Economy Now Seen Through Partisan Prism

Summary of Findings

As President Bush prepares for his Jan. 31 State of the Union address, the public remains skeptical that the economy is improving, in spite of recent positive signals. Overall, about a third of Americans (34%) rate economic conditions as excellent or good, while nearly twice that number say they are fair or poor (64%). Views of the economy are more favorable than in the fall, when economic attitudes were shaken by two major hurricanes and a spike in gas prices, but remain below where they were a year ago (39% positive in January 2005).

As has been the case through much of Bush’s presidency ­ and in stark contrast to the Clinton years ­ public views of the economy are deeply split along political lines. Republicans generally see an economy that is thriving; 56% judge it as excellent or good. Democrats and independents see it much more negatively; just 28% of independents and 23% of Democrats say the economy is doing well.

Public perceptions of the economy were far less polarized during the Clinton administration. During Clinton’s first term, positive views of the economy rose gradually, and at about the same rate, among both Democrats and Republicans. During the boom of the late 1990s, optimism soared among members of both parties, while lagging a bit among independents.

Republicans have significantly higher household incomes than either independents or Democrats, but at every income level Republicans are much more likely to say that the economy is in good shape. Even among those with household incomes of at least $75,000, more than twice as many Republicans as Democrats express a positive view of the economy (65% vs. 31%). Independents’ opinions of the economy, again regardless of income, are much closer to those of Democrats than Republicans.

Partisans differ in their view of nearly every aspect of the national economy. Most notably, just under half of Democrats (47%) and nearly as many independents (44%) think the affordability of health care is a very big problem for the nation’s economy; just 28% of Republicans agree. Similar gaps exist with respect to energy and gas prices and the federal budget deficit, where Republicans are more sanguine than are Democrats and, to a lesser extent, independents.

Democrats are also far more concerned than Republicans about the job situation, a factor which weighs heavily in overall evaluations of the national economy. Three-in-ten Democrats say jobs are a very big problem for the country, compared with 17% of Republicans. Among Democrats who take this view, fully 88% say the economy is in only fair or poor shape.

The latest national survey by the Pew Research Center for the People & the Press, conducted Jan. 4-8 among 1,503 adults, finds only modest public expectations for this year’s State of the Union address. Just 30% think Bush’s speech will be more important than speeches in past years, down slightly compared with last year and 2004 (34% each); roughly half (47%) say Bush’s address will be about as important as the speeches of recent years. In January 2002, a few months after the 9/11 attacks, 54% said Bush’s speech that year would be more important. And the following year, as the war with Iraq loomed, nearly as many Americans (52%) felt Bush’s address would carry greater importance.

As in recent years, the public gives highest priority to protecting the country against terrorism, along with dealing with a range of domestic issues including education, the economy and jobs. Public sentiment in favor of a greater focus on domestic issues increased sharply in the aftermath of Hurricane Katrina, and it is still predominant, although not nearly to the extent it was in the fall. Currently, 57% say it is more important for President Bush to focus on domestic policy than foreign policy, down from 64% who expressed that view in October. The public is about evenly split over whether it is more important for Bush to focus on domestic policy (42%) or the war on terror (39%); in September and October, half or more said Bush should pay greater attention to domestic matters than the war on terror (56%, 50% respectively).

The survey also finds some specific domestic priorities of greater importance to the public in 2006. Compared with a year ago, significantly more people say that dealing with the nation’s energy problems (up 11 points), reducing crime (nine points) and protecting the environment (eight points) should rate as top policy priorities for President Bush and Congress. More people now rate these goals as major priorities than at the start of any year since 2001. In addition, regulating health maintenance organizations (HMOs) and dealing with the nation’s moral breakdown also has gained ground over the past year.

By contrast, there have been notable declines in the percentage who rate strengthening the economy and the military as major policy goals. While, two-thirds of Americans (66%) rate strengthening the economy as a top priority, this represents a decline from January 2005 (75%). And the percentage who rate strengthening the military as a top priority has declined 10 points, owing largely to a decrease among Democrats (14 points since January 2005).

Modest Economic Expectations

Positive ratings for the economy have risen since October, when just a quarter of Americans said the economy was good or excellent. But fewer Americans see the economy going well today (34%) than did so a year ago (39%), or two years ago (43%).

The public’s mixed views of the economy are reflected in the outlook for the coming year. One-in-five think things will be better a year from now, but a comparable number (22%) say things will be worse, while the majority see no changes on the horizon. This again marks an improvement from October, when many thought that the hurricanes and high gas prices signified trouble for the economy in the future. But a year ago there was significantly more optimism than pessimism as Bush started his second term.

Biggest Problems: Energy, Health Costs

Gasoline, home heating, and health care prices lead the public’s list of economic problems. Fully 82% of Americans cite gas prices as a very big (43%) or big (39%) problem for the nation’s economy and 87% say the same about home heating and energy prices (42% very big, 45% big).

The affordability of health care ranks just as high ­ nine-in-ten say this is either a very big (40%) or big (50%) problem for the nation’s economy.

Fewer Americans cite other concerns as serious problems for the nation’s economy. The federal budget deficit is rated as a very big problem by 32%, and 29% see the affordability of retirement as equally serious. Roughly a quarter rate both the job situation and housing prices as very big concerns, and both inflation and interest rates fall significantly lower in the list of economic problems.

Democrats cite all of these issues as very big problems more frequently than Republicans do, but the partisan gap is particularly notable when it comes to health care and jobs. Nearly twice as many Democrats as Republicans rate the job situation as a very big problem (30% vs. 17%).

Low-income Americans are particularly concerned about such issues as gas prices, jobs, and housing. Fully 54% of people in households earning less than $30,000 say gas prices are a very big national problem, compared with 36%
of people in households earning $75,000 or more. Similarly, lower income respondents are twice as likely to rate the job situation and housing prices as very big problems. Inflation and interest rates, while rated lower by all groups, are also felt more by low-income Americans than those with high incomes.

But other issues span across the economic spectrum. In particular, people in both high- and low-income households are equally likely to rate the affordability of health care as a very big national problem, and the same is true for concerns about the affordability of retirement. And people in high-income households are, if anything, slightly more likely than their low-income counterparts to rate the federal budget deficit as a very big problem.

Not surprisingly, people in different parts of the country see different problems as more important as well. Residents of the Northeast and Midwest are the most likely to rate home heating and energy prices as a very big problem, while those living in the West are far less likely to rate either home energy or gas prices as a major economic concern. Residents of the Northeast also are substantially more likely to rate the affordability of health care as a very big national problem than those in other parts of the country.

By contrast, residents of Western states are much more likely to rate housing prices as a very big problem. Fully 38% in the West say affordable housing is a very big problem, compared with just 19% in the Midwest and 20% in the Northeast.

The Market: Fewer Bears

By a 46% to 34% margin, more Americans are bullish than bearish on the stock market today, as the percentage saying it is a “bad time” to invest has dropped six points from May of last year. Men, college graduates and people in households with incomes of at least $75,000 annually are the most optimistic about the stock market, with income being perhaps the most decisive factor shaping a person’s market outlook. By a 66% to 20% margin, people in high-income households think it is a good time to invest, while those in households with less than $30,000 in annual income tend to be gloomy (44% bad, 30% good, 26% don’t know).

As with virtually all economic evaluations, Republicans are significantly more upbeat than Democrats. By more than two-to-one (58% to 26%) Republicans say now is a good time to invest, while Democrats are divided (39% good time, 41% bad time). Again, this partisan difference of opinion persists even when income is taken into account with the exception of those earning $75,000 or more, where Democrats are just as upbeat as Republicans.

Job Availability

One-in-three Americans say that there are plenty of jobs available in their community, while 56% say jobs are difficult to find. This is largely unchanged from a year ago, and represents some improvement from a low point in 2003 when fully two-thirds said jobs were difficult to find in their community.

But when a separate group of respondents is asked whether there are plenty of good jobs available, the outlook is slightly more negative. By a 64% to 28% margin Americans say it is hard to find a good job where they live.

Younger people and those with less education and income are the most skeptical about job availability, as are people living in rural areas of the country. When asked about jobs generally, people over age 50 are somewhat more optimistic about employment opportunities than those who are younger. But when the question is about good jobs, this age difference largely disappears, particularly when looking at Americans age 50-64, 70% of whom say good jobs are hard to find in their community.

The difference between finding a job and finding a good job is also more noticeable to people with more education. People who have attended college are significantly more likely to say that good jobs are hard to find than they are to say that jobs generally are difficult to find. Only among those who did not attend college is this distinction largely irrelevant; however, under either form of the question those who lack a college education are the most concerned about job availability.

Similarly, seven-in-ten people living in rural areas say jobs, whether good or not, are difficult to find, while people in urban and suburban areas think more jobs are available. Suburbanites see the general employment situation more favorably, but express as much doubt about the availability of good jobs as their urban counterparts.

Democrats are far more critical of the job situation than are Republicans ­ 62% of Democrats say jobs are hard to find in their community compared with 38% of Republicans. This difference shrinks somewhat when the question focuses on good jobs, however, as Republicans are far more likely to say these jobs are hard to find. Independents make no distinction between jobs and good jobs; two-thirds (67%) say either is hard to find.

Priorities: Little Change at the Top

As in recent years, defending the nation against terrorism remains the public’s leading priority for the president and Congress. Eight-in-ten rate terrorism defense as a top policy priority, which is largely unchanged from past years.

As was the case a year ago, improving education and strengthening the economy rate behind protecting the country against terrorism. However, the number rating the economy as a top priority has declined significantly over the past year (from 75% to 66%). Roughly as many now view improving the job situation as a top priority as say that about improving the overall economy.

Several domestic priorities have moved up on the public’s agenda since January 2005. More than six-in-ten (62%) rate reducing crime as a top priority, up from 53% last year. That is the highest number citing crime prevention as a leading priority since January 2001 (76%).

Dealing with the nation’s energy problem and protecting the environment have both become more important priorities in the public’s view. A solid majority (58%) now says dealing with energy is a top priority, up 11 points from January 2005. About as many (57%) rate protecting the environment as a top priority; a year ago, 49% rated environmental protection as a top policy priority.

By contrast, fewer Americans now view strengthening the military as a top priority than in recent years. Overall, 42% rate strengthening the military as a leading policy priority. From 2001 through 2005, about half of the public consistently rated this objective as a top priority (52% in 2005).

Crime’s Comeback

Government statistics show that crime rates have fallen dramatically since the 1990s, but crime concerns are making a comeback with the public. Crime is emerging as a more important priority particularly among college graduates, young people and women. A year ago, about twice as many of those with a high school education as college graduates cited reducing crime as a top national priority. But that gap has narrowed considerably as the number of college graduates who rate this as a top priority has risen by 19 points (from 32% to 51%).

Fully seven-in-ten women (69%) view reducing crime as a top priority. That represents a 13-point increase over the past year and is by far the largest percentage of women expressing this view since January 2001 (78%). Crime concern among young people also has risen sharply; 68% of those under age 30 say reducing crime should be a top priority, up from just 50% last year.

Party Divides Persist

Republicans and Democrats are deeply divided over the nation’s policy priorities for the coming year. As in past years, the largest gaps are over expanding government assistance for the needy and protecting the environment.

Nearly twice as many Democrats as Republicans say that dealing with the problems of the poor should be a top priority for the president and Congress (69% vs. 36%). The differences are only somewhat smaller over providing health insurance for the uninsured and protecting the environment.

The environment is emerging as a bigger concern among members of both parties, though differences over the importance of this issue have not narrowed. Four-in-ten Republicans (41%) now rate protecting the environment a top priority, up from 32% in January 2005. About two-thirds of Democrats (68%) believe protecting the environment should rate as a top priority, up 10 points from a year ago.

Similarly, there has been a comparable rise in the percentages of Republicans and Democrats who rate dealing with the nation’s energy problem as a top priority (nine points among Republicans, seven points among Democrats). There also has been a sharp increase in the number of independents who view this as a major priority (from 45% in 2005 to 60% this year).

As in past years, more Republicans than Democrats view security issues as top priorities. The differences are particularly notable ­ and growing ­ when it comes to strengthening the military.

A solid majority of Republicans (56%) rate strengthening the military as a top policy priority, compared with just 34% of Democrats. While fewer of those in both parties see this as a top priority than did so last year, the decline has been larger among Democrats (14 points vs. six points among Republicans). The percentage of Democrats rating a stronger military as a top priority is now at its lowest point in a measure dating to 2001.

Deficit Politics

A solid majority of Democrats (62%) rate reducing the budget deficit as a top policy priority, compared with just 45% of Republicans. The partisan gap on this issue has not narrowed in recent years, and represents a major shift from the 1990s. In 1997, for instance, two-thirds of Republicans (66%) viewed deficit reduction as a major priority, versus 54% of Democrats.

Conservative Republicans, in particular, do not view deficit reduction as an important goal. Just 36% of conservative Republicans rate this as a top priority; far more conservative Republicans rate cutting middle-class taxes (48%) and simplifying the tax code (46%) as top policy priorities.

Half View Tougher Immigration Controls as Top Priority

Roughly half of the public (51%) views tighter restrictions on illegal immigration as a top priority. By contrast, only a third as many (17%) say the same about a proposal to allow immigrants to enter legally and work in the U.S. temporarily before returning home. The public is divided over the merits of such a “guest worker” program ­ 47% are in favor while about the same number (46%) are opposed.

The modest five-point partisan gap over restricting illegal immigration obscures other significant differences over this issue. For instance, two-thirds of those ages 65 and older (67%) rate tougher immigration restrictions as a top priority. Far fewer younger people ­ including just 39% of those under age 30 ­ view this goal as important. In addition, a solid majority of high school graduates (59%) believe tougher immigration restrictions should be a top priority, while fewer than four-in-ten college graduates agree (36%).

There also is a deep ideological divide over the importance of cracking down on illegal immigration. A solid majority of self-described conservatives (63%) view this as a top priority compared with about half of moderates (48%) and just 39% of liberals.

Divided Over ‘Guest Workers’

The goal of making it easier for immigrants to legally work in the U.S. for limited time periods rates as a relatively low priority among all demographic and political groups.

Fewer than a quarter in every group rate this as a major priority for the president and Congress.

As previous Pew studies have shown, the underlying proposal of allowing immigrants to work legally in the U.S. draws support from both liberal Democrats (56% favor) and conservative Republicans (55%). By contrast, groups in the middle of the political spectrum ­ especially conservative and moderate Democrats ­ are more skeptical of this idea.

Nearly six-in-ten college graduates (59%) favor letting immigrants work in the U.S. temporarily, compared with 39% of those with a high school education. There also are regional differences in opinions about this policy. Westerners favor this proposal by 52%-39%, while Midwesterners on balance are opposed (by 52%-44%).

Extending Bush’s Tax Cuts

Half of Americans approve of the major cuts in federal income tax rates passed by President Bush and Congress in recent years, while 38% disapprove and 12% have no opinion one way or the other. There has been no significant shift in public backing of these tax cuts over the past three years.

Focusing the question specifically on the tax reductions on capital gains and stock dividends has no impact on public reactions. Half of Americans support extending reductions in taxes on investment income such as capital gains and profits from stock dividends, while 35% believe these tax cuts should not be extended.

Extending the tax cuts on dividends and capital gains is more popular among high income Americans ­ 61% of people in households bringing in $50,000 or more annually favor the extension, compared with 48% of those between $30,000 and $50,000 and just 42% of those whose household income is below $30,000. And there also is a stark partisan divide. Republicans favor extending these tax cuts by a 73% to 18% margin, while Democrats oppose the extension by a 53% to 32% margin. Independents tend to support extending the tax cuts on investment income (54% favor, 35% oppose). In all cases, reactions to extending the dividend and capital gains tax cuts are indistinguishable from overall support and opposition to the tax cuts more generally.

Drilling in ANWR

Public support for allowing oil and gas drilling in the Arctic National Wildlife Refuge in Alaska, which rose in September as gas prices surged, has declined. Currently, 47% are opposed to opening the refuge to drilling while 44% favor that action. In September, 50% supported oil and gas drilling in ANWR, while 42% were opposed.

Opinion among Democrats has fluctuated significantly on this issue over the past year. In March 2005, just 29% of Democrats favored opening the reserve to drilling, a figure which jumped to 42% following Katrina, and has dropped back to 33% today. By comparison, roughly two-thirds of Republicans have consistently favored allowing drilling in ANWR.

There is a sizable generation gap over the question of drilling in ANWR; people under age 30 oppose the idea by two-to-one (61% to 30%), while people ages 65 and older favor it by two-to-one (56% to 27%). Those between ages 30 and 64 are divided evenly.

Education and income have little to do with peoples’ views on this issue. College graduates are no more prone to support or oppose the policy than are people who never attended college. Household income is not much of a factor in views on ANWR drilling, although those with low incomes (under $30,000 annually) are less supportive than others.

Public views on ANWR are closely related to the overall priority they place on protecting the environment ­ those who say environmental protection should be a top priority for the president and Congress in the coming year mostly oppose allowing drilling, while those who rate the environment as a lower priority generally favor the idea. But public views on ANWR are not linked to how much emphasis people place on dealing with the nation’s energy problems. Those who rate this as a top policy priority have about the same views of opening ANWR to drilling as those who do not.

Little Change in Personal Concerns

Thinking about their own personal economic situation, Americans feel that they face many problems but are optimistic about the future. About as many say their own financial situation is excellent or good (46%) as say they are in only fair or poor shape (52%). However, 61% think their situation will improve over the next year, while just 19% expect their situation to get worse. Saving for both retirement and health care expenses loom large on people’s minds, as do college expenses for those with children or grandchildren.

In many respects, these evaluations have not changed in recent years, reflecting the fact that views of personal finances are considerably more stable than perceptions of national economic conditions. The partisan gap in personal financial evaluations is much more modest than differences over national economic conditions. Republicans, who have higher household incomes than Democrats, consistently take more positive views of their own finances than do independents or Democrats. These differences have remained fairly stable for more than a decade.

Currently, 60% of Republicans rate their personal financial situation as good or excellent, compared with 45% of independents and 40% of Democrats. Majorities in all three groups feel their finances will improve over the next year; 70% of Republicans expect their personal finance to improve a lot or some over the next year, compared with 61% of independents and 59% of Democrats.

Specific Concerns

In several areas, Americans are feeling less personal economic stress today than was the case five years ago. The percent saying they are very concerned about being unable to afford necessary health care when a family member gets sick has dropped from 60% to 50% since February 2001, and the proportion very worried about not having enough money for their retirement is also down from 55% to 46% over the same time period. Similarly, the share of Americans very concerned about losing a job or taking a cut in pay peaked at 41% in 2003, but stands at just 29% today.

The drop in these concerns has occurred across the political and economic spectrum. While poorer people are far more worried about these types of problems in their lives than high-income individuals, both groups feel better today than they did in 2001. And similarly, Republicans continue to feel more confident about their finances than Democrats, with both expressing less concern today than five years ago.

Increased financial security over the past five years does not span all generations, however. Younger people today, for the most part, feel just as economically unstable today as they did in 2001. But older Americans, particularly those age 65 and older, feel considerably more secure. For example, in 2001 46% of seniors were very concerned about having enough money to last through retirement ­ just 29% express this same concern today.

Personal Debt

About a quarter of Americans say they owe either a lot (8%) or a little (15%) more than they can afford on credit cards and other loans ­ not including home mortgages. Most say the personal debt they carry is manageable, while 21% say they have no debt at all. These figures are largely unchanged from recent years, as is the way debt is distributed. Roughly three-in-ten lower income Americans say they owe more than they can afford, twice the rate as among people in households earning $75,000 or more annually (16%). People under age 50 are also more likely to feel they are overextended (28%) when compared with people age 50-64 (21%) and especially seniors, only 9% of whom say they owe more in personal debt than they can afford (fully 45% of seniors say they have no debt outside of a mortgage).

Afghanistan Not Forgotten

More than four years after the U.S. invasion of Afghanistan, the vast majority of Americans (77%) are aware that the U.S. still has forces deployed there. There also is strong support for the use of military force in Afghanistan, in contrast to the divided opinion over using force in Iraq. Nearly seven-in-ten (69%) say using military force in Afghanistan was the right thing to do, while just 20% disagree.

There are partisan differences in opinions of the war in Afghanistan, but they are much smaller than the differences over Iraq. Nearly all Republicans (91%) feel the decision to use force in Afghanistan was right, compared with smaller majorities of independents (70%) and Democrats (56%). By contrast, more than three times as many Republicans as Democrats support the decision to use force in Iraq (80% vs. 23%).

While most Americans favor the use of force in Afghanistan, there are significant divisions over whether the mission has been successful. A narrow majority (52%) feels the war against terrorist organizations in Afghanistan has been mostly successful, while 30% believe it has mostly been a failure. There is a similar balance of opinion regarding views of whether U.S. efforts to establish a stable democratic government in Afghanistan have been successful.

By nearly seven-to-one (72%-11%), Republicans feel war against terrorists in Afghanistan has been mostly successful; Democrats are evenly divided (41% mostly successful/40% mostly a failure). In several demographic groups ­ notably senior citizens, those with a high school education and women ­ relatively large percentages express no opinion on this issue. This suggests that while the public is still aware that U.S. forces remain in Afghanistan, many Americans are not closely following developments in the country.