Survey Says: Keynes Is Dead
A new Reason-Rupe poll finds that Americans are willing to cut spending of all kinds, even in times of crisis.
In 2008 Americans could not get enough of John Maynard Keynes. As the economy tanked, the long-dead 20th-century British economist emerged as one of the most popular men in recession- haunted Washington. Keynesian stimulus spending—massive infusions of cash from the federal government for infrastructure programs, weatherizing, green energy, education, and anything else that came to mind—was going to prevent job losses and get the economy working again. More than $500 billion in American Recovery and Reinvestment Act spending later, unemployment sits at an intractable 9.1 percent, the labor-force participation rate is the lowest since 1983, and the economic prognosis remains bleak.
Three years after the financial crisis, four decades after Richard Nixon and Milton Friedman made the phrase "We are all Keynesians now" part of the popular lexicon, and more than half a century after Keynes died, a national Reason-Rupe public opinion survey has found that Americans are firmly rejecting Washington's favorite economist. In polling conducted in August, a majority of Americans—more than 57 percent—say reducing government spending will "mostly help" the economy. Just one in five believes cutting spending will "mostly harm" the economy.
Voters also support reforms aimed at limiting elected officials' ability to squander money. More than 77 percent of Americans believe the federal government should have a spending cap preventing it from doling out more than it takes in during a given year; 62 percent believe this "strongly." In addition, 69 percent favor (and 50 percent strongly favor) a constitutional amendment requiring a balanced federal budget. These findings mirror those of a CNN/ORC poll taken around the same time, which shows between 60 percent and 75 percent supporting a balanced budget amendment, depending on how the question is phrased. "Keynesian policy and Keynesian theory is now done," Texas Gov. Rick Perry declared, perhaps a bit prematurely, at a Republican presidential debate in September. "We'll never have to have that experiment on America again."
No matter who takes power next November, Americans are not optimistic that elected officials will stop dishing out dollars, even at a time of runaway deficits and degraded credit ratings. Government spending and debt, along with high tax rates, routinely rank near the top of voter concerns. When asked in the Reason-Rupe poll how to deal with reducing the national debt, 57 percent said the solution should focus mainly on spending cuts. In fact, 37 percent wanted to focus entirely on cutting spending with no increase in taxes. Only 23 percent wanted equal emphasis on taxing and spending.
Still, nearly 69 percent of voters expect their taxes to go up in the next five years, compared with only 6 percent who expect taxes to go down. And when they do go up, 62 percent of Americans expect Congress to spend those increased revenues on new programs, not on paying down the debt. (Probably related: Congress's approval rating currently sits at a spectacularly low 14 percent.)
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As more than one observer has pointed out, calling for reduced government spending is one thing, while showing a willingness to sacrifice your own entitlements is another. The trillions of dollars required to keep promises made by Medicare and Social Security in the coming decades make stimulus outlays look like pocket change. With rare exceptions, politicians will tell you that Americans have no stomach for entitlement cuts. This analysis is bolstered by poll after poll showing everyone from Tea Partiers to Teamsters unwilling to consider substantial reform. But Americans aren't really so universally opposed to tackling entitlements. Pollsters have just been asking the wrong questions.
The Reason-Rupe poll finds that most Americans are actually open to reform of Social Security and Medicare—as long as they can get back the money they have already paid into the system. In fact, 61 percent would be willing to see cuts in their own current or future Social Security benefits, and 59 percent would accept cuts in their Medicare benefits, under a system where they are guaranteed to get back what they and their employers have already contributed.
The poll calibrated these results by asking the standard questions first: Would respondents be willing to have their current or future Social Security benefits reduced as part of a plan to balance the federal budget? Congruent with other polls, 57 percent of Americans opposed that. Asked a similar question about Medicare, 51 percent were opposed.
But unlike other polls, Reason-Rupe did not stop there. Follow-up questions probed conditions under which Americans would be willing to accept cuts in their benefits, asking about a scenario where beneficiaries were still guaranteed to receive at least the amount of money they have kicked in. That's when the results flipped, with about 60 percent open to cuts in their payouts from Social Security and Medicare.
Social Security reform enjoys support across all major political groups, with 65 percent among Republicans, 59 percent among Democrats, and 61 percent among independents. Similar majorities of all political affiliations support Medicare reform. In addition, most Americans favor allowing workers to opt out of Social Security (54 percent) and Medicare (56 percent), which is another sign people are open to new proposals.
The responses suggest that Americans have a fundamental misunderstanding of the way entitlements work: They envision Medicare and Social Security as secure, trust-fund-style accounts, as opposed to pay-as-you go transfers. But there is some useful and even hopeful information here for would-be reformers. Americans understand that the essentially unlimited benefits currently promised by Medicare are not possible; they just want to make sure they don't get shafted.
Keynes may be done for, as far as the American people are concerned, but his mustachioed ghost still haunts the halls of official Washington. Americans don't want government to respond to our economic woes with more spending, but they know their representatives disagree. And most of those politicians are throwing up their hands (and hiding under their desks) when faced with the prospect of making hard decisions about entitlement reform. Given all this, it's no surprise that nearly half of Americans surveyed by Reason-Rupe—48 percent—would consider voting for a third-party candidate who is economically conservative and socially liberal.
What can explain such widespread dissatisfaction? An August Washington Post poll hints at the root of these findings: 73 percent of Americans doubt the federal government's ability to solve economic problems—dramatically up from 52 percent last year and 41 percent in 2002. It appears that the more the government tries to fix the U.S. economy, the less satisfied Americans are with the results.
The Reason-Rupe poll, conducted August 9-18, 2011, surveyed a random national sample of 1,200 adults by telephone (790 on landlines, 410 on cell phones). The results have a margin of error of plus or minus three percentage points. The poll was conducted for Reason Foundation by NSON Opinion Strategy.
For more information about the Reason-Rupe Polling Project, visit reason.com/poll, or contact Emily Ekins, polling director at the Reason Foundation.