Now It's the Debt, Politicians and the Economy, Stupid

U.S. Debt money pocket watch
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Americans are growing increasingly worried about federal debt and government dysfunction, which economists say could be a sign they are afraid that squabbles about the "fiscal cliff" and the debt ceiling could derail the nation's fragile economic recovery.

"I would guess that the real concern is that if Congress screws things up with the fiscal cliff … and then coming up with the debt ceiling, that it will hurt the economy," said Justin Wolfers, a professor of economics and public policy at the University of Michigan.

The economy in general still tops the list of the biggest problems facing America today, with 21 percent listing it as the biggest issue, according to a Gallup poll released this week.

But the poll conducted in early January found that nearly as many people — 20 percent — listed the federal deficit as the top problem facing the country. The percentage of people listing the deficit as the biggest U.S. problem has grown sharply in recent months, while the percentage of people naming the economy in general has fallen.

Over that time, Americans also have grown much more dissatisfied with politicians and the government. About 18 percent listed politicians and the government as the top problem facing the U.S. in the January poll, up from 9 percent in October.

Meanwhile, 16 percent said unemployment was the top problem, down from 26 percent in October. That marks the first time since 2009 that unemployment has not been in the No. 1 or No. 2 spot.

Economists say they don't necessarily think Americans are less concerned about the economy or the tight job market. Rather, they say, Americans may be growing more concerned that political infighting and the growing federal deficit could hurt the nation's already fragile economic recovery.

"We're maybe actually just as concerned about unemployment as we were six months ago, but we're much more concerned about the deficit," said Erik Snowberg, a political economist at the California Institute of Technology.

Snowberg and others say Americans likely want the government to fix the nation's economic woes, or at least not exacerbate them.

"It's one thing if (politicians) can solve the people's problems. It's another thing if they are doing the opposite — if they're just arguing and not solving problems and making things worse," said Chris Christopher, senior principal economist with IHS Global Insight.

Christopher noted that consumer confidence fell sharply in November and December, as the fight over the fiscal cliff started to heat up. Wolfers, at the University of Michigan, documented a similar effect when the debt ceiling fight came up for the first time in the summer of 2011.

Economists say it's not clear how much of an effect consumer confidence has on things like spending and hiring. But it is clear that consumer confidence is impacted by political strife, and there's been plenty of that in recent months.

"We're going from the fiscal cliff into higher (taxes) to this bickering over the federal debt ceiling," Christopher said.

The political strife comes as the nation's economy appears to be steadily, if slowly, improving. The job market is adding some new jobs each month, and the housing market appears to at least be stabilizing.

Still, economic growth is not yet strong enough that something couldn't throw it off course, Snowberg and others say. President Barack Obama warned Monday that an extended fight over the debt ceiling could weaken the economy or even push the nation back into recession.

The United States is set to hit the limit on how much it can borrow some time in the next month or so, and Congress must approve an increase in that limit so the government can pay its bills. But Republicans would like to use the debt ceiling limit vote as an opportunity to push cuts in government spending, which they say are necessary for the nation's long-term fiscal health.

Democrats argue that it doesn't make sense to use the debt limit as the basis for that discussion, since the limit itself does not authorize the government to spend more money.

Wolfers, who does work for Gallup but was not involved in this survey, said the idea that the U.S. could stop paying its bills because of political fighting is astounding to many people who are watching the situation unfold in other countries and in the financial sector.

"It's a fragile recovery and we certainly don't need politicians in Washington derailing it," Wolfers said.