Economic optimism falls. Are 'fiscal cliff' worries to blame?
A new Monitor/TIPP poll shows Americans' outlook on the economy soured in December, across the board – coinciding with the 'fiscal cliff' standoff. For Republicans, economic optimism has hit rock bottom.
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Other indexes of the economic outlook have given mixed signals lately. The index of consumer confidence by the Conference Board, a business-oriented research and reporting service, rose in November. But a Reuters/University of Michigan index of consumer sentiment rose only slightly during that month, and recently fell in a December reading. Economists interpreted the drop as partly related to fiscal-cliff worries.Skip to next paragraph
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Other factors can strongly affect confidence or optimism in all these polls, including slow-but-steady improvement in the job market and volatile gas-pump prices.
When gauges of consumer confidence are released, politics is often off the radar as an explanation of American sentiment. Yet the TIPP poll has shown, over time, that political views can color people's perceptions of the economy.
In 2004, as the economy was in expansion mode with an improving job market, Democrats were generally pessimistic. Republicans at that time, with George W. Bush in the White House and heading toward a reelection win, were optimistic. Independents showed very modest optimism.
The political moods swung the opposite way starting in 2008 as Obama won the White House. And, despite high unemployment during the recession and its aftermath, Democrats have remained generally optimistic (with some ebbing and flowing) since then. Republicans have remained generally pessimistic.
The partisan gap is, predictably, very visible in the index component that relates to the federal policy climate. But the divergence along party lines is visible even in the way people report their own financial outlook, and their sense of where the economy will head over the next six months.
The TIPP Economic Optimism Index, although down sharply since October, is little changed from where it stood earlier this year, and is close to its average level during the Obama presidency.
Optimism fell sharply over the past month among women, Hispanics, and Democrats, all groups that tended to favor Obama in the election. One possible explanation is something of a "return to Earth" factor as the election campaign fades in the rearview mirror. All those groups still show above-average optimism levels in the poll (although for women it's only slightly so). And Democrats, despite an eight-point drop over the past month, still have higher optimism today than they did six months ago – in contrast to the US population at large.
Although fiscal bargaining has resulted in headlines about potential tax hikes for the rich, optimism barely budged (edging down to a level of 43.6) for people making over $75,000 a year.