Friday, July 19, 2019

Overcoming Economy Is Big Hurdle For 2020 Democrats

Despite President Trump’s unpopularity, he does have one big thing going for his re-election campaign. If history is any indicator, the Democrats may have a difficult time overcoming the president due to the continued strength of the economy.

Axios pointed out earlier this year that every incumbent president since FDR who has avoided a recession in the runup to an election has been re-elected. On the surface, that would appear to be good news for Donald Trump, who has presided over an economy that grew 2.2 percent in 2017 and 2.9 percent in 2018 and a consistently low unemployment rate. Voters have typically rated Trump’s handling of the economy much better than his overall performance as president.

A recent focus group of swing voters, also reported by Axios, showed that many voters who switched from Obama to Trump, liked Trump’s economic policies, including his tariffs, even though they were put off by his behavior.

“His antics, mannerisms, and personality I could do without,” a member of the focus group said, “but I feel like there are a lot of good things happening in the country that people don’t like to admit.”

“Our economy would have to really crash for me to vote against him,” he added.

At only 12 participants the focus group’s size was too small to represent a statistical sample of voters, but their responses do elicit a number of questions. The most obvious is why, when the economy is seen as his strong point, Donald Trump chooses to focus on immigration and picking fights with low-level Democrats, strategies that seem to be hurting his standing with most of the electorate.

Headlines recently reported that the president reached an all-time average approval rating. The buried lede was that Trump’s all-time high was an embarrassing 42.7 percent. A comparison with the approval rating of other presidents (going back to Truman) at this point in their term by FiveThirtyEight finds Trump’s approval below every other president except Jimmy Carter, who went on to lose his re-election campaign.

Interestingly, George Herbert Walker Bush, the other incumbent who failed to win re-election, had a 70 percent approval rating at this point in his presidency. In 1991, the first Bush was riding high after winning Desert Storm, the first Iraq war, but a recession from July 1990 to March 1991 sparked by high gas prices after Iraq’s invasion of Kuwait and interest rate hikes by the Federal Reserve led to his defeat the following year. Two other factors, Bush’s decision to raise taxes despite a promise of “Read my lips: no new taxes” and a third-party challenge Ross Perot, also contributed to the election of Bill Clinton in 1992.

The second important point from the focus group is that if the economy falters swing voters could quickly abandon President Trump. The most serious threat to the Trump economy is something that his supporters view favorably: his trade wars.

Already, there signs that the Trump economy is not as strong as advertised. A growing number of economists see the potential for a recession before the election. Fortune notes that “the greatest downside risk is trade policy and increased protectionism.” This is especially true since trade talks between the United States and China, one of our largest trading partners, have been unproductive.

The concern about a recession is echoed by corporate financial officers surveyed by Duke University. CNN reported that almost 70 percent of CFOs cite the trade war and a shortage of skilled workers, which is exacerbated by President Trump’s restrictive immigration policies, as reasons that there will be a recession before the end of 2020.

The recession jitters are not unfounded. New data from the Federal Reserve released this week shows that US manufacturing is already in a recession after six consecutive months of declining production. The manufacturing slump is a direct consequence of the trade war. The decline in manufacturing spells trouble for Trump’s hopes of reclaiming the Rust Belt states that pushed him to victory in 2016.

There are other indications that Trump is in trouble on the economy as well. Despite the backing of participants in the focus group, a recent poll from The Associated Press-NORC Center for Public Affairs Research found that Trump’s standing on the economy may already be slipping. The poll showed that majorities now disapprove of Trump’s handling of the economy in general as well his positions on taxes and trade negotiations. While two-thirds said that the economy was good, only 17 percent believed that they got a tax cut and only 15 percent saw the tariffs as beneficial.

As recession fears mount, Donald Trump faces a situation similar to the one that dashed the electoral hopes of the first President Bush. Trump’s tariffs, which are literally tax increases on trade, have offset the economic stimulus of the 2017 tax reform and are acting as a drag on the economy. Likewise, Trump may well have a strong third-party challenger who can siphon the votes of disaffected Republicans. If the economy slows to a recession, the situation will be very similar to the one that took down a much more popular president.

The flip side is that the Fed has indicated that it will cut interest rates in the near term. The expected cuts may goose the economy enough to drag Trump across the finish line.

Finally, there is the possibility that, as his supporters often say, that Donald Trump has created a new dynamic in Washington but not necessarily the way that they mean. Several polls over recent months have indicated that more than half of voters refuse to support President Trump for re-election for any reason. The aversion to Trump’s behavior, which one focus group member said is not “where it should be for a president,” may be strong enough that even a good economy will not assure his re-election.

With 16 months to go until the election and with no Democratic candidate holding a lock on the nomination, there are too many variables to predict how the election will turn out. Democrats should be cautious in their expectations about taking on an incumbent in a good economy. Trump’s economy might well sink into recession before the election, however, and, even if it remains strong Trump may have alienated so many voters that he loses anyway.

President Bush’s experience should be a lesson for President Trump. Clinton’s mantra during the campaign was “it’s the economy, stupid” while Bush allowed himself to be distracted. Just as importantly, Bush laid the seed of his own defeat with his tax increase, without which, the 1990 recession and the sluggish growth that followed might never have happened. Trump’s tariff taxes, which are slowing the economy, his focus on his unpopular immigration policies, and his unpresidential behavior may be the seeds of his own defeat.

Originally posted on The Resurgent

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