WHY AMERICANS ARE SO PESSIMISTIC ABOUT THE ECONOMY

Americans are pessimistic about the economy, the Biden administration, and Democrats in Congress despite the good news about jobs, unemployment, and wages. Although inflation, pandemic fatigue, partisanship, and the negativity of the mainstream media have a role to play, Americans’ economic insecurity probably plays a significant role. [1]

Over the last 40 years, economic insecurity has been increasing for middle and lower-income households. Many of these households see government policies undermining their economic security and are not optimistic that government is doing or will do much that will improve their economic well-being.

Middle and lower-income households in the U.S. have seen very little income (or wealth) growth in the last 40 years, while the rich have experienced big increases in income and wealth. This growth in economic inequality has been much more dramatic in the U.S. than in other wealthy democracies.

Furthermore, these households are now exposed to much more financial risk than they were 40 years ago. Jobs are much less stable due to off-shoring and the growth of contract, gig, and part-time work. When a job is lost, new jobs with similar pay and benefits are often hard to find. And unemployment benefits are generally not available to workers who are not full-time employees.

Retirement benefits are much less secure. They have been shifted from company sponsored plans with income and often health insurance guarantees to individual savings plans where the individual assumes the risks and responsibilities of saving and investing for their retirement.

Unions used to help by ensuring jobs had good pay and benefits, as well as some stability. Unionization had an impact not only on union jobs but on the economy as a whole because non-union employers had to compete with union employers to hire workers. However, unionization in the private sector has plunged from 35% in the 1950s to 6% today. This greatly reduces the power of workers in the job market and has led to an erosion of economic well-being and stability for workers.

The risk of bankruptcy due to a health crisis is very real as private insurance has introduced limits on coverage and increased co-pays, although access to reasonably good health insurance has been improved to some extent by the Affordable Care Act (aka Obama Care). The security of the equity in one’s home was shattered by the housing market collapse and the Great Recession of 2008. Debt from higher education has skyrocketed at the same time as the good jobs needed to pay back student loans have become harder to find and keep for many.

The effect of the pandemic on jobs and earnings was dramatic. Everyone is now aware of the risks of a pandemic and this undermines middle and lower-income workers sense of security. Many of the emergency pandemic economic measures made a real difference for these workers, but now it’s clear they were only temporary relief. Furthermore, the stress of the pandemic, along with that of political divisiveness, climate change (and the related crises from forest fires to more frequent and powerful storms), as well as international conflicts, are additional unsettling influences on people’s state of mind.

Finally, Americans are not optimistic that government its leaders will effectively address their economic insecurity and stress. The failure of the Build Back Better bill - which would have supported families by extending the Child Tax Credit, helped them pay for child care, strengthened the health insurance system, reduced the price of drugs, reduced the cost of higher education, etc. – does not give middle and lower-income households any faith that help is on the way. By the way, all of the factors increasing economic insecurity have, of course, hit Black and Latino households harder the white households.

The termination of pandemic economic assistance policies, despite their popularity, indicates to middle and lower-income households and workers – the bulk of the American public – that the U.S. political system is broken and does not, and cannot be expected to, work for them and reduce their economic insecurity.

Given all of this, it’s not surprising that the public is pessimistic about the economy and the government, even if there are jobs to be had and pay is increasing.

[1]     Hacker, J. S., & Kapczynski, A., 3/22/22, “The great disconnect,” The American Prospect (https://prospect.org/economy/great-disconnect-american-economy/)