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Maybe People Donít Think the Economy Is So Great Because It Isnít So Great

by Ruy Teixeira

Last week, I pointed out that, while views of the economy had improved somewhat toward the end of last year, that didnít mean the public now thought the economy was in good shape. They merely thought it was less bad than before.

And this week we have a new poll from Ipsos-AP that indicates views of the economy may be declining once again. From the Ipsos report on the poll:

Despite strong job numbers for December, Americansí confidence in the economic state of the country declined in January, according to the most recent results of the RBC CASH (Consumer Attitudes and Spending by Household) Index. This was primarily due to low expectations in economic performance over the next six months and increasing fears about job security.

This stubborn failure of the public to get happy about fairly solid GDP and job growth has occasioned much head-scratching among the commentariat and, of course, among GOP operatives who smell a press plot to discredit Bushís alleged economic achievements.

But there is a much, much simpler explanation for the available data: people donít think the economy is so great because it isnít so great. The indispensable Economic Policy Institute has produced a crisp one-page summary supporting this viewpoint. Here are some choice excerpts:

Profits are up, but the wages and the incomes of average Americans are down.

--Inflation-adjusted hourly and weekly wages are still below where they were at the start of the recovery in November 2001. Yet, productivityóthe growth of the economic pieóis up by 13.5%....

--Consequently, median household income (inflation-adjusted) has fallen five years in a row and was 4% lower in 2004 than in 1999, falling from $46,129 to $44,389.

More and more people are deeper and deeper in debt.

--The indebtedness of U.S. households, after adjusting for inflation, has risen 35.7% over the last four years.

--The level of debt as a percent of after-tax income is the highest ever measured in our history. Mortgage and consumer debt is now 115% of after-tax income, twice the level of 30 years ago....

--The personal savings rate is negative for the first time since WWII....

Rising health care costs are eroding families' already declining income.

--Households are spending more on health care. Family health costs rose 43-45% for married couples with children, single mothers, and young singles from 2000 to 2003.

--Employers are cutting back on health insurance. Last year, the percent of people with employer-provided health insurance fell for the fourth year in a row. Nearly 3.7 million fewer people had employer-provided insurance in 2004 than in 2000. Taking population growth into account, 11 million more people would have had employer-provided health insurance in 2004 if the coverage rate had remained at the 2000 level.

There you have it. The publicís not so crazy after all. Commentators and GOP operatives take note.