Here Comes the Trump Slump

And he has only himself to blame.

 When he isn’t raving about how the deep state is conspiring against him, Donald Trump loves to boast about the economy, claiming to have achieved unprecedented things. As it happens, none of his claims are true. While both G.D.P. and employment have registered solid growth, the Trump economy simply seems to have continued a long expansion that began under Barack Obama. In fact, someone who looked only at the past 10 years of data would never guess that an election had taken place.

But now it’s starting to look as if Trump really will achieve something unique: He may well be the first president of modern times to preside over a slump that can be directly attributed to his own policies, rather than bad luck.

There has always been a deep unfairness about the relationship between economics and politics: Presidents get both credit and blame for events that usually have little to do with their actions.

  • Jimmy Carter didn’t cause the stagflation that put Ronald Reagan in the White House;
  • George H.W. Bush didn’t cause the economic weakness that elected Bill Clinton; even
  • George W. Bush bears at most tangential responsibility for the 2008 financial crisis.

More recently, themini-recession” of 2015-16, a slump in manufacturing that may have tipped the scale to Trump, was caused mainly by a plunge in energy prices rather than any of Barack Obama’s policies.

But unlike previous presidents, who were just unlucky to preside over slumps, Trump has done this to himself, largely by choosing to wage a trade war he insisted would be “good, and easy to win.”

The link between the trade war and agriculture’s woes is obvious: America’s farmers are deeply dependent on export markets, China in particular. So they’re hurting badly, despite a huge financial bailout that is already more than twice as big as the Obama administration’s auto bailout. (Part of the problem may be that the bailout money is flowing disproportionately to the biggest, richest farms.)

Shipping may also seem an obvious victim when tariffs reduce international trade, although it’s not just an international issue; domestic trucking is also in recession.

The manufacturing slump is more surprising. After all, America runs a large trade deficit in manufactured goods, so you might expect that tariffs, by forcing buyers to turn to domestic suppliers, would be good for the sector. That’s surely what Trump and his advisers thought would happen.

But that’s not how it has worked out. Instead, the trade war has clearly hurt U.S. manufacturing. Indeed, it has done considerably more damage than even Trump critics like yours truly expected.

The Trumpist trade warriors, it turns out, missed two key points. First, many U.S. manufacturers depend heavily on imported parts and other inputs; the trade war is disrupting their supply chains. Second, Trump’s trade policy isn’t just protectionist, it’s erratic, creating vast uncertainty for businesses both here and abroad. And businesses are responding to that uncertainty by putting plans for investment and job creation on hold.

So the tweeter in chief has bungled his way into a Trump slump, even if it isn’t a full-blown recession, at least so far. It’s clearly going to hurt him politically, notably because of the contrast between his big talk and not-so-great reality. Also, the pain in manufacturing seems to be falling especially hard on those swing states Trump took by tiny margins in 2016, giving him the Electoral College despite losing the popular vote.

And while many presidents have found themselves confronting politically damaging economic adversity, Trump is, as I said, unique in that he really did this to himself.

Of course, that doesn’t mean that he will accept responsibility for his mistakes. For the past few months he has been trying to portray the Federal Reserve as the root of all economic evil, even though current interest rates are well below those his own officials predicted in their triumphalist economic projections.

My guess, however, is that Fed-bashing will prove ineffective as a political strategy, not least because most Americans probably have at best a vague idea of what the Fed is and what it does.

So what will come next? Trump being Trump, it’s a good bet that he’ll soon be denouncing troubling economic data as fake news; I wouldn’t be surprised to see political pressure on the statistical agencies to report better numbers. Hey, if it can happen to the National Weather Service, why not the Bureau of Economic Analysis (which reports, by the way, to Wilbur Ross)?

And somehow or other this will turn out to be another deep-state conspiracy, probably orchestrated by George Soros.

The scary thing is that around 35 percent of Americans will probably believe whatever excuses Trump comes up with. But that won’t be enough to save him.

Trump Can’t Beat Obama on the Economy

It’s time for a reality check on Trump’s claims about jobs, wages and economic growth.

Recession fears may be seeping into the national conversation, but President Trump continues to boast about how great the American economy is — “the best in the world, by far,” Mr. Trump tweeted a few days ago.

Time for a reality check on Mr. Trump’s economic accomplishments, using two key measuring sticks: how well the economy is doing, compared with its performance under President Barack Obama’s leadership, and whether it has performed up to Mr. Trump’s promises.

The short answer is, the economy’s performance is not much different than it was under Mr. Obama and far short of what Mr. Trump pledged.

Take, for example, the all-important matter of jobs. Yes, many unemployed Americans are back on the payrolls. Yes, the unemployment rate continues to fall, as it did under Mr. Obama. But no, the pace of hiring has not been faster than it was during a similar period under Mr. Obama and indeed, has been even a bit slower.

In the first 30 months of the Trump presidency, jobs were added at an average rate of 191,000 a month. That’s certainly respectable, although it’s still less than the increase of 220,000 jobs a month during the final two and a half years of the Obama presidency.

Weaker Hiring Under Trump

Monthly job growth in thousands: Obama’s last 30 months versus Trump’s first 30 months.

Obama average: 220k

Trump average: 191k

300

220

200

191

100

0

2015

2016

2017

2018

2019

By The New York Times | Source: Bureau of Labor Statistics

Moreover, on Aug. 21, the Bureau of Labor Statistics announced that it is likely to revise downward substantially payroll gains earlier this year, which could cut about 15,000 jobs a month from Mr. Trump’s tally.

Then there are wages, the other key component of what matters financially to everyday Americans. The rate of pay raises has continued to edge up under Mr. Trump, a typical occurrence in the latter part of an economic recovery. But more important is what is left for workers after inflation takes its bite.

And on that measure, earnings for American workers rose faster under Mr. Obama.

Not to mention that Mr. Trump has utterly failed to deliver on his wage promises. As part of pushing for the 2017 tax cut, his Council of Economic Advisers projected that the legislation would raise average pay by $4,000 a worker. No material amount of that has been realized.

After Inflation, Workers Did Better Under Obama

Private worker average hourly earnings, year-over-year percent change: Obama’s last 30 months versus Trump’s first 30 months.

+4

Nominal

+3

+2

Obama average: +1.5%

Real

(adjusted

for inflation)

+1

Trump average: +0.7%

0

–1

2015

2016

2017

2018

2019

By The New York Times | Source: Bureau of Labor Statistics

Then there’s the overall economy. The sluggishness of growth since the 2008 recession has puzzled and dismayed policymakers. During his presidential campaign, Mr. Trump routinely promised to push this rate up; in seeking passage of his tax cut legislation, he said growth would accelerate to “4, 5 and maybe even 6 percent.”

That is not remotely what transpired. The tax cut produced a short “sugar high,” a momentary boost. Gross domestic product, after adjusting for inflation, rose at a 3.5 percent rate in the second quarter of 2018. But for 2018 as a whole, the 2.5 percent increase did not come close to the Trump administration’s projection of 3 percent.

All told, G.D.P. has risen at a 2.6 rate during Mr. Trump’s presidency, which, in fairness, is marginally higher than the 2.4 percent rate of improvement during the last 10 quarters of Mr. Obama’s tenure. Neither number is anything to brag about.

Now the economy is demonstrably slowing down, thanks in large part to Mr. Trump’s trade war. Interestingly, the business community appears more worried than consumers, who have continued to spend and who, in surveys, still express confidence.

Capital investment has ceased growing (and has even fallen a bit in recent months), manufacturing output peaked last December and business sentiment is softening.

As a result, forecasters have been marking down their projections; by the end of this year, J.P. Morgan expects G.D.P. to be increasing at only a 1.8 percent rate. (The White House seems to live in a parallel universe; it clings resolutely to its prediction of 3.2 percent growth this year.)

Should that slowdown occur, expect Mr. Trump to blame the Federal Reserve and the interest rate increases it instituted beginning in December 2015. But the Fed’s increases were modest; rates are still exceptionally low by historical standards, especially in the tenth year of a recovery.

Accordingly, private economists rank the trade war as playing a much larger role in the slowing economy than the Fed’s actions. (And, of course, now it has begun cutting rates.)

“The fears of a further slowing in growth and recession are entirely due to the trade war,” Mark Zandi, chief economist at Moody’s Analytics, told me. “If the president follows through on his current tariff threats, growth will continue to weaken to well below the economy’s 2 percent potential by early next year.”

Mr. Zandi is not alone. Private economists recently polled by Reuters gave a median 45 percent probability of the United States economy entering recession in the next two years.

Economists are notoriously poor at predicting downturns. But what’s not disputable is even if we duck a recession, when it comes to the economy, Mr. Trump still has not eclipsed Mr. Obama’s record and is many miles from making America great again.

Trump’s immigration policies have been a failure. Neither he nor Democrats have much of a solution to the current problem.

For the president, immigration is a proxy for many issues — national security, domestic security, cultural change, nationalism, even nostalgia. The president’s rhetoric inflames the left as much as it energizes his loyalists, which is exactly his purpose. Democrats oppose Trump’s policies and cry foul when he seeks to blame them. They also point out that Trump tried to use immigration during the closing weeks of last year’s midterm elections, only to see his party lose its majority in the House.

Immigration will continue to animate Trump’s core supporters and will likely be one of two pillars of his reelection campaign. The other is the economy, the issue he will look to as a bridge to other voters whose support he will need to win what looks to be an extremely competitive election. Here, too, the Democrats appear to be struggling to find their own voice on what should be a central part of a presidential campaign message.

.. The new Battleground Poll by the Tarrance Group and Lake Research Partners under the auspice of Georgetown University’s Institute of Politics and Public Service shows the president holding a clear advantage over Democrats in Congress on which party people trust to deal with the jobs and with the economy. Democrats need to narrow or reverse that margin.

As an insurance policy, Trump has already gone on the attack against the Democrats on the economy, playing the “socialism” card. He has seized on Democratic proposals for a Medicare-for-all health-care plan and a Green New Deal, both of which in their most expansive iterations would require a heavy dose of government intervention and regulation, warning of dire consequences to the economy.

Candidates like Sen. Bernie Sanders (I-Vt.) and Sen. Elizabeth Warren (D-Mass.) have economic messages built around populist us vs. them themes, including attacks on big corporations and wealthy individuals. Their platforms contain the broad promise to rebalance the economic scales in favor of middle- and working-class Americans, in part through a variety of new taxes on those corporations and wealthy individuals. Warren in particular has offered a fresh list of detailed policies.

Most of the Democratic presidential candidates favor new taxes on the wealthy. But at this stage, most haven’t really said how they would pay for what they propose. The Democrats are often more focused on other issues than on the centrality of the economy in the lives of voters. Another sign of a lack of consensus in the party is the inability of House Democrats to agree on the outlines of a new budget.

The president has begun to set the themes for his reelection campaign. Democrats have vowed not to make the mistakes in 2016 of focusing too much on Trump’s fitness to be president. But they can’t ignore legitimate questions about how they would govern — or how they will credibly respond to the president’s attacks on his issues of choice.