You might think that’s crazy. And you would have some grounds for that view. Trump trumpets the good things about the economy - unemployment down, tax cuts in every wallet, etc. But there are powerful indicators that voters are still concerned about what is not looking up for them. Ask common folk “what’s in your wallet” and they express worries about flat wages, increasing health care costs, and higher cost of living. The short of it is that when you conflate those issues with Trump policies (e.g., toward big corporate tax breaks), then Trump’s ratings, and those of the GOP generally, tank. That leaves a huge opportunity for Democrats. In 2018 the Republicans cannot survive the scrutiny of their own economic failures.
Trump brags and bullshits about the growth in GDP. But all that fluff masks what is really happening in our economy. John Cassidy (The New Yorker) reveals The Hidden Danger for Donald Trump in the Economy’s Growth Spurt.
Going into the midterm elections, a higher rate of growth is obviously a positive thing for the political party in power, although history suggests that it won’t necessarily be enough to preserve the Republican majorities in the House and Senate. Consider what happened in 2014. Despite annualized G.D.P. growth of 5.1 per cent in the second quarter, Republicans took control of the Senate from Democrats and enlarged their majority in the House. A big problem for Republicans this year is that, so far, the pickup in G.D.P. growth hasn’t led to a rise in wages. When you take into account price inflation, hourly and weekly earnings are basically unchanged from this time last year. The biggest beneficiaries of Trump’s and the G.O.P.’s policies have been owners of capital—investors and senior corporate executives who have used the savings from the tax bill to buy back more of their companies’ stocks.
… Outside of a few redoubts of supply-side economics, such as the White House, the consensus among economists is that the effects of the stimulus will be strictly temporary, and that, once it fades, over-all economic growth will slow sharply. In the latest quarterly survey by the National Association for Business Economics, two-thirds of the economists surveyed saw the next recession starting by the end of 2020.
Such pessimism seems warranted given Trump’s policies. In The Nation, Nomi Prins writes about how These 5 Trump Policies Are Leading Us Toward Economic Chaos. The question is not if but when.
According to the Merriam-Webster dictionary, entropy is “a process of degradation or running down or a trend to disorder.” With that in mind, perhaps the best way to predict President Trump’s next action is just to focus on the path of greatest entropy and take it from there.
Let me do just that, while exploring five key economic sallies of the Trump White House since he took office and the bleakness and chaos that may lie ahead as the damage to the economy and our financial future comes into greater focus.
Below are selections from each policy discussed by Prins.
(1) CONTINUOUS BANKING DEREGULATION
… Kathy Kraninger, a former Homeland Security official tapped by Trump to run the entity [Consumer Financial Protection Bureau] , has no experience in banking or consumer protection. His selection follows perfectly in the path of current interim head Mick Mulvaney (also the head of the Office of Management and Budget). All you need to know about him is that he once derided the organization as a “sick, sad” joke. As its director, he’s tried to choke the life out of it by defunding it. [Scriber: Think X/antiX.]
… still-evolving deregulatory actions reflect the way Trump’s anti-establishment election campaign has turned into a full-scale program aimed at increasing the wealth and power of the financial elites, while decreasing their responsibility to us. Don’t expect a financial future along such lines to look pretty. Think entropy.
(2) TENSIONS RISE IN THE AUTO WARS
… the Center for Automotive Research has reported that a 25 percent tariff on autos and auto parts (something the president has threatened but not yet followed through upon against the European Union, Canada, and Mexico) could reduce the number of domestic vehicle sales by up to two million units and might wipe out more than 714,000 jobs here. Declining demand for cars, whose prices could rise between $455 and $6,875, depending on the type of tariff, in the face of a Trump vehicle tax, would hurt American and foreign manufacturers operating in the United States who employ significant numbers of American workers.
(3) THE POPULIST TYRANNY OF THE TRUMP TAX CUTS
President Trump has been particularly happy about his marquee corporate tax “reform” bill, assuring his base that it will provide jobs and growth to American workers, while putting lots of money in their pockets. What it’s actually done, however, is cut the corporate tax rate from 35 percent to 21 percent, providing corporations with tons of extra cash. Their predictable reaction has not been to create jobs and raise wages, but to divert that bonanza to their own coffers via share buybacks in which they purchase their own stock. That provides shareholders with bigger, more valuable pieces of a company, while boosting earnings and CEO bonuses.
… For the average American worker … wages have not increased. Indeed, between the first and second quarters of 2018 real wages dropped by 1.8 percent after the tax cuts were made into law. Trump hasn’t touted that or what it implies about our entropic future.
(4) TRADE WARS, CURRENCY WARS, AND THE CONFLICTS TO COME
Just this morning China announced more retaliatory tariffs on US goods. Where this one stops, no one knows.
… China has launched more than 100 new business projects in Brazil alone, usurping what was once a US market, investing a record $54 billion in that country. It is also preparing to increase its commitments not just to Brazil, but to Russia, India, China, and South Africa (known collectively as the BRICS countries), investing $14.7 billion in South Africa ahead of an upcoming BRICS summit there. In other words, Donald Trump is lending a disruptively useful hand to the creation of an economic world in which the United States will no longer be as central an entity.
As, I suspect, he promised his BFF Vladimir Putin.
(5) FIGHTING THE FED
President Trump’s belligerence has centered around his belief that the wealthiest, most powerful nation on the planet has been victimized by the rest of the world. Now, that feeling has been extended to the Federal Reserve where he recently lashed out against its chairman (and his own appointee) Jerome Powell.
WHEN ENTROPY WINS, THE WORLD LOSES
What we are witnessing is the start of the entropy wars, which will, in turn, hasten the unwinding of the American global experiment. Each arbitrary bit of presidential pique, each tweet and insult, is a predecessor to yet more possible economic upheavals and displacements, ever messier and harder to clean up. Trump’s America could easily morph into a worldwide catch–22. The more trust is destabilized, the greater the economic distress. The weaker the economy, the more disruptable it becomes by the Great Disrupter himself. And so the Trump spiral spins onward, circling down an economic drain of his own making.
It has become an article of faith among Republicans and some pundits: If only President Trump would stop with the racism and cruelty (as with family separations), the authoritarian assaults on the press and on the Mueller probe, and the panting embraces of Vladimir Putin, Republicans could bask in the glorious “Trump economy” and stave off big losses this fall.
In this telling, if the election were about only the economy, Republicans would still face stiff headwinds but might at least weather them to the degree needed to hold the House. Friday morning, the monthly jobs report showed the unemployment rate ticking down to 3.9 percent, which would seem to support that notion.
But Democrats have reached a very different conclusion. They believe they can actually win the argument over the economy in a way that advantages them in the midterms. Indeed, they think it’s imperative they break through to the voters with an economic argument if they are going to win at all.
This reading of the midterms is laid out in a new polling memo from the Democratic super PAC Priorities USA. You should always treat partisan polls with skepticism, but this memo — which was first reported by Axios — also suggests that Democrats face a serious challenge in this regard as well: It warns that the information environment could make it harder for them to communicate that argument. The onus is on candidates to do something about this, and succeeding is anything but assured.
Here is the poll cited by Sargent:New Poll & Messaging Guidance: Russia, Immigration and Trade War Sticking to Trump. And here are some results cited by Sargent.
Priorities USA surveyed 1,000 presidential-year voters and people who recently registered to vote and found:
- Voters are evenly divided on Trump’s economic policies in general, with 41 percent viewing them favorably and 41 percent viewing them unfavorably.
However, on some of the specifics, Trump fares worse:
By 56–31, voters say they have an unfavorable reaction to what they’ve been hearing about Trump’s trade policies and his developing trade war with China and Europe.
Only 33 percent view the Trump/GOP tax law favorably, while 21 percent are neutral and 38 percent view it unfavorably.
By 47–22, voters say things are getting worse rather than better in terms of wages keeping pace with the cost of living.
64 percent say the cost of health care is getting worse.
… Democrats face two major challenges. … The first is the difficulty of puncturing their message about the economy through the din of press coverage of other matters, especially child separations and the Russia probe and Trump’s reaction to it. … a crucial ingredient [is] that their message about the economy get heard. “Unlike Russia and immigration, voters won’t hear about this as much in the press,” the memo concludes, “meaning Democrats must continue to carry the message in paid media and on the campaign trail.”
The second big challenge Democrats face is that it isn’t clear voters will necessarily base their choices on personal perceptions of the economy, rather than on general perceptions of it. A recent Post-Schar School poll found that 57 percent of voters rate the economy as good or excellent, including 58 percent in battleground districts.
Thus, the imperative for Democrats is to get voters to base their choice instead on their personal experience of the economy, as well as on specific Republican policies that would slash the safety net, particularly on health care (an area where Democrats are stronger). Of course, many Democrats are already trying to do this. As Margot Sanger-Katz reports, Democratic candidates around the country are stressing health care, crucially by asking audiences how many of them suffer from preexisting conditions, thus personalizing the issue, which is essential.
So when you see Democratic candidates trying to stress voters’ personal experience of the economy and the health-care system, and highlighting specific Trump/GOP policies on both fronts, this memo helps shed light on the thinking behind it.