The index of consumer sentiment fell to 78.2 in December for Republicans, the lowest reading since October 2016, the month before Trump’s election victory over former Secretary of State Hillary Clinton.
The reading hit a high of 127.2 in February 2020 – just before COVID-19 lockdowns sent the U.S. economy spiraling into its sharpest slowdown of the post-World War II era.
Sentiment measures are becoming “more linked to politics” than what is actually happening in the economy, said Gbenga Ajilore, senior economist at the Center for American Progress, a liberal-leaning public policy research and advocacy organization.
Biden, set to take office on Jan. 20, has pledged to at least partially reverse the benefits of Trump’s Tax Cuts and Jobs Act and tighten regulations.
“Almost everything Biden wants to do on the economy is negative,” Stephen Moore, economic adviser to Trump, told FOX Business. “It’s hard to point to anything that’s really constructive or pro-business.”
Trump, whose legal challenges to the Nov. 3 election results have so far failed to extend his presidency, lowered the top corporate tax rate to 21% from 35% and reduced personal income taxes for many Americans. He also favored a climate with fewer regulatory restrictions.
While those policies were favored by Republicans, they weren’t necessarily liked by Democrats, who saw their economic sentiment reading jump to 85, up from 73.6, in the month following the election. The December level was the highest since the 102.1 recorded just ahead of the 2016 election.
Democrats “drink the Kool-Aid” that government spending and higher taxes on the rich will boost the economy, Moore said, noting the rebound in sentiment is due to their “hatred of Trump.”
The U.S. economy grew at a record 33.4% annualized pace in the three months through September, the strongest quarter on record, according to the Commerce Department. That followed an annualized 32.9% contraction during the prior quarter that was spurred by state-at-home orders from state and local governments aimed at slowing the spread of COVID-19.
Biden in the White House means Democrats have a “higher probability of policies they support being passed,” Ajilore said while also suggesting gridlock was likely unless the Democrats win both Georgia runoffs to take control of the Senate.
That might be the case for Republicans and Democrats, but consumer sentiment among independents remains below pre-pandemic levels, increasing last month to 78.5 from 76.5. The reading was prior to the lockdowns at 101, near an all-time high.
Ajilore says a number of people taking part in the survey could consider themselves an independent, ranging from a Bernie Sanders supporter to someone who's a conservative but a Never Trumper to an independent who might not support Biden because they’re afraid he will go too far.
“When you average all that out, it's going to be less about the future,” Ajilore said.