- The Washington Times - Thursday, May 25, 2006

Even with a 50 percent spike in oil prices over the past year, the U.S. economy continues to surge ahead, creating millions of new jobs while inflation remains in check and the equity markets push near all-time highs. Despite these objective strengths, polls show Americans’ subjective view of the economy remains in the doldrums. Only 29 percent of U.S. citizens rate the economy as excellent or good, while those with a pessimistic view of the economy outnumber the optimists by a three-to-one margin.

This enigma is on the minds of many in Washington, particularly Republican lawmakers anxious for voters to recognize their successful economic policies. House Majority Whip Roy Blunt of Missouri recently told Roll Call, “I spend a lot of time wondering about this myself — why is it with this incredibly strong economy… people don’t embrace the economy with the kind of confidence that everything indicates they should?”

It’s a daunting riddle with no single answer, but taken together, three critical factors help explain why a good economy produces bad perceptions: 1. hyper-partisanship, 2. new-economy angst, and 3. lifestyle inflation. In the next several installments of the American Survey, I outline how these three factors contribute to negative perceptions and what can be done about them.

The chart below reveals the contribution of hyper-partisanship. From 1980 to 1992, during the tenures of Presidents Reagan and George H.W. Bush, Republicans consistently gave better ratings to the economy than did Democrats. During the Clinton years, the pattern reversed, and Democrats became more positive. Starting with the current President Bush’s term in 2001, the trend flips back again. Republicans again are now more positive than Democrats.

The latest American Survey (800 registered voters; April 25-May 1) shows a wide gap, with 47 percent of Republicans vs. just 11 percent of Democrats holding a positive view of the economy. And if partisanship is increasing, as many experts believe it is, Democrats today likely drag down the overall perception more than Republicans did during the Clinton years or Democrats did during the Reagan/Bush era. In other words, without today’s hyper-partisanship, economic evaluations would be more sanguine.

But partisanship is only part of the answer. “New Economy Angst” also contributes to economic pessimism. Over the past five years, the bursting high-tech bubble and the accompanying stock-market collapse, along with the September 11 terrorist attacks, have instilled a cascading sense of vulnerability. These events, along with increased uncertainty, rapid change and cultural/institutional breakdown in modern America, are the foundations of new economy angst. More on this in the second part of this series.

“Lifestyle inflation,” brought by rising costs not completely captured in economic statistics, is a third factor contributing to economic pessimism. In the third installment I discuss how increased financial leveraging, new gadgets and services now deemed necessities and the dark side of affluence result in lifestyle inflation. Interest-rate increases over the past five years, gas price spikes, and property-tax surges associated with rising home prices all contribute to this upward spiral in lifestyle inflationary pressure.

Democratic pollster Fred Yang reinforced this point, telling Roll Call, “In most of the research I’ve done it’s not that people are worried about unemployment. This is more of a cost-of-living recession — the high costs of health care, education and energy.” The Washington Post made a similar point two weeks ago, arguing that despite official economic statistics, consumers are feeling the pinch of higher costs of gas, food, adjustable rate mortgages, personal property taxes, cell phones and internet access.

The final installment presents survey data suggesting lawmakers in Washington can begin to address economic pessimism by emphasizing policies focused on economic security, government competence and legislative goodwill.

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