Animal Spirits

The most recent Wall Street Journal/NBC poll finds Americans in a foul mood over the economy:

Still scarred by a recession that ended five years ago, Americans are registering record levels of anxiety about the opportunities available to younger generations and are pessimistic about the nation’s long-term prospects, directing their blame at elected leaders in Washington.

A new Wall Street Journal/NBC News poll found that despite the steady pace of hiring in recent months, 76% of adults lack confidence that their children’s generation will have a better life than they do—an all-time high. Some 71% of adults think the country is on the wrong track, a leap of 8 points from a June survey, and 60% believe the U.S. is in a state of decline.

What’s more, seven in 10 adults blamed the malaise more on Washington leaders than on any deeper economic trends, and 79% expressed some level of dissatisfaction with the American political system.

“The American public is telling its elected representatives that the economic distress that a significant proportion of them are feeling is directly their fault,” said Democratic pollster Fred Yang, who conducts the Journal poll with Republican Bill McInturff. “The public seems to have moved beyond the plaintive cry of ‘feel our pain’ to the more angry pronouncement of ‘you are causing our pain.’ ”

The economy is an area in which belief equals reality or, at least, belief has an important effect on behavior which produces the reality. That’s what John Maynard Keynes referred to as “animal spirits”, an important force in pulling economies out of recessions.

In comments recently it was remarked that things would be no different today if Bill Clinton were president. I disagree. Whatever his failing, Bill Clinton was a relentless and indefatigable cheerleader for the economy. His confidence built confidence in others.

George W. Bush didn’t have that same quality and neither does Barack Obama.

9 comments… add one

  • Andy

    “In comments recently it was remarked that things would be no different today if Bill Clinton were president.”

    I didn’t actually write that – I posed a question: How much better/worse would the economy be if Bill Clinton were President rather than Barack Obama?

    I think it would be somewhat better, but not because of Presidential cheerleading. Cheerleading and optimism are pretty easy in an economy with no recessions that’s buoyed by a tech bubble and the temporary elimination of federal deficits. I think the real difference between the two Presidents has nothing to do with cheerleading ability, but something you’ve posted on many times – their relative ability to forge relationships and cut deals.

  • jan

    “their relative ability to forge relationships and cut deals.”

    So true. However, I would add one more ability, and that would be to depend less on divisive tactics to propel policies forward. So much going on in DC today is conceived and passed by unilateral decisions, rather than collaboration and compromise.

  • jan

    There’s a “total disconnect” between what the public feels as to what the WH is saying.

  • steve

    I odnt think it would be much different. I think that we are seeing long term problems/trends coming to fruition. We are also seeing, maybe, a critical stage in the development of capitalism. Maybe Mao was right and it has been too soon to tell.

    The 80s economy did well secondary to deficit spending, Carter’s deregulations and the fact that China et al were only just beginning to adopt market reforms. IOW, we didn’t have that much competition.

    The 90s economy did well because of IT. Part of that was a bubble, but part of it was a real increase in productivity. Secretaries disappeared. We all learned to use Excel. Still, the bubble was important.

    In the early 2000s we boomed because we had a real estate bubble. We also had some increased productivity secondary to some more IT advancements, and we benefitted from the build out in the 90s. Still it was mostly a bubble. However, even with that most people didn’t benefit that much. The boom mostly went to a select few. China et al became real competitors. A lot of jobs went overseas.

    Now, we can’t really deficit spend that much anymore as we have already run up our debt. We have real competition beyond China going into the SE Asia area and Latin/South America. We aren’t the only game in town.

    So, we weren’t as rich as we thought. Our economy was in more trouble all along than we thought. And, we really don’t know what happens with end stage capitalism. WHat happens when the land is all settled, when other countries are developed and have freer markets. It has been assumed that this would result in prosperity for all, but we don’t know. Following prevailing theories on capitalism, I think you have to assume a nearly perfect meritocracy for that to happen. I don’t think that is true here, and I am not sure how true it can be anywhere. I think it is just as possible that we end up with a two tiered society.

    This may change if see innovation on the scale that we had in the 30s. We are certainly on the edge, I think, of major new discoveries in science, especially physics. However, what happens if that funding gets cut? What if the anti-science crowd wins out? The kind of discoveries we are talking about are not the kind to be found by a single person in a lab somewhere.

    Steve

  • I think that we are seeing long term problems/trends coming to fruition.

    I agree but that doesn’t excuse not trying on anybody’s part. It does mean that the old Keynesian pump-priming just isn’t enough.

    The real problem is one of preferences. The Powers-That-Be like things the way they whatever the consequences.

  • I think it would be somewhat better, but not because of Presidential cheerleading.

    I think that, the factors you mention, and being interested in getting the policy right would all help.

  • Guarneri

    “I agree but that doesn’t excuse not trying on anybody’s part. It does mean that the old Keynesian pump-priming just isn’t enough.”

    Exactly. The economic environment is always evolving; that’s not new. Clutching to old dogma when an impediment or ineffectual and then lamenting that “no one could do better” is no way to go. Its a focus on a person and party rather than adaptive public policy.

  • steve

    “Its a focus on a person and party rather than adaptive public policy.”

    In a post commenting on “a person”, this is a bit ironic.

    Steve

  • ...

    “We aren’t as rich as we thought.”

    Lol, yeah, I’m sure you are really suffering from this economic environment. What a load of horse shit.

    Every Obama supporter that is rich seems quite content with this economic environment, thus all the “there’s nothing we can do” comments. Conveniently ignored is all that was done to help the wealthy in recent years. But I guess as Charlie Munger said, we should all be grateful the rich got bailed out at the expense of everyone else.

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