The Economy and the Election

The latest Washington Post/ABC News poll found that Donald Trump’s approval rating had risen to 44 percent. The uptick was produced by sentiment regarding Trump’s handling of the economy; 51 percent saw this as a positive.  What’s the real story?  And what can we expect as we barrel towards the 2020 presidential election?

The Post poll was based upon 1008 interviews.  It found that while 44 percent of respondents approved of the President (32 percent strongly), 53 percent disapproved (45 percent strongly).  65 percent characterized Trump as acting “unpresidential.”

The Washington Post/ABC News poll (https://www.washingtonpost.com/politics/aided-by-a-strong-economy-trump-approval-rises-but-a-majority-also-see-him-as-unpresidential/2019/07/04/c9c42c54-9d9f-11e9-b27f-ed2942f73d70_story.html? ) asked respondents: “How much credit do you think the Trump administration deserves for the country’s economic situation?”  47 percent answered  “a great deal or a lot of credit;” while 51 percent responded “some credit to none.”

There are two questions to be answered: Who is responsible for the current economic situation and what can we expect going forward?

The U.S. economy is in its 121st month of growth — a historic stretch.  Most of that growth took place during the Obama Administration:
Trump claims the economy is “the best it has ever been;” that’s inaccurate. The economy is growing at roughly 3.2 percent, but in the 1990’s the economy grew at over 4 percent for four straight years.

While there are several positives about the economy, there are also strong negatives.  There’s a widespread perception that the Trump economy primarily benefits the rich and powerful.  An April 25th Washington Post/ABC News poll (https://www.washingtonpost.com/page/2010-2019/WashingtonPost/2019/04/29/National-Politics/Polling/question_21389.xml? ) asked : “Do you think the economic system in this country mainly works to benefit (all people) or mainly works to benefit (those in power)?”  62 percent responded that it benefited those in power (82 percent of Democrats, 68 percent of Independents, and 34 percent of Republicans).

A July 4th Washington Post article ( https://www.washingtonpost.com/business/economy/this-doesnt-look-like-the-best-economy-ever-40percent-of-americans-say-they-still-struggle-to-pay-bills/2019/07/04/855c382e-99b5-11e9-916d-9c61607d8190_story.html?) characterized the economic recovery as “two-tier” and said that 40 percent of the population has not benefited: “[They] have seen paltry or volatile wage growth, rising expenses for housing, health care and education, and increased levels of personal debt.”

What jumps out from the current economic situation is the fact that Trump has broken his pre-election promises to American workers.  Writing in Common Dreams economist Robert Reich detailed “the 7 Biggest Failures of Trumponomics” (https://www.commondreams.org/views/2019/06/11/7-biggest-failures-trumponomics ): “[Trump] promised to boost the wages of American workers, including a $4000 pay raise for the average American family.  Instead, wages for most American have been flat, adjusted for inflation… over the same period, corporate profits have soared and the rich have become far richer.”  (Reich noted that Trump promised a tax-cut for middle class families but instead this tax-cut disproportionately benefited the rich.)

On July 10th, Federal Reserve Chair Jerome Powell appeared before Congress and noted mixed trends in the economy: the U.S. jobs market remains robust and consumer spending appears set to rebound, however business investment has slowed considerably, along with housing investment and manufacturing output.  Powell continued: “Our baseline outlook is for economic growth to remain solid, labor markets to stay strong, and inflation to move back up over time to the Committee’s 2 percent objective.  However, uncertainties about the outlook have increased in recent months. In particular, economic momentum appears to have slowed in some major foreign economies.”

There are storm crowds on the economic horizon.  Many are Trump’s fault. In August-September, the U.S. hits the debt limit.  Forbes Magazine (https://www.forbes.com/sites/teresaghilarducci/2019/04/25/the-u-s-debt-ceiling-expired-on-march-1-and-nobody-cared-but-they-will/#57842bff6b3f ) explains: “When the [debt] limit is reached, the U.S. Treasury can’t borrow any more… severely impacting the real economy for fear the government would default on our debt…. Interest rates, already one of the fastest rising costs in the federal budget, will rise as the political crisis builds, because foreign borrowers will demand an additional risk premium. And rising interest rates will impact U.S. Treasuries, mortgages, credit cards, car loans, student debt, and corporate debt. If workers, households, students, and corporations can’t pay their bills because of the interest rate shocks, the economy could go into recession.”

During that same time frame, the government runs out of money as Republicans have been unable to pass a new appropriations bill.

Many observers are concerned about Trump’s trade policies.  Robert Reich noted: “Trump promised to bring down America’s trade deficit ‘as fast as possible.’  Instead the trade deficit has hit an all-time high.” Reich continued: “Trump’s trade wars have hammered rural America. Farm incomes are down $12bn in the first quarter of this year, according to the Department of Agriculture. Farm bankruptcies are at near record levels.”

Trump’s trade policy is emblematic of the problems created by his “America first” foreign policy.  In many decisions — for example pulling out of the Iran nuclear treaty (the JCPOA) and the Paris climate change agreement — Trump acted without support from our allies.  (Recently, when it appeared that the U.S. would attack Iran, after it shot down one of our drones, Trump seemed ready to launch major military action without support of our allies.)  Trump’s “unilateralism” has economic consequences: information security, pandemics, and climate change.

It’s been well-documented — but denied by the Trump Administration — that the United States is under continuous cyberattack by Russia.  What’s gotten less press is the reality that American industry is under attack from China, North Korea, and Iran, as well as Russia.  Trump is doing nothing to thwart this.  There’s a real possibility of devastating damage to America’s energy and financial infrastructure.

International cooperation is required to respond to the threat of pandemics.  But Donald Trump is a unilateralist (and germaphobe) and, therefore, unlikely to respond effectively to a global health challenge.

Finally, there’s the issue of global climate change.  Trump doesn’t believe it is happening and  has chosen to ignore the mounting evidence. (As I write this, a massive storm is battering Louisiana.)  Here in Northern California, climate change — in the form of floods and wildfires — has already affected our economy; in some counties, housing loss has affected the tax base and, overall, there’s been a massive infrastructure hit.

We’re 16 months away from the 2020 presidential election.  It’s likely that the U.S. economy will weaken.  Trump will be responsible.  HIs approval rating will decline.