The economy will be the card Trump plays in 2020, perhaps more than any other.
But will it pay off for him the way he’s hoping?
A case of the jitters
Expansion could go continue for years. Or not.
Back in April, JPMorgan CEO Jamie Dimon said the expansion could continue for quite some time.
That, notably, was before Trump’s trade talks with China cooled. More recently, Dimon said trade could be a factor in derailing growth.
Compounding issues were on display Wednesday, as rising concern about China dovetailed with special counsel Robert Mueller’s public comments that his investigation into Russian election attacks was hamstrung by Department of Justice rules from resulting in charges against Trump even though it could not clear him.
It may no longer be the economy, stupid
The issue for Trump is that his 2020 prospects are so reliant on the economy while his approval ratings have not kept pace with how well he says things are going.
Democrats have made clear they want the election to be about issues and not about Trump.
Political opponents of Trump like Jared Bernstein, who was chief economist to then-Vice President Joe Biden during the Obama administration, do not necessarily see a recession on the horizon.
“First of all, I want to be clear, it is a fool’s game to try to predict the next recession,” said Bernstein in a phone interview before Trump’s threat of new tariffs on Mexico. “That said, the American consumer remains pretty strong and they’re at the heart of at least near-term economic outcomes. Consumer spending is nearly 70% of our economy.”
The political answer to a booming economy is inequality
Bernstein said Democrats in 2020 will have to focus on the idea that the economic boom under Trump was born of tax cuts that created a sugar high.
“I think the Trump tax cuts were a massive misdirection of critical resources, but those cuts combined with other deficit spending has to create a fiscal boost to the economy,” he said, adding they “juiced economic growth.”
But while the tax cuts did undoubtedly help the economy in the short term, he said the key for Democrats is to show that the reductions haven’t ultimately improved the lives of everyone or even most people. There’s no evidence yet that the cuts, which most benefited the wealthy and corporations, will lead to longer-term business investments, growth or wage gains. What they’ve definitely done is explode the US budget deficit.
“Once, again, this trickle-down stuff has been shown to be snake oil,” he said.
Addressing inequality is central to Democratic proposals like “Medicare for All” from Bernie Sanders, free college tuition and child care from Elizabeth Warren, universal income from Andrew Yang and baby bonds from Cory Booker. Warren and Sanders want to impose taxes on the wealthy to help pay for these programs.
Bernstein pointed to figures, published for the first time by the Federal Reserve in March, that show the top 1% of Americans have 30.9% of the country’s net worth. Compare that with the bottom 50%, who have 1.2%.
The data shows that the total net worth of US households has more than quadrupled since 1989, but the increase has mostly benefited the top 10% of households, while growth has been much slower for lower groups and nearly nonexistent for 50% of the country.
In 2018, according to the Fed, the top 10% of US households controlled 70% of all household wealth, and their growth came at the expense of households with lower incomes, whose share of total net worth decreased. The bottom half of households saw their share of the country’s wealth shrink from 4% in 1989 to 1% in 2018.
Who feels helped by Trump?
He survived, he wrote, in part because he lived in a city near a good hospital and had quality health insurance — things not all Americans have.
“Anyone who wants to be president needs to explain how he or she is going to address the stark regional inequalities,” he said. “Whether it’s jobs, opportunities, business start-ups, health care, hospitals, addiction. I want to hear concrete plans about how we’re going to address this increasing regional divide.”
And Trump’s success in 2016 came in large part because of frustration among less educated white voters in Rust Belt states angry that the economy and the country were leaving them behind.
Whether those voters — be they farmers, coal miners or autoworkers, will be buoyed by the President standing up to China or angry that Beijing’s countermeasures often target them directly could be a key element of whether Trump is reelected, regardless of the stock market and the data economists pore over.