As economy stabilizes, Trump looks to ’20
Fading recession threat makes president optimistic, but others say it’s far from clear
WASHINGTON — In late October, President Donald Trump spoke with one of his top advisers after reading reports of election forecasting models that predict a win for him based on the economy’s performance.
These projections — from Moody’s Analytics, Oxford, and Yale economist Ray Fair — gauge things like the unemployment rate and income growth to predict the election’s outcome. Three of the leading models show Trump winning easily in 2020.
“He was delighted by those stories. He’s been very interested in them,” said Larry Kudlow, director of the White House National Economic Council, arguing they reflect a “middle class worker boom” under Trump.
Engulfed in an impeachment inquiry and facing eroding support, Trump has turned to the strength of the U.S. economy as a sign that he is likely to be reelected. Since World War II, no U.S. president has lost re-election when the unemployment rate was below 7.4 percent. No president has even run for re-election when the jobless rate was as low as it is now — 3.6 percent.
Trump will soon test this precedent. His poll numbers remain very weak, and his support in suburbs has eroded steadily. A number of political experts say traditional measures of economic success may not prove decisive enough for voters to give Trump a second term.
On Tuesday, one day before the House of Representatives begins public impeachment hearings, Trump plans to give a speech in New York on trade and economic policy, potentially setting up a contrast with Democrats over priorities heading into next year.
“President Trump has created the hottest economy in modern history, and you can be certain that it will be a persistent theme emanating from the Trump campaign,” Kayleigh McEnany, Trump’s national press secretary, said in a statement.
But it is far from clear whether Trump can bank on the economy for his re-election. Political scientists note electoral models based on the economy may miss crucial factors, like rising health care costs, as well as how voters view the personal behavior of the president.
State elections earlier this week may have also underscored the president’s political danger, as Republicans suffered embarrassing losses even in Kentucky and Virginia, where economic growth remains relatively strong. And signs of voter discontent with the president have emerged in crucial swing-states, including over health care.
“Typically, these sorts of models include only economic variables, plus some measure of incumbency. The problem is that those aren’t the only things that matter,” said Alan Abramowitz, a political scientist at Emory University. “They leave out so much, including what voters think of a president’s honesty and trustworthiness, as well as whether they agree on his policies on issues like health care, the environment, and a whole range of things.”
About 44 percent of voters say the economy has improved during the Trump administration, according to a recent Washington Post-ABC News poll. But in “Blue Wall” states Michigan, Minnesota, Pennsylvania, and Wisconsin, voters give Trump a -21 percentage point net rating on health care, according to a poll released this week by the Kaiser Family Foundation and Cook Political Report. This tension has made it hard for some forecasters to predict how Trump might fare.
Democratic lawmakers and a number of experts also dispute that the economy gives Trump a decisive political advantage. They point out that bankruptcies in farm country are rising and wage growth has remained sluggish. More Americans are homeless or without health insurance over the last two years, among other trends that hurt the working class, such as persistent poverty, high income inequality, and a devastating opioid epidemic.
“Given the structural inequities embedded in our society, Democrats’ agenda is as relevant at 3 percent unemployment as it is as 7 percent,” said Jared Bernstein, a former economic adviser to Joe Biden. “It doesn’t obviate the progressive agenda at all. There are lots of people and lots of places that have been left behind.”
The White House has still received some unambiguously good economic news compared to the summer, when there were growing fears that the economy could be sliding into a recession. Manufacturing output was weakening. Trade tensions with China were at a high. The stock market gyrated wildly. Sen. Elizabeth Warren, D-Mass., echoing many economists, warned of a “coming economic crash.”
But since August, several key variables have gone the administration’s way. The Federal Reserve has cut interest rates, generating additional spending in the economy. Two measures of U.S. business activity, after tanking over the summer, leveled off in the fall. Trade tensions appear to have subsided.
Recent Commerce Department data show the economy is slowing, but it is still growing, appearing to steer clear of a recession for now.
At the same time, Trump’s Democratic opponents have increasingly called for far-reaching government interventions in the economy. Kevin Hassett, who recently stepped down as chair of the White House Council of Economic Advisers, said Trump will lay out a “second-term agenda” that presses the contrast with Democrats’ economic agenda. White House advisers and congressional Republicans have begun discussing the contours of a second tax cut package.
“It’s ironic: Typically, it’s at the peak of a financial crisis, when markets are collapsing, that you see demands for radical change,” Hassett said. “He’s going to focus on the state of the economy and a different version of what to do for the next four years.”