America's Economic Model Is Broken, Americans Say

Americans: Our Economic Model Is Broken

If the economy's so great, then why do so many of us feel bad about it?

A new survey finds that a large majority of Americans think the country's "economic model is broken," even as the stock market has raced to its highest level in years and standard measures of economic growth show a fairly steady, if sub-par, recovery.

This is just the latest example of what seems to be a disconnect between what the stock market and the news media are saying about the economy and and how people actually feel about it.

"Americans of working age feel as worried about their financial situation as they did a year and a half ago," wrote David Bowers and Sarah Franks of the British research firm Absolute Strategy Research, the survey's authors.

This doesn't mean the economy isn't really recovering. But it does suggest that the Great Recession has left long-lasting scars, maybe permanent ones, and that some of the big problems that preceded the recession haven't been solved yet.

More than a third of Americans worry "a lot" about their finances, according to the survey, which also found that people generally feel "worse off" than they did a year ago and that the percentage of people who are having a hard time meeting their monthly payments is rising.

You could argue that Americans are just understandably skeptical just a few years after a flesh-melting stock-market crash, housing bust and recession. This sentiment jibes with other measures of consumer confidence and have not translated into a spending shutdown. What's more important for the economy in the short term is what consumers do, not what they say.

That's the most-optimistic view. That's the Dow 14,000, Everything's Great view.

Another way of looking at it is that maybe Americans sense a somewhat darker future for the economy, one in which the depth and length of the Great Recession and Lame Recovery have done permanent damage to its growth prospects. Greg Ip worried about this in the Economist late last week, and again today.

"[W]ith the long-term unemployed now such a large share of the jobless, we could be doing permanent damage to the economy’s productive potential," Ip wrote today.

Ip and many other economists are ultimately optimistic, thinking consumer appetites will bounce back more strongly soon enough, creating demand that puts more people back to work.

But other responses in the ASR consumer survey suggest that, if and when demand bounces back, there will still be big questions about just what has been actually fixed in the economy.

Just 36 percent of those surveyed said America's economic model "provides equal opportunity for everyone," while 63 percent said it "no longer works for the majority of Americans."

Only 20 percent of respondents said the economy "distributes wealth and income fairly," and only 43 percent said the economy "rewards people for their hard work and skill."

"This survey suggests that beyond the immediate economic problems, there is an underlying concern about the structure of the economy," Bowers and Franks write.

And these concerns are widespread, affecting Republicans and Democrats, homeowners and renters, young and old.

"At least half of all the groups we analyzed find serious problems with the American economic model," Bowers and Frank write.

This feeling of a fundamental unfairness could also be dismissed as just the lingering bite of the recession and weak recovery. Once demand picks up, people might suddenly find the system's more fair.

The likelier explanation? Americans are well aware that the gap between the haves and have-nots has widened steadily in the past three decades, and that they were encouraged to borrow to the hilt to keep up the appearance of prosperity.

In the wake of the biggest credit bubble and bust since the Great Depression, that approach to credit appears to have changed fundamentally, as the ASR and other surveys show. Consumers are now painfully aware of their debt and worried it will leave their kids worse off than they are now.

Meanwhile, President Obama and other Democrats have promised to raise taxes on the wealthy, an issue that polls well in this and other surveys.

But borrowing less and taxing rich people more together address symptoms, not causes. More helpful would be an economy that relies less on conspicuous consumption and growth for growth's sake, one that rewards actual innovation rather than just the raw accumulation of wealth, which has been our economy's North Star for far too long. Maybe that attitude is changing, too. The economy could be in for a lot more pain otherwise.

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