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Although the Republican sweep of the White House and both chambers of Congress in November has gotten a lot of credit for the stock rally that followed, a significant number of Americans think those same politicians are the biggest threat the economy faces over the next six months.
According to a new survey by Bankrate.com, “the political environment in Washington” was labeled the top economic threat by 38 percent of respondents, but this view is colored considerably by people’s political affiliations.
While just 28 percent of Republicans said the political climate is our greatest near-term economic threat, 52 percent of Democrats said the same.
“We can imagine that Democrats are concerned about the possibilities of a Republican-led Congress and Donald Trump,” said Mark Hamrick, Bankrate’s senior economic analyst.
At the same time, he added, early setbacks indicated that even a unified government was having trouble getting legislation passed, which could be weighing on that 28 percent of Republicans. “There’s plenty of concern to go around,” he said.
Bankrate found a split along income and educational attainment lines, as well: While 56 percent of Americans with a college degree say politics pose the biggest economic threat, just 22 percent of those with a high school education or less do. Less-educated Americans are more likely to fear the economic effects of terrorism and a drop in the stock market.
This difference in sentiment along partisan lines has cropped up in other recent surveys, as well. In a January report, Richard Curtin, director of surveys of consumers at the University of Michigan, wrote, “Consumers who self-identified as Democrats were the most optimistic and Republicans the least optimistic in June 2016… Following the election of Trump, the reverse was true as Republicans were the most optimistic and Democrats the least optimistic.”
A March Gallup poll found that Republican optimism about the economy has surged since the election, while Democratic sentiment has fallen. Seven in 10 Republican or right-leaning Americans told pollsters they feel good about how much money they have available to spend, up more than 25 percentage points since October. But among Democrats, that number fell from 66 percent to roughly half. Among both groups, the trend towards positive or negative accelerated after Donald Trump officially took office.
In that same time frame, more Democrats and fewer Republicans say they have cut back on their spending.
“Consumer confidence has been unusually high in the first part of 2017, and that may have been a reflection of expectations of a big fiscal stimulus from the Trump administration, which is now fading,” said Barry Bosworth, an economist at the Brookings Institution.
“We’re starting to see some signs of business lending or loan demand ease as those businesses look for further clarity on policy coming out of Washington,” Hamrick said. “I think that on the margin, there’s probably some increased consumer caution. There’s also been a rebound in gasoline prices which takes some previously ‘disposable’ spending off the table,” he pointed out, while sluggish wage growth continues to dog otherwise healthy job growth.
“This is really quite unusual,” Curtin said. “Usually optimism and confidence go together, but now what we have is optimism and uncertainty.”
In today’s economy, political polarization is affecting spending in unexpected ways.
Tomorrow Is Another Day
“Generally speaking, Americans, when we feel good about today but worried about tomorrow, we tend to spend,” said Bryan Gildenberg, chief knowledge officer at Kantar Retail. “People, by and large, are feeling better about today, but as a group they’re not certain about tomorrow,” he said.
“Spending among consumers will be uneven across population groups and across products,” Curtin said. “I think sales in the first quarter reflect that kind of unevenness.”
And if consumers’ worry about the future comes into the present tense, expect spending to drop. “ If people start feeling worse about now, that’s when spending ratchets back,” Gildenberg said.