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Securing the Future

The Poll

"It's the economy, stupid."
-- James Carville

That statement by political operative James Carville was the guiding focus of Bill Clinton's 1992 campaign for President of the United States. Carville felt the economy to be such an overarching issue that the words were posted on the wall of the Clinton campaign headquarters.

The economy took a timely dip for Clinton in late October of 1992, sending President George H.W. Bush into early retirement and installing the former Arkansas governor in the White House for the first of his two terms.

This was not the first time in recent Presidential history the economy played a pivotal role in the outcome of a Presidential race. In 1980, the U.S. economy was wracked by out-of-control inflation, high interest rates and high unemployment. During his debate with President Jimmy Carter the Republican candidate Ronald Wilson Reagan asked Americans if they were "better off now than they were four years ago." The answer was a resounding "no," and Reagan dispatched Carter to the pages of the history books.

In the absence of an immediate national security threat, the economy is typically the key determining factor in a Presidential election. At the moment, economic well-being is competing with debate over the ongoing U.S. involvement in Iraq. Barring a dramatic turn for the worse in Iraq, or a new terrorist attack on the American homeland, economic issues are likely to dominate the 2008 campaign.

As the first Presidential caucuses and primaries approach an interesting dichotomy has developed. Looking at the big picture, Americans are decidedly pessimistic about the current state of the U.S. economy and the outlook for the immediate future. But, when asked about their personal status, the results are more optimistic.

The current crisis in the sub-prime mortgage market aside, most key economic indicators suggest the economy is performing well. Media coverage, however, is overwhelmingly negative and could be a key factor driving the overall negative perceptions of the U.S. economy.

Against this backdrop, the Lincoln Institute of Public Opinion Research, Inc. conducted a statewide poll of 750 Pennsylvanians to determine their attitudes toward the overall economy, their personal economic situations, and their individual levels of financial planning, savings, and preparedness.

Overall Views of the Economy

The Lincoln Institute poll found deep skepticism among Pennsylvania voters over the direction of the national economy. Nearly two-thirds (63%) of poll respondents said the nation's economy is off on the wrong track, while just 28% feel the economy is headed in the right direction.

Perceptions of the national economy vary significantly by income group. Fifty-one percent of those with annual household incomes of over $100,000 said the national economy is off on the wrong track. The wrong track number rises to 56% among those earning in the $75,000-$100,000 range and goes up to72% for those with incomes in the $20,000-$30,000 category. Conversely, 41% of the over $100,000 income households say the economy is headed in the right direction, while just 17% of those earning less than $20,000 hold a positive view.

There is also diversity of viewpoints when the responses are broken down demographically. Those in the 45-54 age group are the most pessimistic, with 67% saying the economy is off on the wrong track and 25% indicating it is headed in the right direction. Eighteen to 34-year-olds are the most optimistic as 32% say the economy is headed in the right direction and 58% say it is off on the wrong track.

Political philosophy and political party affiliation also plays a big role in how respondents view the direction of the U.S. economy. Seventy-four percent of self-described liberals hold a negative view of the economy while 55% of conservatives say the economy is on the wrong track. Thirty-eight percent of conservatives say the economy is going in the right direction; just 18% of liberals agree.

Democrats and Republicans are united in their perception that the economy is off on the wrong track, but the intensity of that feeling is stronger among registered Democrats. Sixty-seven percent of Democrats and 61% of Republicans say the economy is on the wrong track; 31% of Republicans and 24% of Democrats view the economy as headed in the right direction.

Women are more likely than men to view the direction of the economy as being off track. Seventy percent of female respondents answered "wrong track" with 21% saying "right direction" – a 50% spread. Fifty-six percent of males said the economy is off on the wrong track while 45% feel it is headed in the right direction – a spread of 21%.

Generally speaking, the higher the level of education the more favorable a respondent was toward the direction of the U.S. economy. Thirty-four percent of those with a graduate or a four-year degree said the economy is headed in the right direction; just 22% of respondents who ended formal education with a high school degree agreed.

Personal Financial Situation

Most Pennsylvanians do not find their personal economic situation to be worse now than it was a year ago, but their overall negative view of the economy may be driven by a sense of frustration over the fact that they are not doing better. In fact, the Lincoln Institute poll found respondents to be at an exact stand-still. A majority –53% – said they are doing about the same now as they were one year ago; 24% report doing better than one year ago, while 24% said they are doing worse than one year ago.

There is more optimism than pessimism about the near-term future. Twenty-nine percent said they expect their personal financial situation to improve over the coming year, while 16% fear their finances will get worse. Again, a majority – 51%– expect their situation to be about the same one year from now as it is today.

Upper middle income households were the most likely to say their personal financial situations are better now than they were one year ago. Thirty-nine percent of those in the $50,000-$75,000 income bracket said they are better off now than a year ago; 22% of those in the over $100,000 and in the $30,000 -$50,000 income ranges reported doing better. Those in the under $20,000 income bracket were most likely (36%) to say they are worse off now than they were one year ago.

There is also a corollary between education and economic well-being in that the higher the education level achieved the more likely a respondent was to have reported his/her personal financial situation to have improved over the past year. Thirty-three percent of those with a graduate degree said they are better off now than they were a year ago; 31% holding a four-year degree are better off, while just 16% of those with a high school degree say they are better off now than they were one year ago.

Politically, Republicans are more economically satisfied than Democrats. Twenty-four percent of Republicans report improved personal economic circumstances over the past year, with 19% saying they are worse off. But, 28% of Democrats say they are worse off now than they were a year ago compared to 22% who report doing better economically.

Looking ahead to the coming year, younger workers are decidedly more optimistic than older Pennsylvanians. Forty-eight percent of 18-34 year olds expect their personal financial circumstances to improve over the coming 12 months, while 5% expect to do worse. Forty-two percent in the 35-44 demographic and 33% of respondents in the 45-54 and 55-64 demographics expect their personal financial circumstances to improve. Only those in the 65-plus category were on-balance negative. Just 14% in the 65-plus demographic expect improved personal finances during the coming year while 22% expect to be worse off.

Expectations of personal financial well being during the coming year again vary greatly depending upon educational attainment levels and income group factors. Forty-seven percent of households with incomes over $100,000 expect to be better off one year from now than they are today; 42% of those in the middle income range of $30,000-$50,000 hold an optimistic view; and 21% of those in the under $20,000 and $20,000-$30,000 brackets expect to improve their finances over the coming year. By education level, 35% of those holding a graduate degree expect to personally do better financially over the coming year as do 32% of those with a four-year degree. Twenty-four percent of high school graduates expect improved financial circumstances.

Men are more optimistic about their future prospects than women with 35% of males and 24% of females expecting to do better over the coming 12 months. And, in what would appear to be a bit of an anomaly, more Democrats (30%) than Republicans (25%) expect to improve their personal financial situations in the year ahead.

Housing Slump

Thirteen percent of respondents to the Lincoln Institute's "Securing Our Future" poll reported either having had to sell their home or knowing someone who was forced to sell their home as a direct result of the current problems in the home mortgage market.

The numbers were fairly consistent across income brackets, with 17% of those earning less than $20,000 saying either they or someone they knew had to sell their home or had their mortgage foreclosed; 16% in the $20,000-$30,000 and the $30,000 to $50,000 groups; and 15% in the over $100,000 bracket reported the same. Those in the $50,000-$75,000 income group reported the lowest rate (11%) of foreclosures, indicating the problem is most affecting those earning too little, or those earning a lot but who overextended themselves financially.

A solid majority of Pennsylvanians are opposed to the government intervening to help those who may lose their homes because they overextended themselves financially. Sixty percent said the government should take no action, while 29% favor government intervention.

There is a pronounced difference of opinion on this issue based upon political philosophy, and to a lesser degree political party affiliation. Forty-seven percent of liberals, 63% of moderates, and 68% of conservatives say the government should not bail out home-owners affected by the mortgage market problems. By political party affiliation 63% of Republicans say no to the government getting involved, while 58% of Democrats and Independents agree the government should stay out of the problem.

While just twenty-nine percent of Pennsylvanians polled favor government intervention to help individual home-owners, even fewer (20%) support the government bailing out the financial institutions that have gone or may go bankrupt as a result of rising interest rates and the slowdown in the residential housing market. Seventy-two percent said it is the risk those companies took and they should not now be helped by the government.

Liberals were again more likely to favor government intervention than were conservatives. Seventy-six percent of conservatives said the government should not come to the rescue of companies in financial trouble as a result of the home mortgage market problems, while 18% felt the government should get involved. Twenty-six percent of liberals supported government intervention, 65% oppose it.

Republicans (75%) and Democrats (72%) alike strongly oppose a government bail-out of home mortgage firms, although fewer independent voters (66%) felt that way. Female voters were more likely (23%) than male voters (15%) to support government intervention.

Personal Housing Situation

Eighty-five percent of the Pennsylvanian's polled by the Lincoln Institute reported owning their own home, with 15% saying they are not home owners. Home ownership was lowest in the 18-34 year old demographic (48%) and highest in the 45-54 (89%) and 55-64 (91%) age groups.

By income, nearly 100% of those in the $75,000-plus earning category reported owning their own home, with 66% of those earning less than $20,000 being home-owners. Educational achievement also has an impact on home ownership: 93% of those holding a graduate degree report owning their own home; 86% of those with a four-year degree; and 82% with a high school degree are home owners.

The home mortgage and housing problems afflicting many parts of the nation appear to be having less of an impact in Pennsylvania than elsewhere, largely owing to the fact that most Pennsylvanians have not over-extended themselves on mortgage payments.

Twenty-four percent of poll respondents said between 10-20% of their incomes go each month to make the mortgage payment; another 20% said they expend 21-30% of their incomes on their monthly mortgage. An addition 6% said the mortgage payment consumes 31-40% of their income; while 5% said 41-50% of their income goes to pay the mortgage. Four percent reported expending more than half of their income on the home mortgage.

The income groups with the highest percentage saying they spend more than half of their income on the mortgage are those in the $20,000-$30,000 bracket (8%), and in the under $20,000 bracket (6%). Those households with incomes of over $100,000 had the highest percentage paying between 31%-50% of their income on a home mortgage.

Personal Finances

Given the turmoil in the home mortgage markets and the overall concerns about the national economy expressed in numerous polls, the Lincoln Institute asked Pennsylvanians a number of questions relative to their own personal efforts at financial planning, their approach to saving, and expectation for their financial futures.

Seventy-six percent of poll respondents said they have an organized plan for their personal finances, while 23% said they do not. Financial planning was fairly consistent across age groups, with 35-44 year olds reporting the lowest level of formal financial planning (68%) and 55-64 year olds having the highest (80%) planning levels. Generally speaking, the level of formal financial planning increased with a family's household income ranging from 51% of those earning less than $20,000 having an organized financial plan to 89% of those earning $75-$100,000 per year doing such planning.

Financial planning also tended to increase with the attainment of higher education levels. Seventy percent of those who ended their formal education with a high school degree said they have an organized plan for their personal finances, while 86% of those with a four-year degree and 80% of graduate degree holders have done such planning.

Eighty-one percent of poll respondents said it is very important to have an organized plan for their financial future while an additional 13% said having such a plan was somewhat important. Only 1% said financial planning was somewhat unimportant and 2% said it was not important at all.

Aside from a home purchase, college costs and retirement are the two most significant life events for which most families plan. Thirty-three percent said they either are currently or have in the past participated in private savings programs to finance higher education costs either for themselves or for a member of their family.

Predictably college savings rates are the highest in the 25-44 (38%) and 45-54 (40%) year old age demographics reflecting parents saving for their children's education. Fifty-six percent of those with household incomes exceeding $100,000 said they were or are participating in private savings plans. Thirty-seven persent 37% in the $75,000-$100,000 income bracket, 40% in the $50,000-$75,000 bracket, 33% of those with family incomes between $20,000 and $50,000, and 18% of those with incomes of less than $20,000 were or are enrolled in private college savings plans.

College savings rates were also significantly higher among those who already hold a four-year or graduate degree (47%) than among those whose formal education ended at the high school level (24%).

Pennsylvania families utilize a number of savings programs to prepare for higher education costs. Here are the most popular:

     21%      Bank/Credit Union
  21%   529 Savings Plan
  20%   Mutual Fund
  13%   PA Tuition Account Program
  3%   Regular Savings Account
  2%   Savings Bonds

Retirement

Sixty-five is by perception the most popular age for an American to retire and 30% of those polled by the Lincoln Institute say they expect to retire on or near their 65th birthday. However, another 27% expect to work past the age of 65.

Higher wage earners, those earning over $100,000 per year, have the highest expectations of retiring at or near the age of 65. Those in the $75,000 -$100,000 income bracket are the most likely (46%) to expect to work past the age of 65. High school graduates have nearly equal expectations of retiring at 65 (22%) or working longer (21%); among those holding a four year degree 40% expect to retire at or near 65 years old and 33% expect to work longer; and 30% of graduate degree holders say they will retire at or near 65 and 34% say they will work longer.

In a broad generalization, Pennsylvanians as a group are reasonably confident that they have set aside enough resources to provide adequate retirement income. Eleven percent say they are "extremely" confident; 27% are "very" confident and 35% say they are "somewhat" confident they are saving enough. Eleven percent say they are "not confident at all" that they are saving enough for retirement.

Well over two-thirds of Pennsylvanians expect to be dependent on the government for all or part of their retirement income, health care, and other social services once they retire. Fifteen percent say they will be "heavily" dependent on the government; 58% expect to be "somewhat" dependent, and 23% don't plan to be at all dependent on the government for assistance in their retirement years.

The age group with the highest percentage saying they do not expect to be dependent on the federal government at all is the youngest demographic, 18-34 year olds, of which 32% do not expect to depend on the federal government for retirement income. That number could be a reflection of concerns express in the Public Opinion Court focus group session wherein younger workers do not expect the Social Security system to either be there or be a major factor in financing their retirement.

Aside from Social Security, 56% of the poll respondents said they are presently saving for retirement via an employer-sponsored pension program, 401K, IRA or other investment instrument. Forty-three percent say they are not actively saving for retirement outside of the Social Security system.

Of those who are saving outside the Social Security system, here is a breakdown of the most popular savings instruments being utilized:

    42%     401K
  19%   IRA
  14%   Employer Sponsored
  7%   Traditional Pension
  6%   Mutual Fund
  4%   403B

Looking ahead to retirement, 9% of those participating in the Lincoln Institute poll said they expect 100% of their retirement income to come from Social Security; 11% said they expect to derive about 75% of their income from Social Security; 24% expect Social Security to make up about half of their retirement income; 26% are depending on Social Security for about 25% of their income; and 16% are expecting to derive their retirement income almost entirely from private sources.

In terms of overall savings, 31% of the poll respondents said they set aside less than 4% of their annual income; 22% report banking 6% -10% of their annual incomes; another 14% say they save 11% to 15% of their income each year. Nine percent report saving between 16% to 20% of their annual incomes; another 4% say they save between 21% and 25% of their incomes. Five percent say they are able to set aside more then 25% of their incomes in savings.

"End of Life" Issues

Comparatively, few Pennsylvanians are currently insured for "end of life" expenses, such as extended nursing home care. Twenty percent say they or a member of their household carries such insurance, while 78% say they do not have such insurance. As might be expected, those in the 65-plus age demographic report the highest incidence – 26% – of such coverage.

As to whether or not the government should participate in paying "end of life" expenses, such as extended nursing home care, 54% of the respondents to the Lincoln Institute poll said yes, the government should help cover such costs. Thirty-five percent felt the government should stay out of that area; another 11% were undecided. The overall numbers were driven by self-described liberals, 67% of whom felt the government should help pay extended nursing home costs while 46% of conservatives agreed. By political party affiliation, 57% of Republicans and 45% of Democrats agreed the government should be involved in "end of life" extended nursing home care.

Ninety-five percent of those polled believe it is very important (80%) or somewhat important (15%) for individuals to pre-plan final documents such as a will, living will, and/or power of attorney. Those holding the view that such documents are important increases with age. Sixty-five percent of 18-34 year olds said such pre-planning is very important compared to 83% of those in the 65 plus age demographic.

Methodology

Questions posed in the "Securing The Future" poll were drafted by the Lincoln Institute of Public Opinion Research, Inc. and refined using input gathered during a Public Opinion Court focus group session. Tel Opinion Research of Buffalo, New York conducted the telephone survey of 750 registered Pennsylvania voters from October 2 – 7, 2007. All respondents were part of a fully representative sample of registered voters in the Commonwealth of Pennsylvania. The confidence interval associated with a sample of this size is such that: 95% of the time, results will be within +/-3.7% of the "true values." "True vales" refers to the results obtained if it were possible to interview every registered voter in Pennsylvania. Complete numeric results of the survey can be obtained on-line at www.lincolninstitute.org and www.patownhall.com.


Taking the Pulse of Pennsylvania