The Good Old Days? Many Think Today Is Even Better

And now for some good news.

The economy looks great. The stock market is shrugging off the Asian flu. The crime rate is down. The price of oil is at a 25-year low. Most of the world is at peace. On top of all that, summer’s here.

So it should be no wonder that public opinion polls are finding Americans in an optimistic mood--more confident about the future, by some measures, than at any time in 30 years.

This spring, public opinion surveys found that about 70% of Americans think the economy is not just good but getting better. More than half believe that the nation is heading in the right direction, compared with 28% who felt that way in 1996. A stunning 66% of voters in the June 2 California primary said they thought the state was “on the right track.”

Mood matters. In politics, satisfied voters have abandoned the impulse to revolt and turned “incumbent” from a curse word into a boast. “The politics of anger won’t work this year,” Republican pollster Frank Luntz said.

In economics, the high level of confidence--born of six years of prosperity--is fueling further prosperity. Consumer spending is growing, real estate prices have turned up and the stock market seems nearly impervious to such bumps as the financial crisis in Asia.

And prosperity and optimism may bring other benefits as well: less alcoholism, drug use and child abuse and perhaps more tolerance toward minorities, immigrants and other disadvantaged groups.

“People who are feeling no financial pressure feel a margin of generosity that they are willing to apply to others,” said Tom W. Smith, one of the nation’s premier attitude-watchers as director of the General Social Survey at the University of Chicago.

Not everything is coming up roses. Americans are still concerned about issues such as education and health care and public morality (although less concerned than they were a year ago). And they remain generally pessimistic, even cynical, about the ability of the federal government to get things done. But even Congress’ popularity inched into the positive early this year, so there may yet be hope for the bureaucracy.

Nor is everyone feeling bullish. “Personal optimism is at a 30-year high . . . but there’s a big gap between people with a college education and people without,” said Andrew Kohut of the Pew Research Center for the Public and the Press. “People without a college education are much less confident about their ability to succeed in the global economy.”

Moreover, economists have sifted through all the good news and characteristically found a gloomy signal for America’s economic future: People are saving only about 3.5% of their income, as low as that statistic has been since the government began collecting it in 1946. But even that reflects today’s optimism; Americans spend more in good times because they are confident of having still more money next year.

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The nation’s current surge of affability is clearly rooted in the economy’s unexpected vigor. Robust growth, vanishing inflation, rock-bottom unemployment and rising wages would make any grinch, even Federal Reserve Board Chairman Alan Greenspan, hazard a smile.

Several factors make some social scientists suspect that the current bout of good feeling is more than just a blip.

For one, it took Americans a long time to decide that they were not so unhappy after all. On matters as basic as this, people are not subject to violent mood swings.

The national economic upswing began in 1991. But Americans did not believe President Bush when he told them that good times were ahead, and they did not believe President Clinton either at first.

“Psychologically, it took until well into 1996 for people to become convinced that things were good and likely to stay good for the foreseeable future,” said Karlyn Bowman, a poll-watcher at the American Enterprise Institute here.

Second, two decades of a roller-coaster economy with low or flat income growth seem to have adjusted Americans’ expectations--downward. In the 1950s and 1960s, Americans came to regard boom times as their birthright. When the 1970s failed to deliver, many thought that the system had failed.

Now, by contrast, almost no one younger than 45 has ever worked in an economy this good.

“A very different psychology prevails about this expansion than in the economic expansion of the 1960s,” Bowman said. “In the ‘60s, people expected to make continued gains. Now they just expect to hold on to what they have.”

Finally, there’s more good news than just the economy. Crime rates have been falling since 1991. The federal budget is running a surplus--a fiscal miracle that most Washington smarty-pants once thought impossible. The nation is not at war and seems unlikely to wander into one soon. There’s no baseball strike. And for summer drivers, gasoline costs roughly 30 cents a gallon in 1960 dollars.

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When bad news has intruded, it has had little impact. Japan’s stock market nearly collapsed. South Korea and Thailand went into the tank. Indonesia erupted in riots. India and Pakistan detonated nuclear bombs in tests. Through it all, the American public remained serene.

“Those stories haven’t hit home,” Bowman said. “With so many other things going well, people aren’t looking for gloom and doom.”

Economists say that all this confidence will itself help sustain prosperity--sort of a virtuous cycle.

“People are going to spend their rising real income,” said Bill Dudley, chief economist at Goldman Sachs, New York’s investment banking firm. “More spending will go toward services and vacations. And the housing sector--that’s where it makes a difference. People are willing to make the big bet to buy the big house.”

After seven years of bumpy markets, home prices have turned up across most of the nation--an average of 9% over last year nationwide, 10% in Los Angeles County.

In politics, a strong economy generally helps incumbents, who get credit for the good times whether they deserve it or not. In this year’s congressional elections, both parties are trying to claim incumbent status: Republicans because they are a majority in Congress, Democrats because their man in the White House says that his policies created the boom.

Conventional wisdom gives the edge to the GOP, but that logic may not hold, some conservative poll-watchers warned, because optimism is not the Republicans’ friend this year.

“The politics of anger that captured this country in 1994 [when the GOP took control of the House] will not work in 1998,” warned Luntz, a former advisor to House Speaker Newt Gingrich (R-Ga.). “Too often I find Republicans still communicating out of anger.”

A better message, Luntz counseled, would strike a tone of “concern, sadness or regret” at the direction the country is going.

Prosperity muddies the GOP message in another way, noted Douglas Besharov of the American Enterprise Institute: “The Republicans can’t say we’re broke so they can’t resist spending.”

And after a long wave of cutting the size and spending growth of the federal government, there are signs that economic optimism is spurring citizens to take a second look.

“People are more generous about what they want government to do when things are working well,” said Bowman.

When Americans are asked whether they think their taxes are too high, for example, historically about 70% have said yes. But this year, according to Smith, that number has dropped to just over 50%.

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Generosity extends to private giving. Americans donated $143 billion to nonprofit organizations last year, a nearly 10% increase in just two years, even after adjustment for inflation.

Most intriguing--and most uncertain at this point--are the effects of optimism on other forms of behavior.

Smith’s surveys show increased tolerance toward minority groups. “The personal security that comes from job and financial security leads to a diminution of the sense of threat and the acceptance of the idea that I can put up with a world that is a little more diverse and complex,” he said.

There is also evidence that alcoholism, drug use and child abuse decline in times of optimism, he said. “The people who have those problems tend to be those who are under the greatest threat. They are taking out their frustration on others, or on themselves. . . . These intrafamily problems do moderate in good times.”

Not clear, however, is whether prosperity and confidence have any predictable relationship with the nation’s crime rate. Crime declined markedly during the Great Depression, both because there was less wealth available to steal and because many men in the age group that produces the most criminals were forced to live with their parents longer.

Can these good times last? Economists warn that no boom endures forever.

But there are signs that the current optimism--a measured, cautious, storm-tested confidence--might outlast a serious downturn.

In October, when the Dow Jones industrial average suddenly dropped 500 points, many brokers braced themselves for a wave of selling by small investors. Instead, the little guys came back to buy more.

“We regularly ask people what they think the most important problem facing the nation is,” Bowman said. “This year, there isn’t one.”