The Fed And Public Opinion

According to polling lore, when Americans were asked years ago what the Federal Reserve was, a considerable number chose the response “a fine Kentucky bourbon.” Whether apocryphal or not, it’s a fair bet that most Americans don’t know much about the Fed. It’s also a fair bet that economic perceptions along with the Biden administration and the Fed’s actions will play a key role in the 2024 election.

In the mid-April HarvardCAP/Harris poll, 63% of registered voters said the US economy was on the wrong track while 30% gave the right track response. The late April Fox News poll had similarly grim tidings. Seventy-eight percent of registered voters rated economic conditions as fair (35%) or poor (43%), up from the two-thirds that gave that response in December 2020. Seventy percent said the economy was getting worse. Forty percent said the Biden administration’s actions on inflation were hurting while only a quarter said they were helping. In Gallup’s April poll, only 35% of adults had a great deal or a fair amount of confidence in Biden to do or recommend the right thing for the economy. Every other recent poll paints a similar bleak picture of public perceptions.

So how do Americans think about the Fed’s role and actions? Although not as fun as the mystery poll described above, only 7% told Axios/Ipsos interviewers that they knew a lot about the Fed’s responsibilities, while 38% said they knew a little. Fifty-four percent said they knew “not very much” or “nothing at all.” In the April Gallup poll mentioned above, only 36% had a great deal or a fair amount of confidence in Fed chair Jerome Powell.

The University of Michigan Surveys of Consumers recently updated its trend on how Americans see some financial institutions, a question they have asked occasionally since the stock market crash in 1987. As we might expect, confidence in commercial banks plummeted between their 2022 poll and their new late March-April 2023 survey. Confidence in the Fed fell only slightly, although overall responses have been more negative than positive for a long time. Only 9% reported they were more confident in the Fed now compared to five years ago, while 34% said their confidence was about the same, and 53% said they were less confident. In their trend, confidence in the Fed plummeted during the financial crash in October/November 2008 when 57% said they were less confident. The Fed has never fully recovered.

A new poll from Ipsos that asks about the Fed and four other institutions is revealing in other ways. Ipsos noted longstanding low levels of confidence in government in general, but made the important point that trust in federal agencies varies. While 47% in this panel survey trusted the Fed, it ranked lower than the FDA (58%), the CDC (57%), DOT (55%), and was on a par with the VA at 48%. Ipsos also looked at partisan assessments of each agency. Republicans were less likely than Democrats to believe the Fed was “guided by facts and science” and, separately, that the Fed provided “an important public service” and “worked for the best interest of the public.” Republicans were more likely than Democrats to say the Fed does the bidding of partisan political figures.

In the 2020 election, half of voters said the economy was not so good (31%) or poor (19%). Those voters supported Joe Biden. Thirty-nine percent said their family’s financial situation was about the same as four years before and 20% worse. These voters also opted for the out party.

There’s a familiar adage in politics that presidents get more credit than they deserve when the economy is in good shape, and more blame than is warranted when it is doing poorly. Today the public believes the economy is in bad shape and they don’t have a lot of confidence in the President or the Fed to fix it. In President Biden’s announcement video, we heard little about the economy and a lot about threats to democracy and personal freedoms. We shall see whether Biden can run successfully on those themes or whether his stewardship of the economy will prove voters’ main concern.