With the austerity versus stimulus debate about to spill out of the halls of Congress onto the campaign trail, budget hawks clearly have the upper hand in the battle for voters' hearts and minds. The public clearly thinks that deficit reduction is more important than spending to help the economy recover.
This preference for belt-tightening over pump-priming is clearly fueled by the rising U.S. national debt. But it also has ideological roots. And it appears to be the result of the GOP drumbeat of debt doomsterism that resonates most with Republican voters who disproportionately get their news from Fox, Democrats' bad luck and a colossal failure of White House political communication.
Moreover, voters clearly prefer the Republican nostrum of tax cuts to the Democrats' prescription of more spending when it comes to stimulating the economy. This partisan divide is again largely attributable to ideology, but also to voters' economic illiteracy, again compounded by the administration's messaging shortcomings.
CBO predicts the federal debt, the sum of annual budget deficits, will equal 62 percent of the economy this year and at least 79 percent by 2035. Alternative CBO scenarios foresee the debt hitting 185 percent of GDP by 2035.
To pay for that, debt interest payments would have to eat up more and more of the annual federal budget. So public concern about the deficit is grounded in a serious and mounting economic problem. But why has it become a public priority now, when unemployment is 9.5 percent and the economy is expected to slow?
The reason is partly ideological. Americans have historically distrusted government. And over the last half-century the American public has become increasingly dissatisfied with government's performance.
This has particularly been the case among Republicans. And, most recently, people have told pollsters that, at least philosophically, they prefer a small government with limited services, not withstanding the fact that they also want to keep all the services they currently have. So it is not surprising that the public is worried about the government debt, a vivid, tangible symbol of the large government that makes them uneasy.
It is little wonder then that the GOP, the party of small government and limited government spending, has beat the deficit issue like a drum. And it seems to be working among both the Republican Party faithful and independents.
The public prefers deficit reduction to new spending to help the economy recover, 51 percent to 40 percent, according to the latest Society for Human Resource Management/National Journal Congressional Connection Poll conducted with the Pew Research Center. That is a swing from a February Pew survey that showed the public was evenly divided: 47 percent to 47 percent. And the telling change was an 11 percentage point increase in support for deficit reduction by independents and a 10 point increase by Republicans.
Republicans' messaging, especially to their base, seems to be aided by a Fox News echo chamber. Pew surveys show that members of the GOP are far more likely to say that Fox is their main source of news. There is no content analysis of such news.
But, according to an early July Pew survey, fully half of Republicans, 52 percent, said they are now hearing mostly bad news about the economy, up from 37 percent in June. More independents also say they are hearing negative news about the economy than they did from July to June, 43 percent to 30 percent. By contrast, there has been less change in perceptions among Democrats: 31 percent say economic news is mostly bad, while 25 percent said that in June. And Democrats are more likely to get their news from CNN or MSNBC, among cable news networks.
Meanwhile, White House efforts to pivot the national debate from healthcare reform to jobs were derailed and the administration's touting of its efforts to stimulate the economy was drowned out by the public uproar over the oil spill in the Gulf of Mexico.
As a result, whatever limited good economic news there has been -- the 10 percent improvement in the Dow Jones average from February to May, the recent slight decline in the unemployment rate -- has gotten short shrift in the media.
"The Gulf oil spill definitely crowded out the economy as the No. 1 story," said Tom Rosenstiel, director of the Pew Research Center's Project for Excellence in Journalism, "and has remained that way for a sustained period of time."
But bad luck can hardly account for the fact that the White House has failed to convince its base of the merits of more government spending. Only 41 percent of Democrats think the stimulus has helped state and local governments avoid layoffs and cuts, according to the latest Congressional Connection Poll.
This despite the fact that, among other public sector jobs preserved, nearly two-thirds of all school districts have used the federal stimulus money to save or to create teaching jobs in the last school year. And about half of all Democrats, 49 percent, think the stimulus kept unemployment from getting even worse despite CBO estimates that such public spending meant 3.4 million Americans had jobs they otherwise would not have had as of the second quarter.
"You have conservatives loudly proclaiming that the stimulus did not create any jobs," said Lawrence Mishel, president of the Economic Policy Institute. "You have other people who, for political reasons want to certify themselves as fiscally conservative so they talk about deficits. And you have other forces, the built-in movement dedicated to long-term deficit reduction, who often do not distinguish between long-term and recession generated deficits.
"All these forces talking about deficits had no offsetting voice," Mishel complained. "The administration itself has been an enabler. They spent months talking about the deficit in terms of the deficit commission and restraining growth in domestic discretionary spending, but not talking in a persuasive way about why we need spending now and larger deficit now."
Democrats have also clearly lost the messaging battle when it comes to the subsidiary issue of how best to goose the economy: through tax cuts or more spending. Again, the Republicans' advantage plays on the deeply rooted American aversion to taxation, which exists despite the fact that Americans are among the most lightly taxed people among the advanced economies.
But GOP messaging also seems to be playing on Americans' economic illiteracy. Only two-thirds of the public realizes that the stimulus increased the budget deficit. And less than half the public, 47 percent, thinks spending more money on education, public works and unemployment benefits will stimulate the economy. And more than half of Republicans, 61 percent, and independents, 51 percent, think cutting taxes would be the most effective way to boost growth.
But the public has it backward, according to Mark Zandi, chief economist of Moody's Economy.com, who advised Sen. John McCain, R-Ariz., in the 2008 presidential campaign. Spending increases deliver much more bang for the buck than tax cuts. An across-the-board tax cut of $1 will improve the economy by about $1.03. A dollar spent on infrastructure returns $1.59 to the economy.
Conservatives disagree with these estimates of the relative benefit of spending over tax cuts, but the stimulative advantage of spending is broadly accepted by both the Council of Economic Advisers and the CBO.
With 14 weeks left to Election Day, the Democrats seem to have lost the public opinion battle over deficit reduction versus economic stimulus. Regaining the upper hand, given their poor track record on communicating their message, even to their base, and the underlying economic illiteracy of the average voter, will be an uphill climb.
This article appears in the July 24, 2010 edition of NJ Daily.