Economic outlook split along party lines
Americans have never been so divided, not just about politics, but also about the nation’s economic future.
Republicans are extremely optimistic that President Donald Trump will deliver on his promises to boost the nation’s economy and create millions of new jobs, according to the Survey of Consumers conducted monthly by the University of Michigan.
Democrats, on the other hand, are preparing for a deep, dark recession.
“The sharp partisan divide that now dominates consumer sentiment is unprecedented,” said Richard Curtin, the survey’s chief economist.
With 100 representing neutrality, Republicans registered an index score of 120.1, while Democrats came in at 55.5.
Trump and his supporters believe that overhauling the tax code, reducing regulations and rewriting trade deals will boost the U.S. economy. Treasury Secretary Steven Mnuchin wants to pass a new tax code by August to boost annual economic growth to 3 percent.
Democrats worry that Trump’s plans to roll back global trade will lead to higher prices and trade wars that will hurt U.S. exports. The proposed border adjustment tax, which is central to the House tax plan, could
also do more harm than good.
Curtin said both sides are probably wrong.
“No recession, as expected by Democrats, is likely to be on the horizon; neither is more robust economic growth, as anticipated by Republicans,” he said. “These extreme views are likely to converge in the future due to continued modest GDP growth as well as favorable trends in employment and wages.”
Economists, though, do a pretty poor job of predicting recessions. And not everyone agrees with Curtin. A Wall Street Journal survey of economists conducted before Trump won the election predicted a recession within four years.
That’s a pretty safe bet, considering the U.S. is on one of the longest streaks without a recession ever recorded. Economic cycles do not stop for any president and a recession is inevitable. The hard part is predicting when.
What will be interesting in the months ahead is to see whether Democrats talk down the Trump economy the same way that Republicans slammed the Obama economy, despite steady economic expansion and consistent job growth.
The Consumer Sentiment Index swung wildly based on the political discourse over the last two years. The index dropped when Republicans slammed the economy but then picked up when officials released positive statistics.
The partisan divide on the economy also opens the door to political manipulation of economic data, which should worry us all. Obama supporters were happy to look past the declining labor participation rate in order to focus on the lower official unemployment rate, which just happens to ignore people who have stopped looking for work.
Some economists now worry that Trump will change how those statistics are calculated. For example, he wants to change how the foreign trade deficit is calculated by counting goods imported from overseas as part of the deficit, but then not counting the same goods as exports when they are sold overseas.
His administration also has discussed changing the unemployment rate so it includes people who are not looking for work, including students, homemakers and even retirees. Both of these changes would make the economy appear much worse than the current statistics and give him more justification for the policy changes he is proposing.
The dramatic difference in how Americans perceive the economy also reinforces the debate over “fake news” and “alternative facts.” Americans are allowing their leaders to pick and choose what facts to believe, including economic data, thereby deepening divisions within our country.
The truth is that most economic statistics are truthful, but they should not be considered in a vacuum.
Smart analysis requires that we consider all of them, not just the ones that support our ideology.
If we care about these United States, we would do well to break out of our echo chambers, question our leaders’ motives and look at all reliable, nonpartisan sources of information.
Staking out the middle ground is where we can find truth and compromise that will bring us all a more prosperous future as one nation.
Chris Tomlinson is the Chronicle’s business columnist. He can be reached at chris.tomlinson@chron.com and @cltomlinson.
“No recession, as expected by Democrats, is likely to be on the horizon; neither is more robust economic growth, as anticipated by Republicans.” Richard Curtin, survey’s chief economist