Pessimism Surges as 72% See U.S. Economy on Wrong Course in Poll

Americans’ pessimism about the economy has deepened and confidence in both political parties has fallen with only 20 percent saying the country is on the right course even as they remain divided over solutions.

Just 9 percent of people say they are confident the economy won’t slide back into recession, in a Bloomberg National Poll. A majority says it will take at least six more years for home values in their community to recover to pre-recession levels.

“This country is going downhill,” says Glenn Davis, 53, a political independent and a factory worker from Lafayette, Indiana. “For regular people like me, it’s hard to get ahead.”

Americans are sending mixed signals on the path forward, according to the poll, conducted Sept. 9-12 by Selzer & Co. of Des Moines, Iowa. While they embrace the need for tough prescriptions to cut the federal deficit, including scaling back entitlement programs such as Social Security and increasing taxes on the wealthy, they balk at many specific spending cuts.

Still, the public is re-examining opposition to once- politically explosive ideas such as eliminating the home mortgage interest deduction in the income tax code and raising the Social Security retirement age. Pluralities now support both after a resounding rejection only nine months ago.

The broad message of Republicans is resonating, with 57 percent of the country saying the best way to create jobs is to cut taxes and government spending. That hasn’t stopped the party’s brand from deteriorating, and the public rejects many specific Republican policy prescriptions.

Declining Repeal Appeal

Support for one of the party’s central tenets is declining, with just 34 percent of the country now favoring repeal of President Barack Obama’s health-care overhaul, down from 41 percent six months ago. Republicans support repeal, while political independents and Democrats don’t.

A 51 percent majority says a special congressional committee considering how to reduce the federal deficit by $1.5 trillion should opt to raise taxes on higher-income earners before curbing entitlements such as Medicare or Social Security, rejecting Republican pledges against tax increases. Almost six of 10 say the panel must do one or the other to meet its deficit-cutting goal.

“Taxes are at the heart of the controversy because Americans hold two conflicting views,” said J. Ann Selzer, president of Selzer & Co. “In the abstract, they’d rather cut than raise taxes. But in the context of near-term goals to cut the deficit, they prefer raising taxes to cutting entitlements.”

Losing Patience

The poll results show the public is running out of patience with political leaders after months of protracted negotiations over the national debt ceiling that brought the country to the brink of default and signs that the economy is weakening. Seventy-two percent say the country is on the wrong track.

Both sides have suffered. A 53 percent majority holds a negative view of the Republican Party, up from 47 percent in June. The Democratic Party has also taken a hit, with a 46 percent to 44 percent plurality of respondents saying they have an unfavorable view of the party, a reversal from a plurality of 48 percent to 42 percent with a positive view three months ago.

“Both sides need to think outside the box,” says Rachel Reichard, 40, a political independent and full-time home- schooling mother from Hagerstown, Maryland. “It just seems like everybody is thinking like they did in the Clinton administration. They still had typewriters on the desk and landlines back then.”

No Better Off

Only 27 percent of Americans say they are better off now than in January 2009, when Obama took office in the depths of the recession compounded by the September 2008 financial crisis and the country was losing as many as 820,000 jobs a month. That’s a decline from June, when 34 percent said they were better off.

Unemployment and jobs are the nation’s top concern, cited by 46 percent of Americans, ranking ahead of the combination of the deficit and government spending at 30 percent. Among Republicans, the combination of the deficit and spending was the most important issue, cited by 47 percent, ranking ahead of jobs at 36 percent.

Concern over the economy has increased as growth weakened during the first half of the year to its slowest pace since the recovery began, and market pessimism has risen over the European debt crisis. In August, U.S. employers added no new net jobs, the worst monthly results for payroll growth since September 2010.

Income Drops

Unemployment has been hovering at or above 9 percent for more than two years and real average hourly wages for those who have jobs declined 1.3 percent over the 12 months through July. Even with 3 percent growth in the economy last year, real median income for U.S. households dropped in 2010 to the lowest level since 1996, according to a census report issued yesterday.

The benchmark Standard & Poor’s 500 Index has declined 12.8 percent since July 22 and was down 6.74 percent for the year at the market close in New York yesterday.

After months of political debate dominated by struggles over the national debt and deficit, Obama’s advantage over Republicans on who has the better vision for the economy has now largely eroded.

Poll respondents still favor the president’s long-term view by 43 percent to 41 percent for Republicans, though that has slipped from a 12-point advantage for Obama in March. Political independents now divide almost evenly: 38 percent for Obama and 39 percent for Republicans.

The public’s view of Federal Reserve Chairman Ben S. Bernanke is also less favorable than in the last poll. Twenty- nine percent said they have a favorable view of the central banker against 35 percent who have an unfavorable view. That compares with the June poll, when 30 percent had a favorable view, and 26 percent had an unfavorable view.

Rejecting Republican Plans

Majorities reject many specifics of Republicans’ long-term plan to balance the budget. More than three-quarters oppose cuts to Medicaid, the federal-state health-insurance program for the poor, and almost 6 of 10 reject replacing the Medicare plan for the elderly with a private voucher system.

A 54 percent majority would raise taxes on families earning more than $250,000 per year, a measure that Republican leaders oppose.

Public support is rising for some budget measures that much of the country once considered untenable. Americans are now evenly divided on gradually raising the Social Security retirement age to 69, with 49 percent in favor and 48 percent opposed. Last December, the idea was opposed 60 percent to 37 percent.

Viable Option

“It’s a viable option,” said Chris Nicholson, 44, a political independent and a software architect in Oakland, Tennessee. “People live longer. My mother’s 65 and there’s no reason for her not to work. As a matter of fact, she’d be working now if she could find a job.”

Support for a higher retirement age is strongest among the elderly, whose benefits wouldn’t be affected. Still, middle-aged and younger Americans have softened their opposition. Fifty-two percent of those under 55 are now against an increase in the retirement age versus almost two-thirds in December.

A tax revamp that eliminates all deductions, including that for home mortgage interest payments, in exchange for lower rates is backed by 48 percent and opposed by 45 percent. In December, 51 percent were against the proposal compared with 41 percent in favor.

Republicans favor the idea 54 percent to 38 percent. In December, they opposed it 51 percent to 41 percent.

The poll, which questioned 997 U.S. adults ages 18 or older, has a margin of error of plus or minus 3.1 percentage points.

To contact the reporter on this story: Mike Dorning in Washington D.C. at mdorning@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net.

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.