Boom or Bust: Stark Partisan Divide on How Consumers View Economy
“I find it stunning, to be honest. It’s unreal,” said Michael R. Strain, director of economic policy studies at the conservative American Enterprise Institute in Washington. “Things that were less politicized in the past, like how you feel about the economy, have become more politicized now.”
Indeed, the night-and-day views underscore yet another front on which Americans remain polarized five months after the election, and with President Trump nearing his 100th day in office.
There are some tangible reasons for the split. Many Republican states, including the Midwestern swing states that provided Mr. Trump’s margin of victory, have experienced a more sluggish recovery over the last eight years — and are thus more invested in the change promised by Mr. Trump.
Many Democratic states have bounced back more vigorously. Hence their political and economic viewpoints were jolted by November’s election result.
For example, Vermont, Colorado and Massachusetts — all carried by the Democrats — are thriving, with an unemployment rate below 4 percent. In Republican strongholds like Alaska, Georgia and Alabama, the rate is well above the national average of 4.5 percent.
Rank-and-file Republicans aren’t the only ones who are feeling more upbeat, whether or not it’s justified by the data. Sentiment among business leaders who backed Mr. Trump has also surged since the election.
David Congdon, chief executive of Old Dominion Freight Line, the trucking giant, never expected Mr. Trump to win when he voted for him in November.
“I fell out of bed when I got up in the morning on Nov. 9,” he admitted. “I didn’t quite know what I was voting for.”
But despite misfires in Washington like the failed attempt to roll back President Barack Obama’s health care policies, Mr. Congdon is definitely feeling more positive.
“Trump’s got a hard road ahead of him, but I think he’s off to a decent start,” said Mr. Congdon, who recently joined other transportation executives for a meeting with Mr. Trump and Vice President Mike Pence.
“I’m personally optimistic about the economy for the rest of the year, and I think we will see an uptick in terms of freight deliveries,” he said. “We have picked up our hiring.”
Economists, too, find their outlook shifting with the political landscape. Before the election, Heather Boushey, a top adviser to Hillary Clinton during the campaign, thought “the economy was on the right track, with slow and steady growth like we’ve had over the past few years.”
Now she is much more pessimistic, especially about the economy’s long-term prospects. Although she is pleased that the Affordable Care Act survived Republican efforts to repeal it, the gridlock has led her to believe that Mr. Trump will never get a big infrastructure spending package through Congress.
“I am losing hope that we will make those much-needed investments over the next few years,” said Ms. Boushey, executive director of the liberal Center for Equitable Growth.
The University of Michigan researchers have their own way of measuring the gulf between the two viewpoints and how quickly it has flipped.
Among Republicans, the Michigan consumer expectations index was at 61.1 in October, the kind of reading typically reported in the depths of a recession. Confident that Mrs. Clinton would win, Democrats registered a 95.4 reading, close to the highs reached when her husband was in office in the late 1990s and the economy was soaring.
By March, the positions were reversed, with an even more extreme split. Republicans’ expectations had soared to 122.5, equivalent to levels registered in boom times. As for Democrats, they were even more pessimistic than Republicans had been in October.
As at the voting booth, the split in perceptions could have real-world consequences. If behavior tracks the recession-era sentiment among Democrats, who account for 32 percent of respondents in the survey, prophecies could quickly become self-fulfilling by affecting spending and investing decisions.
“If one-third of the population cut their consumer spending by 5 percent, you get a recession,” said Alan Blinder, a Princeton economist who served in the Clinton administration and advised Al Gore and Hillary Clinton on economic policy during their Democratic presidential campaigns. “I don’t think it will happen, but it’s not beyond the realm of the possible.”
To be sure, even if Democratic consumers pulled back, that wouldn’t necessarily bring on a recession. A burst of spending by bullish Republicans, who equal 27 percent of those polled by the Michigan researchers, could counteract much of that drag. And independents, who are the largest cohort in the survey, at 41 percent, remain fairly optimistic about future growth.
It is rare for “rising optimism to coexist with increasing uncertainty,” said Mr. Curtin, the Michigan expert. “The current level of optimism clearly indicates that no economywide spending retrenchment is underway, but the prevailing level of uncertainty will limit growth in discretionary spending.”
Lawrence H. Summers, who served as Treasury secretary under President Bill Clinton and was Mr. Obama’s chief economic adviser during his first term, said he, too, was struck by the big swing in economic sentiment.
“It is a remarkably big switch from October,” he said. “If you are a Democrat, you are primed for negativity. It carries through in your view of everything else.”
A prominent Democrat himself and a strong Hillary Clinton backer, Mr. Summers is nonetheless slightly more optimistic than he was late last year, because the data on housing starts and business investment intentions has been positive, not because of the new administration’s policies.
Whether the optimists or pessimists prove more prescient about the economy’s trajectory, Mr. Summers said, the split in perceptions will persist.
“I’d bet there will be some minor convergence,” he said, “but there will still be a large divergence on what should be a matter of objective reality.”
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