Consumer spending, say the experts, drives much of the nation’s economy. So it’s not surprising that economists, journalists and politicians hang on those periodic measures of consumer sentiment handed down from a number of sources.
There’s nothing magical about consumer confidence scores. They’re taken from public opinion surveys that regularly ask Americans about the economy and measure changes from poll to poll. Like the economic index periodically published by The Times, most polls ask about personal finances. They try to gauge the general business climate and the public’s expectations, as well as feelings about current conditions.
What motivates changes in confidence is still somewhat of a mystery, however. Over the years, surveys have done pretty well at predicting recessions and recoveries, but the psychology they track doesn’t always conform to “hard” economic data.
On paper, for example, the 1982 downturn was worse than the one in 1980, but the average American seemed to feel otherwise. The experts--and President George Bush--declared the 1990 recession to be over in mid-1991. The public begged to differ, and its persistent gloom helped deliver the White House to Bill Clinton.
With Clinton’s election, confidence jumped. It soured somewhat in mid-1993 but lately has been on the rise. Many surveys, including those by The Times, are now showing a mood more sanguine than that of the last three years.
One would expect to see some aspect of the economy--interest rates, unemployment or disposable income, for example--as the basis for these changes, but a comparison of Times economic polls over the last few years shows another, more surprising factor in the recent mood swing: politics.
Remarkably, the post-election rise in optimism seemed to have been tied to political party loyalties as much as to affairs of the pocketbook. Irrespective of income or financial status, Democrats were gloomier when George Bush was in office; they feel much better now. Today it’s the Republicans’ turn to have the furrowed brows, for all their relative affluence and security.
The partisan character of consumer confidence is quite pronounced. In July, 1992, a Times Poll found that 49% of Democrats but only 30% of Republicans felt the nation was in a serious recession. Asked if the economy would be better or worse in three months, the Democrats said “worse” over “better” by 26% to 13%. The result among Republicans in the survey: 31% saw improvement; just 12% expected to see rougher times.
Democrats in that poll reported lower incomes and less secure finances than the Republicans, so one might expect that would explain the difference in their answers. Not so. In fact, high-income and lower-income people were equally likely to call the recession serious. Party identity, regardless of income, seemed to make a difference.
Fifteen months into Clinton’s term, the pattern looks quite different from that of 1992. As of April, the proportion of Democrats who feel we are in a serious recession is down 38 points from two years ago, to 11% from 49%. The number has dropped for Republicans too, but by just 18 points, to 12% from 30%. And now when Americans are asked if the economy will improve or get worse in the upcoming quarter, 29% of Democrats are optimistic and 9% are pessimistic. Among GOP adherents, negative responses outnumber positive ones 20% to 16%.
Almost equal shares of Democrats (52%) and Republicans (53%) now call this a good time to buy big-ticket items. Just before Clinton’s inauguration, the Democratic number was 16 points lower than the Republican number on the same question.
Are Democrats actually better off under Clinton while Republicans take it on their high-bracket chins? Stalwarts of both parties might make such claims. After all, 44% of Republicans think they paid higher federal taxes last year, compared to 25% of Democrats.
But Republicans are no poorer than they were before Clinton and no less financially secure, either, according to the polls. Nor are Democrats more prosperous. Seven out of 10 Republicans say they have secure personal finances, compared to 57% of Democrats. These numbers are virtually identical to those measured during the Bush Administration two years ago, as are the household incomes reported.
With their man in office, Democrats simply seem to feel better about things economic, irrespective of their own financial lots. Whether that is stimulating real economic activity is hard to verify, because things such as retail sales and durable-goods orders aren’t tagged by political party.
The positive aura among Democrats is definitely a part of the current rise in consumer sentiment. It remains to be seen if it can sustain itself should the challenges Bill Clinton’s presidency faces begin to take a toll.