The Economic Perception Gap

cat's meow · #1 (**permalink**) 11-12-2006, 08:01 PM

analysis of this past week and what is probably coming down the line...I have always read Quinn and what she has to say in terms of economic advice (and taken some of it quite frankly)

Quote:

The Economic Perception Gap
Creeping doubt can lead to big shifts in the political landscape.

By Jane Bryant Quinn

Newsweek

Nov. 20, 2006 issue - Talk about being in denial. President Bush thought that voters should credit him for a great economy, even if they opposed the war. Just look at the numbers: low unemployment, low inflation, record profits, taxes down, stocks up. But in exit polls, half the voters called the economy "not good" or "poor." Only 31 percent said they were "getting ahead" financially. Someone's not in the loop. Is it the public or the prez?

I'll give you a hint: the answer lies in the election returns. The public declared that they're changing the terms of the debate. True, this country is richer than ever, with people spending more at all income levels. But too many unaddressed problems have been piling up—the Iraq and Afghanistan wars, retirement insecurity, oil dependence, political and corporate corruption, budget deficits, health-care costs and hot issues such as stem-cell research. Nobody seems to know what to do.

Creeping doubt can turn into a seismic shift in political thinking, says Allen Sinai, chief global economist for Decision Economics. For example, take the perceived failures of the Carter years. They ushered in Ronald Reagan, whose antigovernment rhetoric has dominated our choices for the past 25 years. But answers don't seem to lie in that direction anymore. "Another great political wave may be building up, and once it rolls out it doesn't quickly get reversed," Sinai says.

The new wave—the one the public sees but Bush does not—is a pervasive feeling of permanent insecurity, says Yale political scientist Jacob Hacker, author of the new book "The Great Risk Shift." By "risk shift," he means that employers and governments have left us more on our own, to fund our health care and retirement plan. Bush's ownership society doesn't look good if you're on the street at 61 and need a Starbucks job for health insurance.

At the top, the "working rich" are doing stupendously well. In 2004, the wealthiest 1 percent of households (with incomes higher than $315,000) copped 53 percent of all the year's income gains. Americans usually don't care how much other people get as long as they're doing OK themselves. But lately, they haven't been. Median incomes for households with people of working age (65 or less) fell last year for the fifth year in a row. Adjusted for inflation, these families are bringing in $3,000 less, the Economic Policy Institute reports. When the president tells them they're fine, he sounds out of touch.

One statistic, however—the slowdown in job growth—may not be as bad as it sounds. The reason could be partly demographic rather than a sign of economic weakness. Baby boomers will be leaving the work force in rising numbers. The working-age generation behind them is comparatively small. Teenagers are staying longer in school. So collectively, there's less growth in the number of people to employ, according to a study by the Federal Reserve System. That should be good for earnings, over time. Employers will have to pay scarce workers more, and the work force will have higher levels of bankable education.

In Washington, the political parties will be sharpening their agendas for the wide-open '08 presidential race. The Republicans have one last chance to show they can fix things, after all. Otherwise, voters will bring in new top management. If there's indeed a longer-term shift in public-policy thinking, here's how the economic priorities will shake out:

The minimum wage. It's expected to rise from $5.15 an hour to $7.25—not a stretch, for the country as a whole. In 22 states and the District of Columbia, the wage is already higher than that; six more states authorized increases at the ballot box this year. That fits with similar data developed by Princeton political scientist Larry Bartels. He's shown that income growth, for the middle class and poor, rises substantially more under Dem presidents than under Republicans (the rich fare about the same, either way).

Taxes. The superrich lost their chance to abolish the estate tax on money left to heirs. Dems will almost certainly want to renew Bush's middle-class tax breaks, such as tuition credits. But the wealthy will find themselves in the cross hairs.

Social issues. Universal health insurance will be back on the table. Congress will target the high cost of prescription drugs. You'll see tax-favored savings programs for the average guy, not just for the person who can afford to put large sums away. Social Security has to be fixed. Money will be shaken out of the Pentagon's budget, assuming a pullback in Iraq.

The new regime won't be cooking anyone a free lunch. But in concept, it believes that government can help. Dems lean toward economic security, not go-it-alone. Can they do it? We're going to see.

Reporter Associate: Temma Ehrenfeld

Dom1 · #2 (**permalink**) 11-12-2006, 08:30 PM

Even if half the voters in the exit polls said the economy was not good or bad it doesn't necessarily mean that the economy is good or bad. There are some people who will always view the economy as "not good" or "bad" because their personal finances are not where they should be. I think that in many cases it is their own fault. It was hard for me to believe this statistic the other day, so I don't know how valid it is, but it was stated that the average credit card debt was $9200. Of course the economy is going to be viewed poorly by the people who carry these large debts, they make poor personal decisions and it is someone else's fault. People view their personal finances as teh determining factor in whether the US economy is doing well, and if they are not able to manage their own household they will automatically view the economy as negative. It doesn't mean it is nearly as bad as they claim, what it very well could mean is that people don't know how to manage their own finances.

You all know someone who has enormous credit card debt, and other debts in general. In most cases I'll bet it is due to poor choices by them, not due to extrinsic factors. Personally, I don't carry any credit card debt because if I refuse to pay interest as it is throwing money away. How about the rest of you? Someone has to be driving that average debt up, and it is not the government's fault.

cat's meow · #3 (**permalink**) 11-12-2006, 09:57 PM

I would agree with you to a certain extent but when people have to go into debt to pay off a medical bill (which does happen) then that is not good.

After my divorce several years ago I cut up all credit cards except one, it was the best thing I could have ever done. I have been very careful to get the car and the student loan I had all paid off. Except for my mortgage I have credit card debt of about $4500 (just the one card) and that is mainly due to a summer filled with several emergencies like a roof repair, the dishwasher flooding my kitchen, and me being stupid and backing my car into a tree. Emergencies do happen.

Yes, you do have to be careful and not live beyond your means and too many Americans 'gotta have everything now.' I am not sure that is exactly what Quinn is relating to.

One of the main things that hit me are the statistics my girlfriend had from her hospital management degree program about Americans having to go into great debt because of out of control healthcare costs (emergencies that are not expected). This cost bites us (the economy) in the ass, we have big a econ prof at our place (Dr. Cyril Chang) who has written extensively about this and how it is killing us. I read some of his stuff she was studying and it is eye openning, he is refered to a lot around the country.

http://fcbe.memphis.edu/modules/gene...d=39&topic=bio

Dom1 · #4 (**permalink**) 11-12-2006, 10:11 PM

Some of the credit card debt may be reasonable, but I think the majority of it is not. We all know people who have outrageous (at least I think so - evidently some do not, or they wouldn't keep spending) credit card debt. It was just an example of why I think some may complain about the economy when it is really their own choices which is causing their economic circumstances.

It is actually pretty common to complain about the economy in my opinion. People still complain about individual taxes being too high - even though we have one of the lowest individual tax liability of any industrialized nation. People will complain about corporate taxes being too low - even though we have one of the top corporate tax rates among industrialized nations. People complained about the economy in the 1990's as well. I think they were doing it more so because they were not where they wanted to be economically, not because the economy was actually bad, which it wasn't.

I look back on a small informal poll done on this forum a little while back. The question was how many people are better off now than six years ago. I think everybody except the original poster said they were better off - yet people will still complain about the economy. I think a lot of the disappointment in the economy is due to how they perceive where they are compared to where they want to be. Not all, but much of it is due to personal choices.

cat's meow · #5 (**permalink**) 11-12-2006, 10:18 PM

Well, to a certain extent the 'hero worship' of the American dollar has to do with this too. If you have not 'struck it rich' like Donald Trump, P Diddy, or Britney Spears then 'you suck' is the message in the grocery store line. Part of our American aesthetic revolves around that and it comes down to personal choices like you say. What do you REALLY value? That is the right question.

gdfather02 · #6 (**permalink**) 11-13-2006, 12:54 AM

Quote:

Originally Posted by Dom1

Some of the credit card debt may be reasonable, but I think the majority of it is not. We all know people who have outrageous (at least I think so - evidently some do not, or they wouldn't keep spending) credit card debt. It was just an example of why I think some may complain about the economy when it is really their own choices which is causing their economic circumstances.

It is actually pretty common to complain about the economy in my opinion. People still complain about individual taxes being too high - even though we have one of the lowest individual tax liability of any industrialized nation. People will complain about corporate taxes being too low - even though we have one of the top corporate tax rates among industrialized nations. People complained about the economy in the 1990's as well. I think they were doing it more so because they were not where they wanted to be economically, not because the economy was actually bad, which it wasn't.

I look back on a small informal poll done on this forum a little while back. The question was how many people are better off now than six years ago. I think everybody except the original poster said they were better off - yet people will still complain about the economy. I think a lot of the disappointment in the economy is due to how they perceive where they are compared to where they want to be. Not all, but much of it is due to personal choices.

You know the old saying "if you tell a lie long enough, people will start to believe it??" That is what we have here.
Politicians hammer home one billion times the thought that the economy is bad because (insert any number of personal financial problems here); in turn, their voting base and a number of other undecided voters, after hearing all of that rhetoric one billion times on tv, on the radio, and in the newspaper, will ultimately start to believe it, "yeah, the economy is doing bad!!"