MARGARET WARNER: When voters in New Hampshire cast their ballots this week, economic worry was very much on their minds. According to exit polls from Tuesday’s primary, the top issue for both Democrats and Republicans was the economy, edging out the Iraq war, health care, and immigration.
Asked to assess their level of concern about the economy, 97 percent of the Democrats said they were very or somewhat worried; 80 percent of the Republicans said the same.
Nearly 60 percent of voters in both parties said their own family’s financial situation was “holding steady,” but 28 percent of Democrats and 17 percent of Republicans said they were “falling behind.”
To explore what’s driving this economic anxiety and how the candidates are addressing it, we’re joined by Daniel Gross, financial columnist for Slate and Newsweek magazine, and Stephen Moore, senior economics writer for the Wall Street Journal and a member of the paper’s editorial page board.
Welcome to you both.
Daniel Gross, beginning with you, I mean, it was quite amazing that this would be the number-one issue to voters. They were more worried about it than terrorism or immigration or the war in Iraq.
What is driving this? Why are people so apparently anxious about the economy?
DANIEL GROSS, Financial Columnist: Well, the news over the last few weeks, especially post-Christmas, has been almost uniformly bad. We had a jobs report. The private sector didn’t really create any jobs in November. Manufacturing is now contracting.
Inflation is high. Oil is at $97 a barrel. In New Hampshire, they have to pay for heating oil, which is very high.
There is good reason to be anxious. The economy is stalled. It may be heading into recession. Consumers have certainly keeled over. All the retail reports we’re getting show that sales in December were quite poor.
And, you know, we’ve had six years of economic growth without a noticeable increase in median incomes or without an increase in the percentage of people who have health insurance. So if this is as good as it gets, that could be reason to worry.
Concerns over job security
MARGARET WARNER: Stephen Moore, do you agree that it's the short-term or immediate crises and problems we see, but that there's also something underlying it for many voters, that they haven't seen much improvement in their own lives?
STEPHEN MOORE, Senior Economics Writer, Wall Street Journal: Well, first of all, I mean, the problem with this analysis that this is just a result of the news over the last few weeks, I think, doesn't tap into the fact that the polls have been showing for at least the last 18 months that American voters are very economically anxious, even at a time when we've had very high economic growth.
I mean, Daniel mentioned that we're in the sixth year of an economic expansion. We've had very steady job growth. We've had very low unemployment. And yet, even in this time of prosperity, Americans are nervous about the future.
And, Margaret, my theory on this is that what's happening, even as the economy has grown very rapidly over the last 20 or 25 years, we're in this new information age where progress and change is happening so quickly that a lot of people's jobs are being outdated. There's a lot of turnover in the workforce.
And people are wondering, is the work that I do going to be relevant two or five years from now?
Just to give you one example, Margaret: I work in the newspaper business. There's a lot of talk that, you know, five or ten years from now, there won't be newspapers, that people will just get all their information on the Internet.
So this is a rapidly transforming economy that's making people richer, but it's also making people very anxious about what their job is going to be like in the near future.
Assessing middle class growth
MARGARET WARNER: So, Daniel Gross, let me quote something that -- following up on this -- that Andrew Kohut, who's head of the Pew Research Center, and they do a lot of polling about attitudes.
And he said recently that the economic mood among the electorate is grimmer now than it has been since 1992, which as you recall was the year Bill Clinton ran for president, saying, "It's the economy, stupid," and we were still coming out of a recession.
Empirically, is the economy as bad as it was then? Has it not been as bad in the last 15 years? Or is it more a question of perception?
DANIEL GROSS: The economy is, I think, nowhere near as bad as it was back in '91, '92. We were having gigantic corporate restructuring, tens of thousands of jobs being lost at once.
I agree with Steve that there's this baseline, underlying anxiety that's at a pretty high level, that's been there for probably the last nine or ten years, with China, trade, all these issues, layered on top of this slew of bad news, the housing issues, all the credit issues.
One of the differences between this decade and the '90s -- Steve was talking about how there has been economic growth -- but it's been wildly disproportionate in terms of who's benefiting.
In the '90s, median incomes rose. We've been making a lot more pies in this decade, but they're all being delivered to Park Avenue.
The gains are going highly disproportionately to relatively few people, which makes those 80 percent of Republicans and 90 percent of Democrats polled in New Hampshire understandably anxious.
I think that's one of the differences weighing on the political situation now versus in previous election years, say 2000, when it seemed like an economic growth era was coming to an end, and also back in '92.
MARGARET WARNER: Do you agree, Stephen, that the gap in benefits, who's benefiting from the economic growth, is a part of this?
STEPHEN MOORE: Well, there's no question that a lot of people are getting very rich in this economy, no question about it.
But, you know, I've been analyzing the data and just the types of goods and services that the middle class in America have access to today versus, say, 20, 25 or 30 years ago, and you just see amazing affluence of the middle class, Margaret, in terms of the types of things we can buy.
Better, high quality health care for treatment like cancer and health disease; more economic gadgets. I mean, you just go into Circuit City today and you see low-priced things, like flat-top computers and large-screen TVs, and all of these things.
There are more cars than people in America today. There are more TVs than people in America today.
So the middle class actually has, in my opinion, a significantly higher living standard than they did even as recently as 1980. But for some reason, people are still very anxious. And they don't feel it.
And I'm going to give you one hypothesis of why that is, Margaret. I think it's people like you who are to blame, because the media continually has this drumbeat that the middle class is falling behind when, in fact, they're not.
Candidates' economic proposals
MARGARET WARNER: Well, and, Daniel, pick up on that, and let's talk about how the candidates are addressing it, because the theme that Stephen just elucidated there, that, in fact, the middle class feels stretched, you do hear Democratic candidates saying, and even Republican candidates saying, but would you say -- I guess my real question here is, are the major differences between the two parties or within the parties right now?
DANIEL GROSS: Well, I think this year is a very interesting year. You have, on the Republican side, you know, Mike Huckabee, who is clearly not cut from the East Coast establishment cloth. He's called the Club for Growth, where I think Steve used to work, the "Club for Greed."
He is explicitly running a populist campaign against Wall Street, for Main Street. You haven't seen that really on the Republican side since Pat Buchanan back in the '90s, whereas the rest of the Republican candidates really not all that much difference in terms of their attitudes toward taxes and what's going on in the economy.
On the Democratic side, you have a similar thing. Edwards much more populist in his rhetoric. The policies of, say, Obama and Clinton, I don't think are noticeably less populist than Edwards. I think on that side it's more a question of the rhetoric, the way they talk about it rather than the substance.
Whereas, on the Republican side, big difference in substance between Huckabee on the one hand and the rest of the crowd on the other.
STEPHEN MOORE: You know, Daniel I think is right, that there is -- as I look at these polling numbers, and I look at, you know, focus groups on middle-class voters, Margaret, there's this incredible appetite for change.
And what people are sick of Washington, they're sick of lifetime politicians, they're sick of the corruption in Washington that they think is rampant, and I think that they're right. There is an incredible amount of corruption in Washington.
And so whichever party, whether it's Hillary Clinton or John McCain or Huckabee, whichever candidate can tap into that mood of being the reform candidate, I believe that's going to be the next president, because people really believe Washington is completely out of touch, is completely corrupt.
And we saw that in the 2006 elections, where Democrats campaigned for Congress saying, "We're going to go clean up the swamp." Unfortunately, the swamp isn't any cleaner now than it was two years ago.
Following Bush's economic policy
MARGARET WARNER: And, Stephen, how much of a difference, if any, do you see between Romney and McCain, in terms of the degree to which they embrace, say, the Bush economic policies?
STEPHEN MOORE: Well, you know, it's funny you should ask about that, because I've been looking very closely at the economic policies of the Republicans. And the trust is there is gradations, but they're all pretty much saying the same thing, Margaret.
They're all saying they want to make the Bush tax cuts permanent, which I think is really important for the economy. They're all saying that they don't want to raise taxes.
Whereas, on the Democratic side, virtually all the Democratic candidates, Obama, Hillary and Edwards, are all saying, playing I think what you might call the class warfare line, which is, "We're going to raise taxes on the rich, give more money to the middle class."
That didn't work for George McGovern or Mondale. Let's see if it works this time.
MARGARET WARNER: And, Daniel, can I assume you would disagree, at least with that characterization?
DANIEL GROSS: Well, certainly it worked for Clinton in '92, raising taxes on the wealthy.
STEPHEN MOORE: But he didn't say he was going to raise taxes.
DANIEL GROSS: But the matters of difference on the Democratic side, I think, are really just matters of degree, very similar platforms, although, again, the rhetoric is somewhat different.
On the Republican side, again, I think it's more interesting. You have McCain, who I believe was against the Bush tax cuts. You have Thompson talking about entitlement reform.
And, again, Huckabee, who clearly not cut from the same economic cloth, he's railing against Wall Street, railing against a lot of these groups that have advocated capital gains tax cuts, et cetera, and wants to replace it with this Fair Tax, which is really sort of out there.
And it will be interesting to see, as this goes on, if he continues to be a sort of mainstream Republican candidate, if he continues to win, I think that sets up a real economic debate within the Republican Party like they haven't had at the presidential level in quite some time.
MARGARET WARNER: Well, it's something we'll definitely be watching for months to come. Daniel Gross and Stephen Moore, thank you both.
STEPHEN MOORE: Thank you, Margaret.
DANIEL GROSS: Thanks.