FOMC’s action on rates and accompanying statement appear to largely ignore these “crises”
PRINCETON, NJ -- Forty-two percent of Americans say rising gas prices at the pump are a "crisis," while 29% point to the declining value of the dollar, 28% to rising healthcare costs, 28% to the housing debacle, and 20% to each of the following: rising food prices, declining real wages, and job losses.
Many Consumers See "Crises," Not Just Major Problems
In order to differentiate among the many economic factors troubling the average American today, Gallup asked Americans in an April 25-27 poll whether in their opinion various economic challenges have reached "crisis" proportions, are a major problem, a minor problem, or not a problem for the U.S. economy. As might be expected, the highest "crisis" percentage is 42% for rising gas prices; another 51% say gas prices are a major problem. Not surprisingly, lower-income households (those earning less than $35,000 a year) are more likely to say gas prices are at crisis levels (49%) than are middle-income households ($35,000 to $74,999), at 39%, and upper-income households ($75,000 or more), at 41%.
However, given that Americans rarely seem to focus on international economic issues, it is somewhat surprising that the declining value of the U.S. dollar receives the second-highest percentage of "crisis" mentions (29%). At essentially the same level of concern are housing market conditions and rising healthcare costs (28% each).
While 20% of Americans rate rising food prices as having reached a crisis stage, the intensity is disproportionately felt by lower-income households: 33% of this group say food prices are at crisis levels, double the 15% holding a similar view among middle- and upper-income households.
Similarly, 20% of Americans say job losses have become a crisis. Once again, those with lower incomes disproportionately feel the intensity: 30% say job losses are at crisis levels -- double the 15% holding a similar view among those with higher incomes, and significantly higher than the 19% crisis rating of middle-income households.
Finally, 20% of Americans also see a lack of real income growth -- wages not keeping pace with inflation -- as having reached a crisis level. Twenty-nine percent of lower-income Americans say a lack of real income growth is a crisis -- once again, more than double the percentage among upper-income households (13%), and significantly higher than the 19% among those with middle incomes.
On Wednesday, the Commerce Department reported that the U.S. economy grew by 0.6% in the first quarter of 2008, matching its positive but minimal expansion of the fourth quarter of 2007. This confirmation that the economy is essentially stagnating -- as opposed to actually shrinking -- supports the position of some observers that the United States is not technically experiencing a recession. In turn, the seeming ability of the economy to avoid recession to this point may explain President Bush's "reverse jawboning" Tuesday when he noted that there is "no magic wand" to fix the current energy situation. Instead of using his presidential platform to lobby against surging energy prices, the president simply seemed to openly acquiesce to what has been happening.
Of course, as Gallup's data suggest, the consumer is faced with numerous major economic difficulties right now. The positive growth report for the first quarter may indicate to some in the administration and Congress that the federal rebate checks that begin arriving this week, combined with the lower interest rates already provided by the Federal Open Market Committee (FOMC), will be enough to avoid a U.S. economic crisis -- and a severe recession -- just as the Bear Stearns bailout avoided a global financial crisis.
However, as Gallup's data also imply, many Americans see various aspects of the current economy as at "crisis" levels, not just as major problems for the economy. In this regard, even as the FOMC decided Wednesday to lower rates ¼ of 1%, it seemed to acquiesce in its statement not only to surging food and energy prices but also to the declining value of the U.S. dollar. While the Fed seems to fully recognize the precarious condition of the global financial system, Wednesday's statement suggests it doesn't fully appreciate the pain on Main Street.
In sum, the president and the Fed seem be looking to the federal government's emergency rebates as the elixir that will moderate the economic downturn and ease the pain on Main Street. The degree to which the rebates will successfully serve this purpose remains to be seen. But as the recent poll indicates, many Americans -- particularly lower- and moderate-income families -- are experiencing an economic crisis, and crises usually mean the public will demand some immediate relief that neither the rebates nor Wednesday's FOMC action is likely to provide.
Results for this Gallup Panel study are based on telephone interviews with 1,008 national adults, aged 18 and older, conducted April 25-27, 2008. Gallup Panel members are recruited through random selection methods. The panel is weighted so that it is demographically representative of the U.S. adult population. For results based on this 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.
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