A Gallup poll this week shows a similar decline in confidence. The polling firm's Economic Confidence Index, which in January had risen to its highest level in three years, is down sharply over the last month. In early February, 43 percent of people expected the economy to improve -- now that figure is at 33 percent, while a larger share also believe things will get worse.
One guess about why folks are downbeat (hint: Fill up your car lately?). Says Gallup:
The slump in confidence is likely tied to gas prices, which have risen sharply amid growing political instability in the Middle East, most notably in Libya. The U.S. Department of Energy reported an increase in gas prices from an average $3.14 per gallon nationwide during the week ending Feb. 14 to $3.38 this past week.The firm said that increased media attention on state and federal budget woes, along with stubbornly high unemployment, also may be sapping morale.
Vox populi: It's all about jobs
William Galston, a former policy adviser to Bill Clinton and now a wonk at think-tank the Brookings Institution, says sagging public confidence in the state of the economy puts pressure on the Obama administration to curb federal spending. He cites the NBC/WSJ poll in noting that 62 percent of people fear the president won't do enough to shrink the deficit, while only 26 percent think he'll cut too much, adding:
Unless [Obama] gets more involved, the public predisposition to see him as fiscally faint-hearted could harden into the judgment that he's part of the problem, not the solution.Small point (that also applies to this post), but it's usually a mistake to infer too much from a single poll. As the Gallup numbers show, confidence can swing significantly from one week to the next, and it will almost certainly rise if the situation in the Middle East cools down and gas prices fall.
More important, I interpret the numbers differently. By a wide margin, Americans' top economic concern is job creation and economic growth, according to NBC/WSJ; reducing the deficit is a distant second. So whatever unease people feel about public spending -- concerns that as Gallup notes are being whipped up by the media -- their attention remains squarely on jobs.
And what's the best thing Obama can do to boost employment? Spend. Although it could have been better designed, the American Recovery and Reinvestment Act of 2009 unquestionably created jobs and spurred economic growth. By contrast, estimates that a House Republican proposal to slash the federal budget this year by $61 billion would cost 700,000 jobs in 2012.
Since spending boosts employment, it also represents the surest way to reduce the deficit. As Jeff Madrick, a senior fellow in economics at The New School in New York, explains:
[T]he deficit would have likely been far larger without the $800 billion Obama stimulus of 2009: contrary to popular intuition, additional spending helped the government from going into further debt by spurring on the recovery when conditions were so weak, thereby raising tax revenues.With the economy remaining fragile and with states around the country taking an axe to their spending, it's even more critical that the government not withdraw into a cocoon. However the public is predisposed to view Obama now, they'll be singing his praises if jobs and the economy come back strong.