The economy, which continues its slow healing from the pandemic recession, actually isn’t all that different than it was in the fall. But there has been a change in what increasingly determines opinions about the economic landscape: the identity of the party controlling the White House.
“The outlook with the Biden administration coming in to replace the Trump administration is what will improve things,” De Santis said.
“I’m 100 percent sure if Biden ends up in the White House, it won’t be good for my family,” said Helms, who retains hope that President Trump will overturn the election outcome.
The views of De Santis and Helms symbolize a striking partisan divide that emerged in the Trump era — when Republicans began routinely viewing the economy in a better light than Democrats — and now may be hardening into permanence.
Over the past five months — and especially since the presidential election — the parties have switched places. Democrats became notably more buoyant, while Republicans just as quickly turned gloomy. The nature of economic policy debates during a strikingly unequal recovery is likely to cement such divergent views, according to Richard Curtin, chief economist for the University of Michigan’s consumer sentiment index.
“A rise in inequality caused a growing share of the population to think the only way to get a fair distribution of income and wealth was through public policy,” Curtin said. “Politics and policy now have a greater impact on people’s expectations about how the economy will perform in the years ahead. That’s why it’s not going away.”
The clash between Republicans’ emphasis on efficiency, expressed through low taxes and light regulation, and Democrats’ insistence upon equity has intensified amid two economic crises in a dozen years. Under the incoming administration of President-elect Joe Biden, fights over policies that would redistribute income from top earners to less affluent households — such as health care and student loan forgiveness — are likely to reinforce the parties’ contrasting economic assessments, Curtin said.
Consumer confidence is sliding amid the pandemic’s winter surge, according to recent surveys from the University of Michigan, Morning Consult and the Conference Board. On Wednesday, the University of Michigan said its consumer sentiment index dipped in late December, though it remained above last month’s reading.
December’s 80.7 figure was up nearly 5 percent from November “due to a large and rapid partisan shift, with Democrats becoming much more positive and Republicans much more negative,” Curtin said.
The change is evident in views of current conditions and the outlook, but it is particularly acute regarding the years ahead. Compared with three months ago, twice as many Democrats (54 percent vs. 27 percent) now expect a “continuous expansion over the next five years,” while that expectation was cut nearly in half among Republicans (down to 32 percent from 60 percent), Curtin said.
Democrats are more optimistic about the economy’s prospects than at any time since Trump defeated Hillary Clinton in 2016. Last month, for the first time in four years, Democratic expectations became rosier than those of Republicans, according to the University of Michigan data.
Democrats’ increasingly positive views defy numerous economic woes, including nearly 4 million workers who have been unemployed for more than six months and rising numbers facing hunger.
Republicans have a much rosier view of today’s economy, but are downright despondent about the future. Not since October 2016 have Republicans been more glum.
It wasn’t always this way. In 1980, when Ronald Reagan first won the presidency, just four points on the Michigan index separated Democrats from Republicans.
By February 2017, following Trump’s inauguration, the gap was more than 38 points, nearly 10 times as wide.
De Santis is an environmental attorney who favors a transition to a “green” economy, while Helms worries such policies will hurt her husband, an oil field worker. Like millions of other Americans, the two inhabit entirely distinct realities.
For De Santis, a lack of presidential leadership allowed the pandemic to put the economy into a “stranglehold.”
He said a newly elected “moderate” will focus on curbing the virus by rolling out new vaccines before focusing on the move away from fossil fuels needed to ensure long-term prosperity.
“The Biden administration will be better for the economy than the Trump administration — but that’s not what the Trump voters would say,” De Santis said.
Indeed, they wouldn’t.
In Central Texas, Helms mourns what she fears is the end of four straight years of solid economic gains. Thanks to Trump, the family prospered, buying a house, outfitting their kids with new clothes and trading their 13-year-old vehicle for a late-model Dodge Ram mega-cab.
“The economy in our part of the state has improved so much,” she said.
Helms said Trump understands the need to balance economic considerations with the pandemic fight. She doesn’t trust Biden or the news media that calls him the president-elect.
“I’m holding out hope for Trump. It will be a really bright future for us if he stays in office,” she said. “If he doesn’t, I’m fearful.”
The partisan divide after Trump’s election was much sharper than in the aftermath of previous elections in which a newly elected president replaced a member of the other party. Following Reagan’s 1980 victory over President Jimmy Carter, just 16.5 points separated Democrats from Republicans on the Michigan scale. After Barack Obama’s 2008 win, the gap was 17.2 points.
But after Trump dispatched Clinton, opposing partisans were nearly 75 points apart.
“This pattern has just undermined the credibility of the confidence indicators to some extent,” said economist Jim O’Sullivan, chief U.S. macro strategist for TD Securities.
The Trump years have taken a toll on other economic surveys. The National Federation of Independent Business optimism index jumped on his 2016 win and — except for the worst months of the pandemic’s initial wave — stuck well above its 25-year average no matter what was happening in the real economy. The small-business survey’s persistent upbeat tilt reduced its predictive value, O’Sullivan said.
Such sentiment indicators are most useful in signaling oncoming recessions, according to Mark Zandi, chief economist of Moody’s Analytics. When confidence plummets, it generally means a broader downturn is a few months away, he said.
The Michigan sentiment reading plunged in December 2000, three months before the 2001 recession officially began. Likewise, the indicator headed south in August 2007, four months before the housing bubble imploded and took the economy with it.
“Consumer confidence is neither here nor there in typical times,” Zandi said. “It reflects the economy. It doesn’t drive the economy.”
Partisanship also has its limits. Unmistakable booms and busts register with members of both parties and drive major swings in sentiment readings.
When this year began, Republicans were more impressed with what the president often called “the greatest economy in the history of our country.”
With the 3.5 percent unemployment rate near a half-century low, Republicans’ view of the economy registered 133.1 on the University of Michigan scale while Democrats were at 100.9.
Even as Helms celebrated good times, De Santis said he harbored doubts about the long-term consequences of what he saw as Trump’s excessive deregulation.
But as the pandemic took hold, members of both parties suffered virtually identical mood swings. Between February and April, Democrats’ view of current conditions plunged by almost 36 points, while Republicans’ reading sagged by about 43 points.
“Partisanship is a big influence, but reality is sort of a constraint on it,” said Jeff Jones, a senior editor with Gallup. “People are responsive to what’s going on. It’s not just partisanship.”
Indeed, for many Americans, partisan leanings can’t obscure economic reality. In Amsterdam, N.Y., Milagros Burgos, 53, was happy to see Biden elected. But she’s no Pollyanna about the economy.
“Things are real bad,” she said.
Burgos’s daily existence remains difficult. A former hair salon operator, who has custody of her two granddaughters, ages 6 and 7, she makes due with less than $20,000 in annual disability payments.
What does she want from the new president? “Help. Help,” she said, beginning to cry. “We’re struggling real bad.”
Asked if the election results had made her more optimistic, she said: “Everything’s political. Let’s see.”