When voters head to the polls in November, Donald Trump Republicans may seem to be facing the president’s many hurdles: a threatening investigation into his relationship with Russia, blatant racism and sexism, an administration rife with corruption — the list goes on. It’s draining and numbing.
And the list doesn’t even include the trouble parties in power have in U.S. midterm elections. The often lose. Badly.
But Trump Republicans have a one very big card to play and it’s a doozy: the economy. Americans have been treated to headlines that suggest we are in boom times. Housing prices are high. Job growth is on a record 94-month streak. Unemployment is at a miniscule 3.9 percent. Those with 401(k) retirement savings are feeling good as the stock market flirts with its all-time high.
And economic growth in the latest quarter was a robust 4.1%.
So, it’s no surprise that confidence in the economy is touching highs of its own, according to polls. And most Americans are giving credit to the president, who is naturally taking credit for what seems like good news.
And in some ways it is. The economy is steaming along, and the president deserves some credit.
But here’s the reality: presidents have few levers to pull when it comes to the economy. As Nicole Lewis put it in a report last December, the U.S. economy is complex, and the decisions of companies and consumers often loom larger than the acts of government.
And when it comes to new presidents, there’s a clear pattern that they inherit much of the economic trend from the previous administration. In the case of Trump, he took a healthy economy and put it on steroids.
He’s juiced the economy in three ways. First, he passed a massive tax cut that benefited corporations. That’s translated into stock market gains as earnings that historically would have gone to the the government have led to massive share buybacks.
Second, the Trump administration has embraced a scorched earth deregulation policy. While lifting rules doesn’t immediately turn into profits, the ethos of deregulation is catnip for the corporate and investing class.
Finally, under Trump, the U.S. debt has climbed to $21 trillion, a new record. By the more traditional economists measure — the ratio of debt to gross domestic product — we are again near a record high and losing ground quickly as the receipts lost in the tax bill go to corporations and government spending continues to rise. At the current rate, the U.S. debt will be at 140% of GDP by 2024, by some estimates, that’s around the debt level of Russia.
If you get the feeling none of this is sustainable you’re right. Tax cuts will only worsen the problem and deregulation will not only put workers, consumers and the environment at risk, it will put the financial system at risk.
But it’s worse. A government deep in debt can’t spend its way out of, or mitigate, a recession. Banks without regulations fail and credit markets seize. And raising taxes in recession isn’t going to happen and shouldn’t.
In some ways — with the exception of trade wars — Trump is treating the economy as if it were in recession. He’s goosing it with every lever he can. Only the Federal Reserve, which is methodically raising rates, is offsetting the moves.
Most Americans, don’t pay attention, of course. What’s happening today: the presence of multiple jobs and a roaring stock market feel good. It feels as if this Trump guy knows what he’s doing.
And though it’s been said before, stupid, the economy is the biggest voter litmus test going.
Graft, racism, deconstructing the post-war world order and children in cages will have to wait.
The administration is playing a card. And it may be too late before people recognize it’s a cheat.