Late last month, aides circulated a New York Times op-ed by Steven Rattner, the former Obama administration official who led efforts to shore up the auto industry, saying the economy offered Trump “a meaningful tailwind” in the 2020 election. Rattner pointed to models created by a Yale University professor and Trend Macrolytics LLC, a macroeconomic forecasting and research consulting firm that predicted the president’s re-election based on the state of the economy. Trump later tweeted an acknowledgment of the piece.
Compounding the problem for Trump is that a slowing economy would not only hurt his standing among voters, but make it harder to garner foreign policy victories by imposing or threatening tariffs.
The president’s levies have already wiped out all but $100 of the average American household’s savings from the GOP’s tax cuts, passed in 2017. And that’s just beginning of the mounting financial hit to families. If the president makes good on his threats to impose tariffs on virtually all imports from China and Mexico, those middle-earning households could pay nearly $4,000 more.
Vice President Mike Pence defended those costs on Thursday, arguing that a “booming” economy could afford the costs of tariffs on Mexican goods the administration hopes will slow migration flows.
“We’ll continue to stand for a growing economy, but ending the crisis on our southern border is the number-one priority for this president and this administration,” Pence said.
Impeachment Protection
Trump has suggested the economy’s performance should protect him from congressional Democrats considering impeachment related to Special Counsel Robert Mueller’s Russia investigation.
“You can’t impeach a president for creating the best economy in our country’s history,” Trump tweeted last month.
But those rationales could disappear if the economy continues to slow. Trump could face tougher attacks on policies he pursued, like the massive tax cut that mostly benefited corporations, if the perception of shared economic success disappears. A Congressional Research Service report released late last month showed the tax cuts had only a minimal impact on overall economic growth, while substantially increasing budget deficits.
Still, Trump has plenty of time to resolve the trade disputes with China and Mexico ahead of the campaign year. And there are no signs yet that the economy has tipped into recession, despite signs of danger ahead from one of Wall Street’s favorite indicators -- an inverted curve in yields on U.S. Treasury debt. Indeed, the economic expansion is poised in June to turn 10 years old, matching the longest on record.
Kevin Hassett, the departing chairman of Trump’s Council of Economic Advisers, said on CNBC that the jobs report was disappointing but wage gains mean the economic outlook is still solid. Flooding in the central U.S. may have reduced the May payroll number by 40,000 jobs, Hassett said on Bloomberg Television.