Optimism Takes A Tumble After Presidential Election

Investor's Business Daily

If newly re-elected President Obama was hoping to float into his second term on a cloud of renewed national optimism and bipartisan goodwill, he's likely to be disappointed.

The latest IBD/TIPP Poll shows that, at least as far as economic optimism is concerned, America very much remains a house divided.

The bellwether Economic Optimism Index for November plunged 10%, from 54 in October to 48.6 in November, as a major part of the electorate took stock of the vote's outcome and didn't like what it saw for the economy.

The partisan breakdown for optimism is telling. Not surprisingly, sentiment among Democrats improved — 4.2%, from 70.8 in October to 73.8 in November.

But Republican poll respondents, who for months were below the break-even level of 50 for optimism , expressed an even gloomier outlook over the economy's future.

The optimism index for this group plunged 41.1%, from an already-low 42.1 in October to 24.8 in November — the lowest reading ever for Republicans.

Independents, who mostly voted for GOP standard-bearer Mitt Romney, likewise saw a slump in optimism, but not nearly as much as Republicans. They fell 8.1%, from 47.9 in the October reading before the election to 44.0 in November.

Why so glum? Republicans seemed to believe that the choice for president this time around was a stark one.

With unemployment still close to 8%, GDP growth half its level of previous recoveries and family incomes shrinking, many thought a can-do businessman with a record of achievement in the private and public sectors would be a logical choice to fix the nation's problems.

Instead, today they see a fiscal cliff of massive tax hikes approaching, the full implementation of ObamaCare, soaring entitlement spending and the likelihood that government's role in the economy and people's lives will be greatly expanded in a new Obama administration.

Most major soundings of consumer confidence have been trending up in recent months.

The University of Michigan's consumer sentiment index, one of the 10 components that make up the Index of Leading Indicators, rose to 84.9 in early November, its highest since July 2007.

Likewise, the Conference Board's Consumer Confidence Index reached its highest level for the year during October.

However, both of those confidence polls were taken before the election results were known.

The IBD/TIPP index is the first to emerge after the election and thus represents a major shift down in economic optimism.

The weak IBD/TIPP data also coincide with the steep downturn in major stock-market indexes following the election. The S&P 500 index has declined 3.3% since Obama's win, as investors ponder the possibility of higher taxes on those with high incomes and on capital gains.

The IBD/TIPP Poll was conducted from last Thursday through Sunday, from a sample of 606 adults nationwide. The margin of error is plus or minus 4.1 percentage points.

Scratching below the surface, our three subindexes diverged sharply along political lines. Our Financial Outlook Index and Satisfaction with Federal Policies Index both showed increased optimism for Democrats, decreased for Republicans and mixed for independents.

The Economic Outlook Index, which gauges how people view the next six months, showed a bigger political gap.

Among Democrats, optimism rose 4.6% to 76.8 in November.

Republicans? Their six-month optimism plunged 62% from an optimistic 51.8 in October to 19.7 in November, a record low. Likewise, independents slipped 20%, from 49.7 in October to 39.7.

Taken together, the latest data suggest a highly polarized electorate, one that might make compromise during the lame-duck Congress difficult.

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