Boost Economy or Avert Collapse? Stimulus Package Support Depends on How It's Framed According to Stanford Business School Research.

STANFORD, Calif. -- Did President Barack Obama correctly sell the $787 billion stimulus package? Since it has been enacted into law by Congress and signed by the president, one might answer yes. But the fact that the bill passed with little Republican support could say otherwise, argue two researchers.

A new study, to be reported in this month's Stanford Knowledgebase, by Neil Malhotra and Yotam Margalit suggests that Obama's political strategists might have gotten even more than $787 billion if they had relied less on Democratic Party lawmakers to sell the package and expended more time and effort arguing for the merits of the package early on. Moreover, to get more support from Republican voters, Obama could have avoided blaming the financial crisis on the Republican Party and the Bush administration and been more alarmist about the consequences.

Today, amid the faltering economy, the Obama administration must still rally the American public around the plan. In the future other stimulus packages may need to be passed, including more asset purchases and the creation of a "bad bank" of problem loans. The study outlines a few key tactics the president might employ.

"Understanding how citizens construct opinions about the preferred policy for dealing with the economic crisis has important applications for gauging how the battle over public opinion is likely to shape up in the months ahead," the authors write.

Malhotra, an assistant professor of political economy at the Stanford Graduate School of Business, and Margalit, an assistant professor at Columbia University, surveyed almost 3,000 U.S. adults in late January and early February 2009, probing to find the factors that shape the American public's preferences regarding the government's stimulus plan.

"The American public is sensitive to cues, such as endorsements and the blame game, and uses them to construct attitudes on the complex issue of the stimulus package," the authors write.

One of the striking findings is that high-income and lower-income citizens have drastically different responses to how the stimulus package is framed. High-income citizens appear to be more risk-averse, supporting the stimulus program at higher rates when it is framed as "preventing a collapse," as opposed to a program designed to "boost" the economy. Attitudes of low-income citizens were just the opposite.

In addition, Malhotra and Margalit found that support for the proposal differed depending on whether the question was presented as an initiative of the Democratic Party, one of the Obama administration, or the federal government. When Republicans were asked about an economic stimulus plan drawn up by "policymakers in the Democratic Party," they were less likely to support it. They were more supportive if the question attributed the proposal to "President Obama and his team" or "policymakers in the federal government."

Another bias participants exhibited is a sensitivity to how an issue is framed--is the glass half full or half empty? Despite the fact that they may have well-reasoned opinions about the topic, "People may be more likely to support policies such as the stimulus package that are seen as high-risk when they are framed as preventing catastrophic outcomes as opposed to promoting beneficial ones," the authors wrote.

The Obama administration correctly assumed it needed to keep the size of the stimulus package under $1 trillion. Malhotra and Margalit found that support among survey participants declined substantially--especially among Republicans and independents--when the cost was presented as $1 trillion versus $900 billion. It didn't matter much, they found, if the cost was $1.1 trillion or $1.4 trillion; sensitivity to the trillion-dollar threshold was paramount.

The study's findings have implications for how the Obama administration should go about gaining public support for the package. It also points up some of the strategies the president should and should not have employed in marketing it.

Early on, Obama sought broad support for the stimulus beyond his own party's base by inviting Republican leaders to the White House and sending key aides to Capitol Hill. But the effort largely failed as the bill gained the vote of only three moderate Republican senators; no Republicans voted for it in the House.

The authors suggest that Obama's political strategy should have differed, depending on whether he was trying to gain bipartisan support for the stimulus bill, or to solidify support within the Democratic base and some independents. If going for broad support, he needed to describe the proposal as one he himself owned, keeping the Democratic Party out of the limelight. If he wanted to gain more Republican support, he should have avoided blaming the financial crisis on Bush.

And, "If he solely wanted to gain Democratic support, he should have pushed through a bigger plan," Malhotra says. "It seems like Democrats were insensitive to price. However, independents were leery of the plan exceeding $1 trillion." Malhotra says Obama made the plan more palatable to Republicans by: "Emphasizing the catastrophic consequences if the plan had not been passed, and keeping [cost] below $1 trillion."

In the future, when out stumping for the package, the president should carefully consider his audience. If it is well-to-do, "frame the proposal as necessary for avoiding a sharp downturn," the study suggests. "Otherwise, emphasize the potential growth that the stimulus may help instigate."

(This story reports on research at the Stanford Graduate School of Business and will be forthcoming in the February 2009 issue of Stanford Knowledgebase, the free monthly information source for thoughts, ideas and research at the Stanford Graduate School of Business. To dig deeper, visit http://www.gsb.stanford.edu/news/research/Malhotrastimulus.html?tr=research.)