Lower-income Americans more likely to be financially “worse off” than year ago
PRINCETON, NJ -- Wall Street's "talking heads" responded to the results of the Iowa caucuses with considerable disdain for the anti-Wall Street economic populism promoted by candidates such as Republican Mike Huckabee and Democrat John Edwards. At the same time, new economic data surfaced last week that signaled an increasing likelihood of recession during the first half of 2008. If economic conditions continue to deteriorate in the months ahead, the recent messages of economic populism may only grow in volume or gain momentum.
"Better Off" by Income
About half (52%) of all Americans say they are financially better off now than they were a year ago, while 27% say they are worse off and 21% say their financial situations are about the same, according to an Experian/Gallup Personal Credit Index survey conducted between October and December. However, higher-income Americans are more likely than those with lower incomes to say they are financially better off now than they were a year ago.
Two in three (67%) households with annual incomes of $75,000 or more say they are better off financially now, while only 17% say they are worse off and 16% say they are just about the same. In sharp contrast, only 40% of those with incomes of less than $40,000 a year feel they are better off now, while just about as many -- 38% -- say they are worse off. Fifty-five percent of those with incomes of at least $40,000 but less than $75,000 say they are better off, with 25% saying they are worse off than they were a year ago.
Growing Economic Populism
Generally speaking, when the U.S. economy is expanding, members of the average American household reasonably expect their overall financial wellbeing to improve as well. When almost everyone is benefiting as the economy expands, the forces of economic populism find it hard to muster support. However, when many lower- and middle-income families feel their financial situations are deteriorating while those of most upper-income households continue to improve, as is the case in the current climate, a sense of unfairness tends to evolve.
In a Gallup Poll conducted in April 2007, only 29% of Americans said they felt the distribution of income and wealth in the United States was "fair," while 66% felt it should be more evenly distributed. In the same poll, 37% said "we have too many rich people in this country," 40% said the country has the right amount of rich people, and only 17% said there are too few rich Americans. Finally, 49% said the government should redistribute wealth by placing heavy taxes on the rich; 47% said the government should not do so.
Given these findings, it is evident that many Americans hold views that are anathema to Wall Street and free-market capitalism. With soaring gas and food prices and the potential for a significant economic slowdown/recession this year, no one should be surprised if "economic populism" strikes a strong chord with the U.S. electorate during the months ahead. Rather than treating these ideas with contempt, economic and political policy-makers might do well to consider how the current financial stress that many Americans are experiencing might be ameliorated.
Results for the Experian/Gallup Personal Financial Credit Index poll are based on telephone interviews with 3,057 adults, aged 18 and older, conducted October through December 2007. For results based on the total sample of national adults, one can say with 95% confidence that the maximum margin of sampling error is ±2 percentage points. In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.
Other results are based on telephone interviews with 1,008 adults, aged 18 and older, conducted April 2-5, 2007. For results based on the total sample, one can say with 95% confidence that the maximum margin of sampling error is ±3 percentage points.
In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.