Over the last year and a half, there have been three things one could say about Donald Trump’s standing with the public, depending on which aspect you wished to emphasize:
(1) Trump is not very popular.
(2) Given his scandals and wildly unpresidential conduct in office, Trump is surprisingly popular.
(3) Given the public’s view of the economy, which is highly positive, Trump is extremely unpopular.
All three of these points are neatly brought together in a chart compiled by political scientist Patrick Egan, comparing presidential approval rating to consumer sentiment. The historically large divergence between the two illustrates just how badly Trump is underperforming given the buoyant assessment of the economy
But beneath all these points, there is another question that has not yet been answered: Why is the public so positive about the economy in the first place? The preferred Republican answer is that Trump has turned the economy around with his brilliant combination of deal-making, tax-cutting, and freeing Job Creators of laborious Obama-era regulation. There is no evidence whatsoever for this widespread claim. Ramesh Ponnuru and Michael Strain, two conservative writers, examine a wide array of economic data, and find the economy is performing no better now than it did in Obama’s second term. Overall economic growth is the same, and job growth is slightly slower. The Trump tax cut is supposed to spur more investment, which would increase incomes over the long run, but there is no sign of any increased investment so far. Indeed, by the measure people are most likely to feel directly, real wage growth, things have gotten distinctly worse over the last year. David Leonhardt shows that wages have (just barely) failed to keep pace with inflation over the last 12 months.
And yet, paradoxically, people think the economy has gotten better. Polls of public opinion show that perceptions have not changed because of any change in conditions. Instead, public opinion flipped immediately following Trump’s election. You might think public opinion is simply behaving in a partisan fashion, but that is only half true. In reality, Republican opinion has been heavily partisan, while Democratic opinion has not.
Like a Volkswagen Beetle mounted with a V-8 engine, the American economy has a lot more power than it can handle right now, and it’s making a lot of noise. So is President Trump, who takes singular credit for a robust second-quarter rise in the gross domestic product of 4.1 percent, something that hasn’t happened under any other president since … Barack Obama. While Mr. Trump praised himself effusively — he’s good at that, isn’t he? — the stock market seemed unimpressed. Friday’s announcement that 157,000 new jobs were added in July, a modest gain or perhaps a seasonal glitch, elicited an even more subdued reaction. That’s because if you look down the line, there are few clear reasons to be so enthusiastic.
“Over all, we see this report as supportive of our views that the economy is currently firing on all cylinders,” wrote Bricklin Dwyer, a senior economist with BNP Paribas, after the new G.D.P. numbers were announced. But there was a caveat: Mr. Dwyer said that “growth is likely peaking. Indeed, in our forecasts, [the second quarter] marks a high-water mark for growth.” For one thing, the initial jolt of the Republicans’ $1.5 trillion tax cuts, mostly for corporations and the wealthy, is wearing off. Corporations have bought back $437 billion of their own shares, which leaves them that much less to invest in new production, or wages. In fact, spending on business equipment slowed. Then there’s the flattening yield curve, which the St. Louis Federal Reserve’s president, James Bullard, warns could invert late this year if current conditions persist. That means short-term rates, such as those for two-year Treasury bonds, run higher than long-term rates, like the 10-year bond, a sign of pessimism that is a well-known red flag. Recessions tend to follow an inverted yield curve like a stray cat looking for a meal.
Purchases of goods drove about a third of that second-quarter economic increase, according to the St. Louis Fed. Consumers were in a spending mood this spring, an attitude that won’t necessarily continue. In the prior quarter, they kept their hands in their pockets. At some point, they were spending the banks’ money, though: Credit cards and other revolving loans had increased to an annual rate of 5.1% in June. A recent Reuters analysis found that the bottom 60 percent of income-earners have been fueling their spending, and thus the economy’s, by using their savings or credit cards. They almost have to, because wage growth is expanding at a disappointing 2.7 percent annual clip — despite evidence that employers are finally throwing a few more pennies at workers.
The prospects for wage growth ought to be good, given the tighter labor supply. But American companies have made an art form of not sharing the wealth with workers. Productivity growth has vastly outstripped real wage growth since the 1970s, according to Deutsche Bank research. Yet employees are working harder and smarter and not getting commensurately remunerated, while corporations have a record share of the national wealth. That is to say, workers have been getting ripped off. Inflation measured by the Consumer Price Index, which is up 2.9 percent over the past year, is absorbing some of those improving wages. Consumers are also running into higher gasoline prices — up more than 20 percent in the past year — thanks to rising oil prices, with the prospect of volatility in the Middle East not helping. Energy is excluded from the basic C.P.I.
All of this seems like a pretty poor return on investment for Mr. Trump’s $1.5 trillion tax cuts, at least for most working-class Americans, who benefited least from the tax cuts. None of these issues by themselves will put the brakes on an economy that is powering along with a 3.9 percent unemployment rate. But the friction is building. And just like any powerful car engine, economic expansions — and this one is in its 10th year — eventually run out of gas. Expect Mr. Trump, who never runs out of gas, to blame the Democrats for that. Mr. President, while you like to take credit for positive economic trends that are well beyond your control, you will own the downside, too.
Fake Economy
Inside the link productivity-is-slowly-
In the current U.S. economy, the right thing is happening for the wrong reason. The wrong reasons are the trillion-dollar budget deficits that are juicing the macroeconomy at a time when it’s already closing in on full capacity. I’m less worried about overheating, though that’s a risk, than I am about the loss of needed revenue and the lack of perceived fiscal space when we hit the next downturn.
Remnants of Great Recession
The financial crisis and the Great Recession were absolutely devastating for the wealth of middle- and lower-income Americans. A report from the Federal Reserve Bank of Minneapolis shows just how big of a hit they took. The average household in the top 10 percent of today’s wealth distribution is almost three times as rich as the average household in the top 10 percent of 1971’s distribution. Meanwhile, the average household in the bottom half is slightly poorer. This is a striking demonstration of rising inequality, but it also tells a story about the last few decades of American economic life. Beginning in the late 1990s, the upper half of the wealth distribution started to pull away from the lower half, but on the eve of the housing crash, all three categories had seen a steady gain in wealth since 1950. A person living in July 2006, looking back on the past half-century, could feel reasonably comfortable that most Americans were still living the dream of steadily rising wealth.
But the housing price decline that began in mid-2006, and the chain of disasters that followed, totally wiped out that trend. Eight years later, the picture looks like one of divergence rather than broadly shared gains. Why? One reason is that the middle- and lower-income Americans tend to hold much of their wealth in houses, while the upper class tends to own a lot of stocks. The main difference between the two groups is debt — the bottom 50 percent relatively have a lot more of it, which cancels out their housing assets and leaves them with very little net worth. There are other options for restoring lost wealth, and these should be discussed. But if something isn’t done, large numbers of Americans are likely to look back on a half-century of wealth destruction and stagnation with an increasingly jaundiced eye.
Movement conservatives, including those who were initially leery of a Donald Trump presidency, are finding much to celebrate these days. The president is advancing their causes on many fronts: cutting taxes, remaking the judiciary, rolling back regulations. Many on the right are even inclined to give Trump the benefit of the doubt on his protectionist trade policies, accepting his assurances that a strong-arm strategy is needed to bring down tariffs and other barriers in the long run. But there is a shadow over all this, and it is growing too big and dark to be rationalized away. That nagging issue is the federal deficit, now projected to reach $1 trillion by 2020 — a level unprecedented during good economic times. When growth is healthy and unemployment is low, the government has almost always narrowed the gap between revenue and spending, even running a surplus between 1998 and 2001 during the dot-com boom.
The Trump administration is heading in the opposite direction. GOP tax cuts have reduced the amount the government collects from corporations to a historic low, even as the president pushes ahead with more spending, including $12 billion in emergency aid to farmers hurt by his tariffs. Trump has taken entitlement reform off the table, and he is also calling for a second round of tax reductions, possibly coming to a vote before November’s midterm elections. Remember when Republicans were presumed to be the party that cared about fiscal responsibility? Fewer and fewer of them seem to anymore, though there are still occasional voices sounding the alarm inside the ranks of what has become the whatever-Trump-says party. Tribalism has indeed come to replace conviction for many Republicans. Trump’s approval within the party has attained levels unmatched by any president except George W. Bush in the wake of 9/11, despite policies that have put the country on a course toward deeper and deeper debt.
“It is somewhat disheartening to spend eight years under [President] Barack Obama railing about debt and deficits and then see Republicans spend even more in this first year under Donald Trump,” Erickson said. History suggests there will be consequences, both economically and electorally. Ronald Reagan also left a trail of red ink. His successor, George H.W. Bush, had to agree to a budget deal that raised taxes and destroyed his hopes for a second term. That laid the predicate for a revival of the Democrats, with Bill Clinton leading to the restoration of fiscal sanity. Nearly two decades later, backlash to spending and the growth of government helped ignite the tea party movement, which turned its fury on the GOP establishment as well as Democrats. Today’s out-of-whack budgets may well define what kind of future conservatism will have, once Trump has left the scene. As some Republicans are starting to figure out, they would do well to start worrying about that now.
The greatest threat to the freedom of Americans and the pursuit of happiness is not illegal immigration. While I strongly believe that we need to reform our immigration system, the greatest threat to the nation is our excessive public spending habits. A recent Treasury Department report predicted that the federal government would need to borrow $769 billion in the second half of this year, making it the highest the government has taken on debt since the financial crisis a decade ago in 2008. Thanks to the widening budget gap, a result of the $1.5 trillion in tax cuts along with a $300 billion spending increase, the Treasury Department needs to boost the sale of bills, notes, and bonds. President Trump is counting on the success of the economy, which expanded at 4.1. percent in the last quarter, the strongest growth since the third quarter of 2014 to boost government revenue and shrink the budget deficit.
However, it is unlikely that the economy will meet the White House goal of sustained 3 percent growth. With the expectation of another recession based on the yield curve, the bond market is signaling potential trouble ahead. As the Treasury Department issues more government bonds and corporate debt increases, this could ultimately become the perfect storm when you add in the ongoing trade wars. Most Americans have to budget their spending habits monthly, weekly, or in some cases, even daily to make sure they have enough to get by. When things become tight, people are forced to make cuts anywhere and everywhere they can just to get by. However, the government appears entirely incapable of or even remotely interested in adopting this true and tried practice. Instead, Washington spends excessively and winds up relying on China, our biggest creditor, to keep us afloat. While for the foreseeable future our two destinies are linked, Chinese expansion into Africa, South America and the Middle East may eventually change that.
Instead of making cuts and balancing the budget, spending has increased. The ratio of debt to GDP averaged 61.7 percent from 1940 until 2017, when the government recorded debt equivalent to 105.4 percent of the GDP. In 1946, the ratio of debt to GDP reached 118.9 percent, yet the government was still able to reduce spending, pay off debt, and run a budget surplus. Unfortunately, that is no longer realistic due to the large deficit gap, overgrown bond market, and increasing corporate debt. The strength of the U.S. economy today shows in the data, but the continued increase of the national debt is not sustainable in the long run. The “perpetual debt” of the government, as Thomas Jefferson called it, has become a dire crisis that Republicans, who are supposed to be stewards of fiscal responsibility, must address more seriously. In a letter to George Washington in 1792, Jefferson wrote, “No man is more ardently intent to see the public debt soon and sacredly paid off than I am.” He stressed that public debt was not only demoralizing to the nation, but argued that each generation should be limited to accumulating only the debt that it could pay off. That theory never held and, as a result, the United States in many ways has become a debtor nation.
Republicans have an obligation, both morally and ethically to our future generations, to rein in government spending, while millions of households across America make cuts where necessary. It is unfair for everyday people to struggle by working hard and pulling themselves up by their bootstraps only to have those very boots removed because Republicans fail to live up to the core party principle of fiscal responsibility. Individuals cannot be free or maintain any sense of autonomy if the country is mired in debt. The middle class will never be what it once was if the government has unpaid financial obligations. If the politicians in Washington really care about the everyday man and woman in America, they need to do what is best for those on Main Street.
The amount of debt the federal government owes could be double the size of the entire U.S. economy in the next 30 years, according to a new report from the Congressional Budget Office (CBO). Debt would surpass an unprecedented 200 percent of gross domestic product (GDP) by 2048 under any of three scenarios explored by the CBO in its report released Wednesday, while the nation’s economy would be smaller than under current projections. The report builds on the CBO’s regular budget outlook published in June, which projected that the national debt would rise from its current rate of 78 percent of GDP to 118 percent in 2038 and 152 percent by 2048 — well above the historical peak of nearly 119 percent after World War II. That budget outlook was based on the assumption that some unpopular provisions in the GOP tax law passed in December would remain in place, alongside several other unpopular measures.
CBO said the debt levels could potentially be even higher, but the unprecedented amount of debt could affect the economy in ways that are difficult to model. “Debt at these levels would have a severe effect on the economy, restraining growth over the long term,” said Michael A. Peterson, who heads the budget-watching Peter G. Peterson Foundation. “In fact, CBO calculates that 20 years from now, real GNP per person would be lower by $1,000 per person if current policies were extended. So the costs may not be apparent now, but American families will feel the impact if we don’t get our fiscal house in order,” he added.
GOP legislators may sense that Trump’s support among voters in his own party may be weaker than it seems and softer than media coverage often suggests.We looked at sentiment among ordinary Republican voters. While hardcore Republicans are vociferous defenders of the president, a larger number of Republicans who are less attached to their party are much more tepid in their support. And that may be a problem for some Republican congressional candidates, come November’s midterms.
During the first two weeks of July, we fielded a nationally representative survey of 1,379 likely voters. Conducted online and on the phone by the National Opinion Research Center, we included only respondents who reported a high likelihood of voting in this year’s midterms. The survey was funded by Cornell’s Center for the Study of Inequality. In our survey, Trump’s approval rating was 85 percent among Republicans. That’s consistent with other polls. On the surface, the president’s support among his fellow Republicans is overwhelming. But the key to our analysis was to divide Republicans into three groups: those who say they identify strongly with the Republican Party; those who identify as Republicans but not strongly; and those who call themselves independents but say they lean toward the Republican Party. These distinctions, often obscured in media coverage, are important because research shows that the strength of a voter’s partisan identity has an important effect on their political attitudes.
Among strong Republicans, Trump’s overall approval rating is 93 percent, with 78 percent “strongly” approving of the president. The problem for Trump, however, is that these voters make up less than half of the Republican electorate — and 18 percent of likely voters. Among the larger number of Republicans who identify less strongly with their party, Trump is much less popular. For example, Trump’s overall approval rating among not-so-strong Republicans is 72 percent, with 38 percent saying they strongly approve. Thirty-four percent say they only “somewhat” approve of Trump. Those numbers are similar among independent-leaning Republicans.
All of this suggests that portraying Trump’s support among Republican voters as unflinching is missing a major piece of the picture. The ongoing controversies about Trump appear to affect a large portion of Republican voters. If Republican politicians fail to sufficiently distance themselves from even Trump’s most controversial actions, the GOP might see reduced turnout on Election Day. The other concern for Republican congressional candidates is that non-Republicans don’t like Trump. “Pure independents” — voters who say they don’t lean toward the Republicans or Democrats — are twice as likely to rate Trump with strong disapproval as they are with strong approval. Independents also ranked Trump second-to-last, compared with other GOP leaders, above only Palin.
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