Gallup’s Economic Confidence Index has shown yet another decrease in public confidence about the U.S. economy, landing at the third-lowest point since the beginning of the COVID-19 pandemic. The poll serves as a comprehensive window into Americans’ views of the economy at any given time. According to Gallup, this evaluation measures the American public’s perception of current economic conditions and which direction the survey respondents believe the economy will trend.
In this latest survey, 28 percent of U.S. adults rated their perception of the economy’s trajectory as “satisfactory,” 42 percent chose “fair,” and 29 percent chose “poor.” This has resulted in a -12 rating, six points lower than the last poll conducted in July.
One noteworthy detail from the poll is the divergence in economic perception across political ideology. Confidence fell among Republicans and Independents, but remained stagnant for Democrats, with Republicans scoring -46 overall and Democrats scoring +27 overall. This partisan divide transcends to the halls of Congress, where congressional delegates face a highly partisan fork in the road regarding the debt ceiling and national spending.
Contributing factors to this decline in confidence are myriad. First, there is uncertainty about the impending potential default of the U.S. Treasury. Second, the economy created the fewest number of jobs in August after seven months of positive growth, according to a Department of Labor report. Third, the delta variant paired with the upcoming flu season may be causing anxiety. Fourth, Americans are concerned about rising inflation, a direct result of previous and pending government spending. With these contributing factors, it is easy to see why nearly 70 percent of survey respondents indicated a lack of confidence in the American economy.
In addition, congressional Democrats and the Biden administration are currently working to push a “social spending” bill with a $3.5 trillion price tag, which along with the $1.2 trillion infrastructure bill forms the backbone of President Biden’s domestic policy agenda. This massive piece of legislation coined the Build Back Better Act is a budget reconciliation package that is currently the shining star of the Biden administration. This package is a comprehensive 10-year spending plan that would increase individual income taxes, extend child tax care credits, increase capital gains taxes, reduce the estate tax exemption, increase corporate tax rates, increase the cost of fuel from your stovetop to the gas pump, and sanction several environmental and climate change federal regulations.
The House Budget Committee advanced the legislative package with a 20-17 vote, to be negotiated. However, it is increasingly likely the total price tag will come down in the face of opposition from certain senators within the Democratic Party.
The Build Back Better Act would affect every single taxpayer in America and create programs that we cannot afford while maintaining an efficient and strong economy.
To make matters worse, we seem to be on the cusp of a period of significant inflation. The United States Postal Service (USPS) has recently projected its rate hikes through 2024 via a recent filing with Postal Regulatory Commission. The decision by the USPS to include rate increases every six months through 2024 likely corresponds to their assessment of consumer price increases emblematic of inflationary pressure. In tandem with U.S. consumer prices rising every month, it is clear that inflation might be here to stay.
The U.S. economy is dealing with a convergence of negative factors including the consequences of COVID-19 lockdowns, record levels of unemployment, inflationary pressures, and rising debt levels. The amount of spending associated with the Build Back Better Act is reckless and would only exacerbate damage to our long-term economic outlook. The generally negative views on the economy illustrated by the Gallup Economic Confidence Index are a strong reflection of public apprehension towards the nation’s path forward and should be taken into consideration when formulating policy.
The following articles provide more information about state income tax and the associated economic effects:
Ten Principles of State Fiscal Policy
The Heartland Institute provides policymakers and civic and business leaders a highly condensed, easy-to-read guide to state fiscal policy principles. The principles range from “Above all else: Keep taxes low” to “Protect state employees from politics.”
Federal Tax Reform: The Impact on States
Nicole Kaeding and Kyle Pomerleau of the Tax Foundation examine the effect of the federal tax reform on the states and how they can use the changes to push for tax reforms of their own.