July 14 (Bloomberg) -- More than 7 out of 10 in the U.S. say the economy is mired in recession, and the country is conflicted over how to balance concerns over joblessness and the federal budget deficit, according to a Bloomberg National Poll.
Just like the experts, Americans are torn about whether the federal government should focus on curbing spending or creating jobs, the poll conducted July 9-12 shows. Seven of 10 Americans say reducing unemployment is the priority. At the same time, the public is skeptical of the Obama administration’s stimulus program and wary of more spending, with more than half saying the deficit is “dangerously out of control.”
This concern over spending extends to aid for the jobless. With unemployment at a near-record high of 9.5 percent in June, the public is closely split on whether another extension of jobless benefits, which is stalled in Congress, is worth the $34 billion cost.
“They’re just running out of patience,” says J. Ann Selzer, president of Selzer & Co., a Des Moines, Iowa-based company that conducted the survey. “The number they’re seeing change is the deficit. It’s rising at what seems like an astronomical rate. The number that seems intractable is the unemployment rate.”
The Obama administration expects a record budget deficit this year of more than $1.5 trillion, or 10.6 percent of GDP, according to projections the White House released in February. The U.S. deficit is a greater percentage of GDP than any other major industrialized nation except the U.K., where it is estimated to reach 11.4 percent, and Ireland, where it will be 12.2 percent, according to International Monetary Fund projections released in April. The only deficit-reduction measure that gets strong support in the poll is higher taxes on upper-income Americans.
The public’s perception that the U.S. is still in recession contradicts data showing the economy has been growing for a year, with the Commerce Department reporting GDP rising at 2.7 percent annual rate in the first quarter. The median forecast in a Bloomberg News survey of economists conducted July 1-8 shows 3.2 percent growth for the second quarter.
Four months ahead of the midterm congressional elections, the poll’s results show a challenging climate for Democrats. The public mood is bleak, with 63 percent saying they believe the country is on the wrong track, the most negative reading of Obama’s presidency. After a year of economic growth, 71 percent say the economy is still in recession; another 13 percent say the economy is faltering and will dip back into recession.
Not Better Off
Only 1 in 6 say they believe they are personally better off than they were 18 months ago, when President Barack Obama took office. They are more apt to see the economy today as deteriorating than improving.
More than half say they are responding to the economic climate by hunkering down. Fewer than a quarter say they are getting back to normal and only 16 percent are seeing opportunity and taking risks. The public’s posture is more pessimistic than the view of global investors polled a month earlier. In a poll of Bloomberg customers conducted June 2-3, more than twice as many respondents -- 35 percent -- said they are seeing opportunities and taking risks.
The divergence in the outlooks of the general population and investors fits the way each group is experiencing the economic cycle. The public confronts an unemployment rate hovering near a 26-year high, home values and retirement portfolio balances that remain below pre-recession levels, and the debt crisis in Europe that threatens the global recovery.
The public’s perception is gloomier than some recent economic data: The U.S. economy has been growing for a year, first-quarter corporate profits were up more than 33 percent from a year earlier and research published in 1980 by Federal Reserve Chairman Ben S. Bernanke points to the possibility of “an investment boom” following resolution of uncertainty such as the jitters provoked by the crisis in Europe. In addition, investors have benefited from a rise of more than 36 percent in the S&P 500 stock index since Obama took office even after the recent turmoil in the markets.
The public gives the Obama administration little credit for its tax cuts, which according to the Washington-based Tax Policy Center lowered federal income taxes for 93 percent of filers. Asked to compare their federal income taxes to what they paid during George W. Bush’s presidency, only 7 percent say they are lower; 20 percent say their taxes are higher and 65 percent say they are about the same.
The Bloomberg National Poll is based on interviews with 1,004 U.S. adults ages 18 or older. Percentages based on the full sample may have a maximum margin of error of plus or minus 3.1 percentage points.
Republicans Pick Deficit
Americans’ anxieties over the economy are reflected in the top issues they see facing the country: Unemployment and jobs, cited by 41 percent, and the federal deficit, cited by 26 percent, dwarfed other concerns. Few Democrats share the concern over the deficit, with just 7 percent choosing it as the top issue -- last in a list of five -- versus 44 percent of Republicans and 31 percent of independents.
“People need to have work to keep their living going,” says poll respondent Jane Phillips, an 80-year-old retired school teacher from Springfield, Ohio, who listed unemployment as the most important issue. “It downgrades our people if they don’t have anything to do.”
The two big priorities are reversed among respondents who say they will definitely vote in November and say the election is exceptionally important. A 41 percent plurality name the deficit as the top issue, compared with 33 percent who pick jobs among those who say they are intensely interested in the November congressional elections. Respondents who describe themselves as Republicans say they are more likely to vote, the poll shows.
“The debt that our kids are accumulating is going to be beyond belief,” says Jim Tympanick, 55, of Foxborough, Massachusetts, an independent who works in technology support. “I don’t see how it can be rectified without an increase in taxes.”
The White House hasn’t made much progress in selling its $862 billion economic stimulus package. Asked how their opinion of the stimulus has changed in recent months, respondents were divided about evenly among those who say they had become more supportive, those who are less supportive and those who haven’t changed their opinion.
Other high-profile spending plans undertaken in the wake of the financial crisis have fared worse. The assistance package to automobile companies is becoming less popular: 48 percent say they had become less supportive in recent months versus 17 percent who say they have become more supportive.
By a two-to-one margin, the public classifies the $700 billion Troubled Asset Relief Plan that Congress passed in 2008 as the financial industry teetered as an “unneeded bailout” rather than “necessary.”
Asked about a range of options to cut the budget deficit, the public is willing to consider removing the cap on earnings covered by the Social Security tax, currently set at just under $107,000, and eliminating tax cuts for the wealthy enacted under Bush.
The public opposes a 2 percentage point increase in income tax rates on the middle class, cutbacks in Social Security or Medicare benefits, though 52 percent say they would at least consider an increase in the eligibility age for Medicare to 67 from 65.
The public is divided on cuts in spending on defense, education, public housing, regulatory agencies or public works and on discontinuing extensions of unemployment benefits to help close the deficit.
Perceptions of the economy’s performance split sharply along party lines. A 48 percent plurality of Democrats say the economy is getting better. Only 17 percent of Republicans and 19 percent of independents see an improving economy.
Younger Americans also had a slightly more positive read on the economy, with 31 percent of people under 35 saying they believe it is improving. Middle-aged Americans had the most negative reading, with only 24 percent describing the economy as getting better. Among those over 55, 28 percent say the economy is improving.
Voters in Western states also were more pessimistic, with 24 percent seeing an improving economy versus 27 percent in the Midwest, 29 percent in the Northeast and 30 percent in the South.
To see the methodology and exact wording of the poll questions, click on the attachment tab at the top of the story.