Washington. If, as a nation, we insist upon pitting one economic philosophy against another in a crucial test - a final battle between party orthodoxies - we are likely to miss opportunities as political gridlock foils action. Even if empowered Democrats were able to institute a plan without the input of Republicans, such a plan would be more likely to fail as Republicans from the leadership to the rank and file avoid cooperation with any policy requiring them to admit the defeat of their economic philosophy.

Fortunately, we appear to have the right President to navigate the country through the economic and political challenges of this moment - a pragmatist who is more interested in the long-term health of the country than short-term political victories. With a practical approach to recovery that starts with Keynesian stimulus to prime the pump of the economy and, perhaps, ends with government incentives for more responsible business practices (i.e. carrots more than sticks), Obama's Democrats and Republican allies may be able to smartly walk the country through a successful recovery. As they do so, they will have to emulate their boss's inclusive practices - always eschewing the temptation to be petty, always respecting the value in opponents' ideas, always seeking to subsume conflict with a larger vision.