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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.

By Staff writer / December 11, 2012

Trader Frederick Reimer, right, works on the floor of the New York Stock Exchange Tuesday, Dec. 11. Stocks opened higher Tuesday ahead of a meeting of the Federal Reserve and possible additional steps to bolster the US economy.

Richard Drew/AP

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A monthly index of US economic optimism fell in December, as Americans became more worried both about the overall outlook and about their own personal finances.

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The optimism index, part of the latest Christian Science Monitor/TIPP poll, showed the mood among Republicans to be particularly sour – reaching a record low for 12 years of survey data.

What's going on?

For Republicans, the November election was a moment of dashed hope, as President Obama won reelection and Democrats gained some added clout in the Senate by winning close-fought races. Republican optimism declined sharply in the November poll, and dropped again in the latest survey, taken between Nov. 30 and Dec. 8.

But in December, the optimism gauge also dropped among Democrats and independents – and across all age and income groups.

The drop occurred as the federal government's "fiscal cliff" came into news headlines. The expiration of Bush-era tax cuts on Dec. 31, coupled with other tax hikes and federal spending-cut mandates, could slow the economy or even send it into recession, analysts say. That may have begun weighing on consumers' spirits.

But it's not clear that the cliff is the biggest factor in the recent dampening of economic optimism. In December, a component of the optimism index on "satisfaction with federal policy" declined only about half as much as the other two elements of the index. The other two components of the index are a monthly question about people's personal financial outlook and a question about the six-month outlook for the overall economy.

The Economic Optimism Index stands at 45.1 this month, down from 48.6 in November and 54 in October. A reading below 50 reflects a pessimistic mood.

Among Republicans, economic optimism stands at a level of 23.7, compared with 42.3 for independents and 65.6 for Democrats.

"The Republican point of view is that America is not heading the right direction" on economic affairs, says Raghavan Mayur, president of TechnoMetrica Market Intelligence, which conducts the TIPP poll for the Monitor and for Investors Business Daily. "They are very worried about the debt."

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