America's Economic Mood: Gloomy (The Wall Street Journal)

Broad Public Pessimism Spurs Democratic Candidates To Target Business Interests

By John Harwood, The Wall Street Journal

WASHINGTON -- Americans are feeling decidedly sour about the economy and those in charge of it, fueling Democratic efforts to target business interests in the 2008 election campaign.

More than two-thirds of Americans believe the U.S. economy is either in recession now or will be in the next year, a new Wall Street Journal/NBC News poll shows. That assessment comes despite the fact the economy has experienced sustained growth with low inflation and unemployment and generally rising stock values ever since the recession that ended early in President Bush's tenure.

In addition, the poll shows a lack of confidence in economic leaders. That includes not just Mr. Bush and Congress, both of whom have the approval of fewer than one-third of all Americans, but the financial industry, large corporations in general and energy, drug and insurance companies in particular.

Some other measures of Americans' economic attitudes, such as the Conference Board's consumer-confidence measure, have risen lately, and the Journal/NBC poll reflected some mixed feelings about the economy. Yet growth in consumer spending has slowed, and concerns about health costs, job security and the gap between the rich and poor have left Americans downbeat about the road ahead.

"They're ambivalent about the current economy but pessimistic about the future," said Republican pollster Neil Newhouse, who conducts the Journal/NBC survey with Democratic counterpart Peter Hart. One consequence is anger at leading economic actors, who respondents believe are failing to protect ordinary Americans' interests.

"There's a combination of anxiety and loathing," Mr. Hart said. "There's a sense that every single one of these institutions is totally out for their own betterment, versus the public they serve."

Democratic politicians are reflecting those sentiments in the 2008 presidential campaign and in legislative proposals in Congress. Populist lawmakers in the House and Senate have targeted oil-industry tax breaks, and challenged pharmaceutical companies on issues from drug prices to generic substitutes to imports from foreign companies. The chairmen of the House Ways and Means and Senate Finance committees, and all three leading Democratic presidential candidates, have endorsed higher taxes on hedge-fund and private-equity managers or firms.

Efforts by Republicans and the business community to raise fears about Democratic tax increases, spending excesses or economic mismanagement have proved unsuccessful. In what Mr. Newhouse called a "world turned upside down," Democrats enjoy an edge in public approval that extends beyond such party strengths as health care and education, where Republicans trail by more than 20 percentage points.

Democrats lead by 35 percentage points on handling gas prices, by 24 percentage points on energy policy and 10 points on dealing with immigration. Even more notably, Republicans lag by 16 percentage points on controlling government spending, 15 percentage points on dealing with the economy and nine percentage points on dealing with taxes.

Both top Democratic presidential candidates, Sens. Hillary Clinton of New York and Barack Obama of Illinois, lead Republican front-runner Rudy Giuliani in a prospective November 2008 matchup by six and five percentage points, respectively. Mr. Giuliani has strengthened his position in the Republican nomination race; the former New York mayor leads with 33%, up from 29% in June, compared with former Tennessee Sen. Fred Thompson's 20%, which is unchanged.

Notwithstanding his struggles with campaign staff and fund raising, Sen. John McCain of Arizona ticked up to 17% from 14% in June, while former Gov. Mitt Romney of Massachusetts fell to 11% from 14%. The telephone survey of 1,005 adults, conducted July 27-30, carried a margin for error of 3.1 percentage points.

"These are sobering numbers for the Republican brand," Mr. Newhouse noted. With Republicans weighed down by Mr. Bush's 31% approval rating, he said, "These party comparisons aren't going to change anytime soon until we get a nominee."

The biggest drag on Republican fortunes remains the Iraq war, which has depressed the nation's mood across the board. Just 19% of Americans say things in the nation are headed in the right direction, while 67% say the country is off on the wrong track.

When those who expressed pessimism were asked to identify a reason, the Iraq war was cited by the highest proportion, 56%. For the first time since the Sept. 11, 2001, terrorist attacks, a plurality of Americans say the U.S. is less safe than before the attacks.

Failures in the health-care system are next on the list at 31%, as Americans continue to struggle with rising costs and coverage gaps. Democratic Gov. Jon Corzine of New Jersey, in Washington yesterday to lobby for higher federal health-care spending, argues that the two concerns feed on each other since Americans "think the war is pre-empting our ability to deal with health care and other issues."

"The macroeconomy is reasonably healthy," said Mr. Corzine, former chief executive of Goldman Sachs Group Inc. "But the reality for the majority of America is they're lucky if they hold on....The numbers are different from what the feel is on Wall Street."

Poll respondents expressed limited anxiety about the effects of either the housing-market decline or stock-market turbulence on their personal circumstances. Just 20% said shifting stock values lately have had a negative impact on their finances, while 17% said the same about home price declines.

The poll shows Wall Street itself is a target of public ire. Just 16% expressed substantial confidence in the financial industry, slightly below those expressing confidence in the energy industry (18%) or the pharmaceutical industry (17%). Large corporations (11%) and health-insurance companies in particular (10%) fared even worse.

One bright spot for the world of commerce: 54% of Americans expressed high confidence in small businesses, which tied with law-enforcement agencies for the second ranking behind the U.S. military among institutions rated by respondents.

About 67% of Americans expressed high confidence in the military. By comparison, local governments drew expressions of high confidence from 34%, public schools 32%, religious leaders 27%, the national news media 18% and the federal government 16%.