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Magazine / RECESSION

Paddling Alone On The Economic Rapids

Americans expect economic instability to continue, and they plan to cope by relying mostly on themselves.

October 10, 2009

Brace yourself: There's more rough water ahead. That's the central message from the latest Allstate/National Journal Heartland Monitor poll exploring Americans' attitudes about the economy.

As the United States struggles to emerge from the steepest economic downturn since the Depression, the survey found that large majorities of Americans expect the economy in the years ahead to keep plunging through unusually severe cycles of boom and bust that increase families' risk of dire financial reversals such as unemployment and foreclosure. That apprehension is shared almost equally by young and old, whites and minorities, rich and poor and those in between, Republicans, Democrats, and independents.

Across all of those demographic divides, Americans also express substantial agreement about the changes that they expect to make in their personal lives to cope with continuing instability. Sizable majorities of almost all of those groups say they intend to wait longer to make major purchases and plan to hold down their overall spending, partly to give themselves a bigger cushion if the economy nosedives again.

 

This broad consensus shatters, however, when the subject changes to the role the federal government should play in this unstable new economic landscape. The survey found Americans sharply and closely divided not only over President Obama's economic agenda but also over the larger issue of whether government generally helps or hinders the nation's quest for greater economic security and opportunity.

That fundamental dispute has simmered in American politics since the conflict between Thomas Jefferson and Alexander Hamilton in the 1790s. But the poll found that the ambitiousness of Obama's agenda on issues from overhauling health care to stabilizing the financial system, coupled with the ferocity of the conservative resistance to it, appears to be pushing the debate over government's role to a boiling point -- and ominously fracturing the country along lines of age, class, and above all, partisanship and race.

Leslie Shockley, a poll respondent who works in a call center in Tucson, Ariz., stands firmly on one side of that divide. Shockley believes that federal assistance for big banks and the automakers was necessary to prevent an even more disastrous economic cataclysm. She has the same view of the massive debt that the federal government has accumulated this year. At age 46, she finds Obama more inspiring than any other politician she has ever seen. "It's strange. This is the first time... that I really trust a politician," she says. "I'm a Democrat and pretty much always have been... but I really feel like he has feelings behind what he says -- he really means it. I think that with him fighting for us and trying to do all this stuff that he wants to get done, it can't be anything but a positive impact, especially in the long run."

Michael Cicco, a respondent who works as an account executive for a printing company in Strongsville, Ohio, views the same government actions with mounting alarm. Cicco is a devotee of the libertarian novelist Ayn Rand ("What's happening today is what the lady predicted 50 years ago") and describes Fox News Channel as "the only station that I believe." At 62, he says he has never been as concerned about the country's direction. His grievances pour forth in a staccato burst of discontent. "I've never seen a recession this severe. I've never seen the federal government this deeply in debt. I've never seen the socialists take over in such a powerful manner as they have in this last election," Cicco says. "The Constitution doesn't matter anymore; that goes from Congress to the White House. The people Obama surrounds himself with, they're terrifying."

The Allstate/National Journal poll's two central findings -- of a shared conviction that average Americans can expect heightened economic instability and a bitter divergence over the proper government response -- seem a recipe for intense political conflict. One final ingredient makes the mix even more volatile: Most Americans say that the past year's tumult has diminished their confidence in government, big companies, banks, and Wall Street. "I myself don't see no one trying to help me," says Shawn Kurt, an unemployed 35-year-old lumber mill worker in Molalla, Ore.

Together, these results paint a sobering picture. Although most Americans continue to express a resilient confidence in their ability to navigate through tough times, the poll captures a public that is emerging from the recession uneasy about the nation's future, distrustful of large institutions, and strongly polarized. These attitudes are not, it's almost needless to say, conducive to building stable support for either party or consensus for any particular direction in public policy.

A Sense Of Vulnerability

The latest Allstate/National Journal Heartland Monitor poll is the third of four examining Americans' attitudes about the economy. This survey focused on expectations about the future after a year of economic upheaval. Ed Reilly and Brent McGoldrick of FD, a communications strategy consulting firm, conducted the poll, which surveyed 1,200 adults from September 24 through 28. It has a margin of error of +/-2.8 percentage points.

Like earlier Heartland Monitor polls, the latest one found that a substantial (though slightly diminished since July) majority of Americans believe that when the economy recovers, it will look very different from the way it did before the recession. Of those polled, 63 percent (down from 70 percent in July) say they expect big change; just 31 percent expect the economy to pretty much return to its old patterns. Those who think the economy will markedly change divide almost evenly between those who are optimistic about that prospect and those who worry about it.

But substantial majorities are quite pessimistic about the road ahead on four other key measures. Nearly eight in 10 respondents say it's likely that "average families will suffer economic reversals like losing a job or facing foreclosure ... more often than they have in the past." Nearly seven in 10 agree that "young people starting out in their careers won't achieve as high a standard of living as my generation did." Just over six in 10 believe that the economy "will experience more-severe cycles of boom and bust than in previous decades." And just under six in 10 say it is unlikely that "the standard of living for people like me will grow more rapidly than it has in recent decades."

Like the earlier Heartland Monitor polls, this one found that a heightened sense of risk crosses almost all social divides. The fear that young people today won't match their elders' standard of living is as powerful among respondents earning more than $100,000 a year as it is among those earning less than $30,000; nearly as powerful among whites as blacks; and almost identical among Democrats, Republicans, and independents. Young people are the most worried about matching the living standards of earlier generations -- but only slightly more so than their elders.

Likewise, the belief that average families will face more economic reversals is almost identical among all age groups (except seniors), all income groups, men and women, and whites with and without college degrees. The concern that the economy will oscillate between unusually severe ups and downs is similarly shared across virtually all major demographic groups. Respondents diverge somewhat more on expectations about future living standards -- with Hispanics and African-Americans considerably more likely than whites, and younger people more likely than older ones, to reject the belief that they will personally ascend the economic ladder more slowly than similar people did in recent decades.

But, overall, these replies point to a shared sense of vulnerability. Indeed, more than 40 percent of those surveyed chose the pessimistic prediction on three of those four questions. An additional 20 percent picked the pessimistic response on all four.

The fear that the United States has permanently lost something important in this recession infused interviews with respondents from very different backgrounds. "They talk about 'the new normal,' " says Denise Brown, a 52-year-old middle-school teacher from Dallas. "I think it's pretty clear there is going to be a step down about what people expect. They're not going to have the same incomes."

Her feelings are similar to those of Karol Hammond, a homemaker in Haysville, Kan., whose husband was recently laid off by an aircraft manufacturer. Raised in West Virginia, Hammond considers herself better off than her parents, but she worries that the escalator will reverse direction for her children. "We've had plenty of advantages to actually flourish compared to what [my parents] were raised like," she says. "But that was due to the economy of the 1980s. I'm thinking my kids are going to struggle more than we did."

Monica Thornton, a caterer in Baton Rouge, La., crystallizes the fragile new mood: "You're nervous all the time, anticipating the worst but praying for the best."

Looking forward, large majorities of those surveyed see clouds on the horizon. Exactly 90 percent expect federal deficits to remain unusually high; 86 percent believe that their taxes will rise, either to close the deficit or to pay for new programs.

But most Americans also think that some positive changes will emerge from this crucible. Eighty-five percent anticipate "a significant increase" in green, environmentally friendly jobs. Eighty-six percent say banks will become more cautious in their lending. Eighty-three percent believe that Americans will become better educated about managing their personal finances. And 77 percent anticipate that Americans will save more to build a bigger cushion of security.

Those latter two findings echo one of the strongest results of the first two surveys: Americans remain confident of their personal ability to cope with tough times. Only two-fifths believe that the economy's performance will have "a lot" of impact on their own financial situation. Many more believe that the economy's overall direction will have only "some" or no impact on them. That's true even though most have modest expectations for the economy's trajectory in the next five to 10 years: Just 8 percent believe it will grow rapidly, while 24 percent believe conditions will deteriorate or remain the same. The largest group (65 percent) foresees a steady but slow recovery.

The poll suggests that Americans from very different circumstances are adopting similar game plans for what they see as a new financial era. Big majorities say they intend to adjust their behavior in the same way they anticipate most other Americans will. Four out of five say they intend to cut back on spending. More than seven of 10 say they expect to wait longer before making major purchases. Just over six in 10 say they intend to become more educated about managing their finances. Almost six in 10 say they will save and invest more than they did in the past. And nearly six in 10 workers will stay in their job longer -- even if they don't like it -- for fear that finding another would be hard.

These sentiments are also broadly the same across demographic, income, and partisan lines, with some predictable exceptions (low-income families and seniors are less likely to pledge to save more). Some belt-tightening responses may reflect intentions honored, like New Year's resolutions, mostly in the breach. But cumulatively they suggest that the past year's searing downturn could reshape Americans' financial habits -- in much the same manner, if not to the same extent, as the Depression remade the Greatest Generation.

Denise Brown, the Dallas teacher, was one of several respondents who directly raised that analogy. "My dad went through the Depression, and he showed his mental and emotional scars from that," she says. "He was a saver, and taught us to save. Most people don't do that. My children will get an education. That's good. But will they have the same material things? Probably not. But maybe it's not such a bad thing to have less. Maybe it will help us to appreciate each other more."

Story continues after graphic.

Jagged Cleavages

Appreciating one another doesn't seem to be very high on the public's agenda these days, though. The poll shows acute and persistent divisions on virtually every front.

Obama's job-approval rating in the survey stands at 52 percent; 40 percent disapprove. That's modestly lower than his 56 percent approval rating in the July poll, which was already down from his 61 percent standing in April.

Between April and July, Obama's support eroded in a consistent pattern. He largely remained strong among groups that supported his election, but he suffered sharp declines among groups that had resisted him last year (seniors and white men, for example) yet appeared to be kicking the tires on his presidency during its first months.

In the latest survey, Obama suffered little, if any, further erosion among those skeptical groups. This time, though, he slipped among some groups that have previously been in his corner. From July to September, Obama's approval rating dropped from 58 percent to 46 percent among college-educated white women, and from 66 percent to 55 percent among people under 30. He drew more support from both groups in the election. Still, although the trend is against him, Obama's overall approval rating has for now shrunk to about the level -- and kind -- of support he attracted in 2008.

Perhaps the survey's best news for the president is that he has regained some momentum in the health care debate. Asked whether they support "the current legislation to reform health care," 49 percent of respondents say yes; 42 percent say no. Obama also held a slight advantage when the issue was addressed at a more basic level: 47 percent say they worry that government will not do enough "to change the health care system," while 44 percent are more concerned that it "will do too much." And Obama ran well ahead of congressional Republicans -- 48 percent to 27 percent -- on being more trusted to deal with the nation's economic problems.

But when asked about the impact of Obama's agenda on their personal economic prospects, only 39 percent say that his policies are increasing opportunity for people like them, while 30 percent say that his actions are diminishing their chances. (The remainder either don't know or think his policies are having no impact.) Those numbers are virtually unchanged from July.

Economists increasingly credit aggressive government intervention by the United States and other countries with having prevented a full-scale economic collapse. But the public is much more equivocal. Asked to assess the impact of Obama's economic policies, 43 percent say the policies helped "avoid an even worse economic crisis and are laying the foundation for our eventual economic recovery," but an equal number think that Obama's agenda has "run up a record federal deficit while failing to end the recession or slow the record pace of job losses." The remaining 14 percent are unsure. Among respondents who approve of Obama's job performance, 77 percent are optimistic about the impact of the long-term changes under way in the economy; among those who disapprove, 84 percent are pessimistic.

Embedded in all of these results are jagged cleavages. Republicans almost monolithically reject Obama's direction, with just one in seven approving of his performance and three-fourths saying his agenda has increased the deficit without boosting the economy. Democrats are comparably united in support, and independents are closely split: Exactly half of independents approve of his overall performance, but they tilt narrowly toward negative assessments of his agenda's impact on the economy as a whole and their own opportunities. (Independents still trust Obama over Republicans on the economy by about 2-to-1, however.)

"I think it's pretty clear there is going to be a step down about what people expect. They're not going to have the same incomes."
-- Denise Brown, Dallas middle-school teacher

Although as a presidential candidate Obama ran remarkably well for a Democrat among college-educated and affluent voters, class reasserted itself as a dividing line in the latest survey: Upper-income Americans, especially whites, are more likely than the less affluent to disapprove of his performance (56 percent of whites earning more than $75,000 disapprove) and to view his agenda as a threat to their personal opportunity and the economy. Among those high-earning whites, just one-third support the health care reform legislation.

Another wide schism runs along racial lines. Obama's approval rating among all whites stands at 43 percent, compared with 88 percent among blacks, 70 percent among Hispanics, and 74 percent among all nonwhites (including Asians). That's approximately the same racial gap evident in his 2008 support, but still a broad chasm. And the gap extends to specific policies. More than twice as many nonwhites, for instance, believe that Obama's agenda has helped the nation's economy (57 percent) than think his agenda has hurt it (26 percent). But whites are much more likely to say that his agenda has hurt (50 percent) than that it has helped (38 percent).

Opposition to the financial lifelines that Washington extended to troubled banks and auto companies appears to be a major source of the discontent about government bubbling up through the results. More than four in five of those surveyed say that government should not make such direct investments a lasting policy. Nearly as many, about three in four, reject the idea that government should make a habit of running large deficits "to stimulate the economy when consumers and businesses aren't spending enough to generate growth."

Other steps that Washington has taken over the past year draw broader support. Four-fifths of respondents say financial services companies should be required to disclose more information about their products' risks. Two-thirds say Washington should continue the tougher regulation of banks and financial institutions. (In a somewhat contradictory result, Americans split about evenly on whether Washington should impose new regulations on the financial industry or the industry should regulate itself.) Nearly two-thirds say that Washington should continue grants and loans to develop alternative energy and other new technologies. Most want to continue tax cuts for individuals, although most want to end them for business.

All of these results reveal seemingly unbridgeable ideological chasms separating ideas for promoting prosperity. Asked to choose the best strategy for encouraging long-term economic growth, 36 percent choose a conservative approach of cutting taxes and deregulating; 34 percent pick a liberal approa ch of investing in education, infrastructure, and technology; and 24 percent prefer a focus on reducing the deficit through spending cuts and tax increases.

Nearly half of Democrats and nonwhites favor an investment strategy; just three in 10 whites and independents and one in six Republicans agree. Just over half of Republicans and about four in 10 whites prefer a tax-cut-and-deregulation strategy; just one-quarter of nonwhites and one-fifth of Democrats agree.

The spoon stirring this volatile stew of attitudes is the public's deteriorating trust in all major economic institutions. Majorities of those surveyed say they have less confidence than a year ago that government, major corporations, commercial banks, and investment banks will make decisions that benefit people like them.

Quite a few respondents seemed stumped when asked whom they now trust most to make decisions that will help them. More pick elected officials in Washington (31 percent) than labor unions (14 percent), major corporations (10 percent), or commercial and investment banks (7 percent each). But the support for government is nearly matched by the 27 percent who say they trust none of these institutions to make decisions in their best interests. And even that narrow advantage for elected officials depends on the strong faith expressed in them by nonwhite voters. Whites in every age group over 30 select "none" over every other option.

These are stark and foreboding findings. Based on this latest survey, most Americans believe that the U.S. economy won't reach placid waters for some time. But as they struggle to steer through the rapids, each major group in society increasingly appears to be piling into its own boat. And more and more of us feel as if we are paddling alone.

Researcher Cameron Joseph contributed to this report.

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