[Post-election updates throughout.]
If you're like most Americans, you think taxes are rising, the economy is shrinking and the bank bailout will cost this country a bundle. Also like them, you're wrong.
In fact, the Obama administration has cut taxes for 95 percent of working people; the economy is growing; and government expects the part of TARP that went to save Wall Street to turn a profit (at least in dollar terms). Yet these misperceptions are widespread, according to a recent Bloomberg survey. And that helps explain how Republicans recaptured the House:
"The public view of the economy is at odds with the facts, and the blame has to go to the Democrats," said J. Ann Selzer, president of Selzer & Co., a Des Moines, Iowa-based firm that conducted the nationwide survey. "It does not matter much if you make change, if you do not communicate change."A useful axiom. For instance, most economists agree that TARP was key in preventing a depression. Yet nearly half of voters said they're less likely to support a candidate who supported the bank rescue, according to the Pew Research Center. Meanwhile, data from the Bloomberg poll, which surveyed 1,000 likely voters in the Nov. 2 midterm election, highlight the reality gap facing the White House:
- Although Obama has lowered federal income taxes by $240 billion, mostly for the middle class, 52 percent of likely voters (including 43 percent of Democrats) say taxes have increased under his administration.
- Although Obama offered tax breaks to moderate-income earners, 63 percent of people making $25,000-$49,999 believe taxes have risen.
- Despite average GDP growth in 2010 of 2.4 percent and of 3.1 for the last year, 61 percent of people say the economy is contracting.
- Despite the U.S. Treasury expecting to earn $16 billion on TARP's investment in big banks, 60 percent of people think most of the money funneled through program will never be recovered.
That may be dirty pool, but it's good politics. Stoking fear about tax hikes sows the kind anxiety that wins votes, especially among the millions of lower- and middle-income people struggling with high unemployment and falling home prices. And attacking government spending heightens concerns about the nation's spiraling debt. As Groucho Marx famously quipped, "Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies."
Of course, just because Americans get certain facts wrong doesn't mean they're wrong about the larger picture. Sure, the Dems' communication strategy leaves much to be desired. And yes ignorance is rife, while political views are vulnerable as ever to cynical manipulation. But the bigger reason people are unhappy is that for a long time now -- under Republicans and Democrats -- most of us have seen our economic prospects decline.
Household income is growing much slower and than it did in the three decades following World War II, and is also more unequally distributed. Essentially, people are working more for less. On average, workers spend roughly 10 percent more time on the job, even as wages stagnate or decrease across most of the economic spectrum.
Between 1979 and 2007, a period covering two economic booms (and busts), per capita GDP rose nearly 70 percent after adjusting for inflation. Yet despite this enormous growth, the poverty rate in '07 was higher, at 12.5 percent of the population, than it was in '79, reports economist John Schmitt of the Center for Economic and Policy Research. Since the financial crisis, unsurprisingly, it's gotten even worse. As of 2009, the share of people living in poverty was 14.3 percent, the highest level since 1994.
As Schmitt wrote in the November/December issue of the economics journal Challenge (subscription required):
We are remarkably richer now than we were in 1979, yet most households have very little to show for it.... [T]he economy has failed the middle class where it really matters -- in providing more and better access to health care, greater retirement security, affordable post-secondary education, employment security, and jobs with pay that grows in line with the broader economy.Does all of this spell doom for the Dems? Not necessarily. Some 47 percent of people want Obama to seek reelection in 2012. By comparison, at roughly the same period before the midterms in 1982, also amid a steep economic downturn, only 36 percent backed Ronald Reagan for a second term (He won the 1984 presidential race going away.)
But these patterns do suggest that regaining the faith of the electorate will take more than, say, fixing the banking industry, holding the line on taxes or creating jobs. It will require something far bolder: a return to economic equality and opportunity.
After all, when anger overcomes people's ability to see the truth, nobody wins.
- House of Cards: Why Falling Home Prices Augur a Double-Dip
- Financial Deform: Republicans Paint a Bulls-Eye on Dodd-Frank Reforms
- Banks are Stealing Homes: Why Won't Obama Stop It?
- TARP's Legacy: More Foreclosures, Bigger Banks, Lost Jobs
- How "Headline Risk" Could Force Bank of America, Wall Street to Their Knees
- How the Foreclosure Mess Could Cause Banks to Crash