There is still a lot of public relations work needing to be done to articulate to Americans the proper role of government in times of economic crisis.
Yesterday, Barack Obama introduced some of the basic priorities and projects of the stimulus plan he will work to enact in his first few weeks as President. From traditional infrastructure projects like road and bridge repair to R&D in energy and health sciences, the package includes a wide range of public spending projects. In addition, the package also includes budget relief for state governments, and a $1000 dollar tax cut for 95% of working American families.
A recent poll commissioned by Politico showed that 79 percent of respondents favor Obama's proposal. This makes sense--unemployment is rising, home values are on the decline, and everyone is worried about their savings. But how deeply rooted is public support for a nearly trillion dollar stimulus? The same poll illuminates a degree of cognitive dissonance in the public's thinking about the economy that might undermine long term support for any next steps Obama takes.
Farther down in the poll, respondents were asked what sort of policies might be effective at improving the economy. Here are the top five responses, with the percentage of people who thought each policy would be effective:
"Stricter enforcement and stronger regulations on 74
businesses, particularly in the financial sector, to
prevent future abuses
A major government investment in energy to develop 66
alternatives to imported oil and make the United
States a world leader in alternative energy innovation
A long-term effort to balance the budget and lower the 66
national debt
Lower taxes for the middle class 59
An across-the-board reduction in federal government 58
spending"
Disregarding number one--essentially an argument for 'sticking it to those greedy bastards on Wall Street'--the next four responses are, in a sense, two for more spending and two for less spending.
This data points to a contradiction between on the one hand maintaining a balanced budget and reducing spending, and on the other cutting taxes and increasing spending, underscoring a void in the public's understanding of government spending and the economy.
It is no surprise, and almost self-evident, that in normal economic conditions, polling would show that the American public supports reduced government spending and, simultaneously, increased government spending. But these are abnormal economic conditions, and at the moment a balanced federal budget would be bad for the economy, indicating that there is still a lot of public relations work needed to articulate to Americans the proper role of government in times of economic crisis.
Right now, credit has contracted and banks aren't lending, which means most businesses don't have access to the loans that allow them to grow their operations or invest in new ventures, or for some, even pay their employees. It is the same for individuals, who aren't able to take out loans to pay for new cars or homes and in many cases are spending a good chunk of their income paying down debts. This reduction in spending causes further contractions in the economy, which makes banks less likely to loan and businesses less inclined to spend. When something like this happens, the government can step in as the spender and lender of last resort. It can reverse the downward spiral by spending on projects that create jobs and increase the productivity of our economy, instilling confidence in lending institutions and easing creditors.
However, the best way for government to do this during a recession is to run a deficit on these spending projects. The alternative to running a deficit would be to increase government revenues by raising taxes. And yet, paying for government spending with higher taxes not in fact stimulate the economy. Spending revenues from new taxes just moves money around the economy from one place to another. Deficit spending, however, especially when interest rates are low, is essentially borrowing to invest in future growth.
This governmental economic principle is not well known to the public, and the media perpetuates the myth that it is always good for government to have as low a deficit as possible. Add to this that the public has spent the past eight years watching the Republicans increase the federal deficit while median incomes have been stagnant, and there is not a lot of evidence to help everyday voters and consumers understand the need to run deficits.
It's almost as if there are two competing economic voices whispering in each American's ears. One voice saying, "Well, the government needs to embark on these spending projects to create jobs and improve the productivity of the economy, reversing the downward spiral of recession." Meanwhile, the other voice says, "Right now, everyone needs to balance their personal budget and start saving because it is financially irresponsible not to do so. This applies to me, my family, other families, and institutions, even one as big as the federal government."
Both these voices appeal to the American citizen, and both seem to make sense. Although deficit spending would be good for the economy, the public has a hard time conceptualizing how the government essentially being "in debt" is good for the country's economy. But it is.
So what does this mean? It means that while public opinion might be that the stimulus is necessary now, there is not a deep and abiding understanding of, or faith in, deficit spending that guarantees that this type of economic plan will always have public support. The Democratic leadership, including Obama, Nancy Pelosi and Harry Reid have a lot of work cut out for them to educate the public and build deeper support for the stimulus package. If they don't, then today's support could quickly become tomorrow's backlash.
