Americans See Debt Threat as They Reject Tax ‘Scare Tactics’

Americans See Debt Threat as They Reject Tax ‘Scare Tactics’
Americans say that the $14.3 trillion U.S. debt threatens the economy and that entitlement programs may go broke even as they dismiss as “scare tactics” the arguments offered by Republicans and Democrats who are debating a solution. Photographer: Roger L. Wollenberg/UPI/Newscom

Americans say that the $14.3 trillion U.S. debt threatens the economy and that entitlement programs may go broke even as they dismiss as “scare tactics” the arguments offered by Republicans and Democrats who are debating a solution.

Their sentiments in a Bloomberg National Poll suggest that the public is open to the recommendations of the majority of President Barack Obama’s debt commission. Members of the group, which included current and former members of Congress and White House officials, called for revenue increases and spending cuts that would have shaved deficits by $3.8 trillion over the next decade.

More than 60 percent of those surveyed say that interest on the debt may lead to a recession and that the rising costs of Medicare and Social Security represent real dangers, according to the poll conducted June 17-20.

At the same time, the poll found that most Americans aren’t swayed by the arguments Republicans and Democrats make to advance their competing remedies for debt reduction and strengthening the financial stability of entitlement programs, viewing them as empty rhetoric. Among the rejected assertions are that either spending cuts or tax increases would cause a double-dip recession or would lead to continued joblessness.

“They always spin things one way or another and you can’t really trust it,” says Richard Klimczuk, 58, an independent voter living in Cleveland. “Democratic and Republican sides are both doing it. We have real problems in this country, but they’ll just say things to get people worried so things turn out the way they want them.”

Scaring Each Other

Taken together, the results show that while Americans are concerned about the country’s fiscal condition and that of cherished social programs, they don’t trust either party’s assessment of what’s needed to address those issues.

“The level of trust of politicians is frankly at an all-time low, and it’s at an all-time low because both sides have recognized how to scare the living hell out of the other,” said Frank Luntz, a Republican polling expert and message strategist. “The tragedy of it is, people know they’re in the middle of a crisis, but politics has so poisoned the well that voters don’t want to drink from the fountain of knowledge.”

Public skepticism extends to the negotiations in Washington between the White House and congressional Republicans to reach a deal on reducing spending and raising the nation’s debt limit. In the past, Congress has lifted the debt ceiling to allow the government to borrow more money without debate. This year, Republicans are using the once pro-forma vote as an opportunity to press for spending reductions, an issue that normally is negotiated separately.

Low Bond Yields

For all the concern about the deficit in Washington, bond market yields in the U.S. are lower now than when the government was running a budget surplus a decade ago. The yield on the benchmark 10-year U.S. Treasury note was 2.91 percent in New York yesterday, below the average of 7 percent since 1980 and the average of 5.48 percent in the 1998 through 2001 period, according to Bloomberg Bond Trader.

Fifty-one percent of poll respondents say they aren’t convinced the U.S. could default on its obligations unless Congress raises the debt ceiling. They say that’s a scare tactic, compared with 43 percent who say default is a real danger.

Treasury Secretary Timothy Geithner has said he will run out of options for staving off a default by Aug. 2 if Congress and the White House don’t reach an agreement on spending levels and raise the legal borrowing limit by then. Obama has also been sounding the alarm. Those messages, however, aren’t breaking through with about half the public even while Wall Street investors and economists have said a default would be debilitating to the economy.

Biggest Skeptics

Republicans are the most skeptical about the specter of a default, with 61 percent deeming it a scare tactic and only 34 percent calling it a real danger. Still, even Democrats aren’t convinced; they are split, with 49 percent calling it a real danger and 46 percent saying it is a scare tactic. Independents are also divided on a potential default, with 46 percent believing it is a genuine risk and 47 percent disagreeing.

The poll tested 10 statements on economic dangers often cited by public officials, asking respondents whether they consider each a “real danger” or more of a “scare tactic.” Majorities of respondents consider six as scare tactics -- three of them Democratic messages and three voiced by Republicans.

Real Threats

In contrast, respondents coalesce around what they deem three real threats -- all of which affect them in personal ways.

On Medicare, 62 percent see a real danger that the program would go broke if not dramatically overhauled, compared with 35 percent who say that’s a scare tactic. Sixty-six percent see Social Security going broke without changes as a genuine threat, compared with 31 percent who call it a scare tactic. And respondents see the prospect that interest on the debt could drag the economy into a recession as a real danger rather than a scare tactic by 66 percent to 31 percent.

“Every year you’ve got more and more people getting on the government bill and more borrowing, and now we have less and less people paying in,” said Jason Gibson, 28, a truck driver from Romulus, Michigan. “You get too many people on one side of the ship, it’s going to tip.”

Public sentiment fractured when the poll tested the partisan solutions to those dangers.

Only 27 percent say -- as some Democrats have argued -- there is a real danger of a double-dip recession if government spending is cut, compared with 67 percent who don’t. A greater proportion, 37 percent, say there’s a real danger that spending reductions will lead to an increase in the unemployment rate, compared with 59 percent who call that a scare tactic.

Tax Increases

On the Republican stance on tax increases, 40 percent say it is a real danger they could lead to a double-dip recession compared with 54 percent who say it isn’t. Thirty-nine percent say there’s a real danger the jobless rate won’t go down if taxes are raised, while 56 percent say that is a scare tactic.

“What this shows is that politicians’ claims just aren’t credible on a lot of issues; we’ve done a lot of damage,” says Karlyn Bowman, a public opinion expert at the American Enterprise Institute. “The messages that do seem to have sunk in are that Social Security and Medicare are in trouble -- that these programs that we care deeply about are in very serious trouble -- and people really are spooked about the idea of a continuing recession, and what it would mean for them.”

Split on China

Respondents are evenly split on the bipartisan claim that China and other countries will stop lending money to the U.S. government if deficits aren’t significantly reduced, with 48 percent saying that is a real danger and 48 percent calling it a scare tactic. Republicans are more likely to see the issue as a danger, with 55 percent identifying it that way, while 55 percent of Democrats call it a scare tactic. Independents are divided, with 49 percent saying an end to foreign investment in the U.S. is a real danger and 46 percent disagreeing.

The public dismisses a charge that emerged during the debate over the overhaul of the health-care system: that the U.S. will become a socialist economy.

Sixty-five percent say the accusation is a scare tactic, while 31 percent of respondents say it’s a real danger. A slim majority of Republicans, 51 percent, backs the assertion, as do 58 percent of respondents who identified themselves as supportive of the Tea Party. Still, 46 percent of Republicans say it’s a scare tactic, along with 67 percent of independents and 79 percent of Democrats.

The poll of 1,000 adults was conducted by Selzer & Co., a Des Moines, Iowa-based firm. It has a margin of error of plus or minus 3.1 percentage points.

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