Americans divided about economy, too
Democrats and Republicans have never been further apart in their expectations for the economy than they are right now.
The Trump presidency appears to have sparked an unprecedented political polarization in consumer confidence, which is often viewed as a leading indicator for the economy’s performance. While Democrats and Republicans have similar beliefs about how the economy is performing at the moment, they are now hugely divided over how it will perform in the future, research shows.
“When we ask them about the economy . . . most Democrats expect a recession over the next year, and most Republicans expect economic growth,” says Richard Curtin, who directs the University of Michigan’s well-known survey. “That has been the big news: about how Democrats and Republicans shifted almost totally and instantly with the election of Trump.”
Perhaps surprising: That is a recent phenomenon. The research shows that Republicans were a little more optimistic than Democrats during the presidencies of Ronald Reagan and George W. Bush, although Curtin says the difference was not statistically significant. The gap was slightly larger under Barack Obama, with Democrats being more optimistic than their Republican counterparts. (The University of Michigan has collected this data only periodically, so it excludes the presidencies of George H.W. Bush and Bill Clinton.)
But with the election of Donald Trump, the partisan gap in consumer confidence split wide open.
Perhaps because Trump’s electoral win was unexpected by some, the data also show a sharp swing in the opinions of Democrats and Republicans before and after the election. Democrats quickly went from having more positive expectations for the economy than Republicans did to having a much dimmer view.
On average, the levels of confidence that Americans as a whole express in the economy are relatively high. After the presidential election, Michigan’s measure of consumer confidence jumped to levels not seen since 2004.
Economists attribute this in part to expectations that the Trump administration would introduce tax cuts, infrastructure spending and other measures to buoy the economy – but they say the biggest factor was probably the continued strength of the economy, which recently qualified as the third-longest expansion on record.
Six months on, the division hasn’t narrowed, Curtin says. But it remains to be seen whether the advent of the partisan gap in how Americans view the economy is a fundamental change, or whether the gap will shrink as time goes on.
Curtin says the impact on the economy is muffled somewhat because independents still remain the largest political grouping in the United States. Meanwhile, the optimism of Republicans helps to cancel out the pessimism of Democrats overall, he said.
Jed Kolko, an economist at job site Indeed who closely follows regional economic trends, says that states that voted for Trump have been growing faster than states that voted for Clinton in the first four months of the Trump administration, but those red states already were seeing faster job growth in the last months of the Obama administration.
The research is not without critics. Ken Goldstein, an economist with the Conference Board, said he respected Curtin deeply and “would not be quick to challenge his assertion. But I think for most consumers it’s about my job, my paycheck, my chance for a raise, my chance for a promotion.”
“What happens in the labor market is far more important than what happens in the political arena,” Goldstein said.