December 11, 2008

Psychology of Bad Times Fueling Consumer Cutbacks

Section 3: The Government and the Economy

The public broadly favors the government substantially increasing funding for roads, bridges and other public works projects. However, other government efforts to deal with the struggling economy – including the program already enacted to help secure financial institutions and markets – are much more controversial.

Fully 70% believe it is the right thing for the government to spend billions on road and other public works projects and large majorities across the demographic and political spectrum support this idea.

In contrast, only about half of Americans (49%) say it is right for the government to help homeowners who are facing foreclosure on mortgages they cannot afford. A comparable percentage (47%) favors the program to aid financial institutions and markets, which is unchanged since mid-October. And just 39% say it is the right thing for the government to spend billions in loans to keep GM, Ford and Chrysler in business.

There is a substantial political divide over the prospect of government aid to homeowners facing foreclosure. Two-thirds of liberal Democrats (67%) endorse this idea, as do solid majorities of moderate and conservative Democrats and independents (56% each). By contrast, only about a third of moderate and liberal Republicans (34%) and 30% of conservative Republicans say it is right for the government to help homeowners with mortgages they cannot afford. People with lower family incomes also are much more likely than the affluent to support government help for homeowners.

The Financial Bailout

While the percentage saying it is right for the government to spend billions to secure financial institutions has remained stable since mid-October, opposition has ticked up, from 37% to 43%. Notably, the program draws strong support from those with family incomes of $100,000 or more; 59% of this group says the program is the right thing. Fewer than half in lower income categories endorse the program.

In addition a majority of liberal Democrats (56%) say it is the right thing for the government to invest billions to secure financial markets and institutions. About half of independents and conservative and moderate Democrats, and substantially fewer Republicans, agree.

Asked why they thought government efforts to boost the country’s financial institutions and markets were the right thing to do, supporters noted that the alternatives were worse: Connections between the finance system and the rest of the economy meant that the failure of financial institutions would ripple through the country. As one person said, “If they crash, we all crash.” “They don’t have much choice,” said another supporter of the government’s efforts. “They have to do something. They have to at least try.”

Opponents of the financial rescue say that people who created the crisis are benefiting, at the expense of the American people. “Let it crumble,” advised one person who complained that those who allowed mismanagement got to “walk away with millions.” Said another opponent of the bailout: “They’re giving it to the wrong people. They need to be giving it to the individual taxpayers.” Some opponents noted that the government’s efforts violated free market principles.

Aid to Automakers

A proposal to spend billions in loans to keep the Big Three automakers afloat draws only modest public support. Fewer than half of conservative and moderate Democrats (47%) and liberal Democrats (45%) say this is the right thing for the government to do. Independents and Republicans are less supportive. While people in the East and Midwest are more supportive of helping the automakers than are those in other regions, just 47% of Easterners and 42% of Midwesterners endorse this idea.

Those who support loans for the automakers express concerns about the loss of jobs – at both the car companies and at other businesses – should the auto companies go out of business. “We need to keep the Big Three going because of the trickle-down effect of unemployment,” said one supporter. Another person said it was the right thing for government to offer emergency loans to automakers “to save the pensions of those that gave their careers and to help those employees on the line – not executive bonuses or salaries.”

Some opponents of government help for the auto industry suggested that bankruptcy was a better route for Detroit. Others pointed to bad decisions by the automakers that made supporting them the wrong move: “They have done that to themselves with inferior products and poor management,” said one person. Others were opposed to Washington intervention on principle: “Government should not be involved in private business,” said one respondent.

Most Say Government Can Fix Economy

Almost six-in-ten (59%) say government still has the power to fix the economy, despite the United States being part of a global economy. That is virtually unchanged from early October, but somewhat lower than in July, when 68% said the government could fix the economy.

Democrats are far more likely to think that Washington can fix the economy than are Republicans, whose confidence in the federal government’s economic abilities has been falling since last summer. In July, 65% of Republicans said they thought the federal government still had the power to fix the economy, a figure that dropped to 57% in October and to 48% now.

By comparison, almost seven-in-ten Democrats (68%) now say the government can still fix the economy. That is up slightly from early October (62%), but is lower than in July, when three-quarters of Democrats expressed this view.

Inherent American Optimism Unshaken

The public remains steadfastly confident in the ability of the American people to solve the nation’s problems. Indeed, compared with two months ago slightly more now say that “As Americans, we can always find ways to solve our problems and get what we want” (68% today vs. 64% in October). Just 27% say that “this country can’t solve many of its important problems.”

Yet the public is not oblivious to some of the implications of the current economic situation. When asked to choose, a small majority of 53% now agrees that “people should learn to live with less,” and just 40% think that “there are no real limits to growth in this country.” This is a complete reversal of the pattern seen four years ago, when 51% saw no limits to growth.

In the midst of this tumultuous period in which the roles of government and business are undergoing scrutiny and possible revision, the public’s basic orientations toward both have remained relatively unchanged. Americans are divided over whether regulation of business is needed to protect the public (47%) or does more harm than good (43%). At least in part, this reflects skepticism about both government competence and business practices. A small majority of 53% says government is almost always wasteful and inefficient. Somewhat more (58%) believe that business corporations make too much profit.

There is also little change in the public’s view of government assistance. Currently, 55% say that the government should do more to help the needy even if it means going deeper into debt. Just 35% say the government can’t afford to do much more to help the needy.