These could get a Democrat elected.
A recession, a war, or a pandemic will ruin the Trump argument that, sure, he is an uncouth, obnoxious, divisive bully, but America is prosperous, safe, and healthy, so re-elect him.
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| Record Dow point drop. |
Trump made the classic rookie mistake. Live by the market, die by the market. Veteran financial advisors warn rookies not to confuse a bull market for brains. Trump was incautious, so of course he took credit.
The market is up! See how good I am at being president!
At the risk of irritating anti-Trump readers, let me describe a simple truth. Trump didn't deserve much credit for the market going up, but he deserves some credit.
Trump successfully jawboned the Fed into continuing a very easy credit regimen which has the effect of inflating assets and encouraging cheaper and therefore easier borrowing. People and businesses whose assets are worth more feel richer and spend more (the "wealth effect"). Higher asset values mean collateral used for bank loans is worth more, so banks can lend more. Plus low interest rates mean people are encouraged to borrow more and can afford to do it because interest charges are lower. Plus, he cut taxes on businesses and the wealthy, and the wealthy are the "investor class" so they had more money to invest. Plus, he cut regulations on businesses so the costs of dealing with the externalities (the consequences to others) were lower, which may well hurt the people who breathe dirtier air, but in the meantime means easier going for polluters. Beyond that, he jawboned that the economy was really, truly wonderful and business, and people do respond to cheerleading.
Bottom line, it may all be a dangerous sugar high, with terrible postponed consequences, and morally unjust in the tax cuts for the wealthiest instead of the middle class, and unfair to future generations, but for now assets are up, unemployment is down, business and consumer confidence are high. The people who will pay for all this are young people who don't bother to vote and kids who haven't been born yet. Trump isn't thinking of them. He is thinking of the electoral college.
Strong economies get presidents re-elected.
At the risk of irritating anti-Trump readers, let me describe a simple truth. Trump didn't deserve much credit for the market going up, but he deserves some credit.
Trump successfully jawboned the Fed into continuing a very easy credit regimen which has the effect of inflating assets and encouraging cheaper and therefore easier borrowing. People and businesses whose assets are worth more feel richer and spend more (the "wealth effect"). Higher asset values mean collateral used for bank loans is worth more, so banks can lend more. Plus low interest rates mean people are encouraged to borrow more and can afford to do it because interest charges are lower. Plus, he cut taxes on businesses and the wealthy, and the wealthy are the "investor class" so they had more money to invest. Plus, he cut regulations on businesses so the costs of dealing with the externalities (the consequences to others) were lower, which may well hurt the people who breathe dirtier air, but in the meantime means easier going for polluters. Beyond that, he jawboned that the economy was really, truly wonderful and business, and people do respond to cheerleading.
Bottom line, it may all be a dangerous sugar high, with terrible postponed consequences, and morally unjust in the tax cuts for the wealthiest instead of the middle class, and unfair to future generations, but for now assets are up, unemployment is down, business and consumer confidence are high. The people who will pay for all this are young people who don't bother to vote and kids who haven't been born yet. Trump isn't thinking of them. He is thinking of the electoral college.
Strong economies get presidents re-elected.
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| The Hill: Amateurs in charge |
There were warning signs of trouble. The inverted yield curve signal--short term rates higher than longer term rates--was once again flashing "Alarm! Recession ahead." Investors ignored the signal.
Then the coronavirus, with its disruption to supply chains and its potential to disrupt the world economy, plus panicky talk on on the news shows. Breaking News Alert: you might get the disease and die.
Then the coronavirus, with its disruption to supply chains and its potential to disrupt the world economy, plus panicky talk on on the news shows. Breaking News Alert: you might get the disease and die.
The stock market just fell 10%, with the largest point drop in history yesterday. CNBC is running headlines warning that things will get worse for investors. Trump had a weird press conference in which he rambled and said everything was under control, and then he introduced CDC experts who said everything was not under control.
For the past two weeks Trump did exactly what the Chinese leaders did: suppress the news, assure everyone things were under control, and condemn the people who accurately described the problem, calling them "troublemakers." It blew up on the Chinese government. The "troublemaker" died of the virus.
Rush Limbaugh and the conservative press say this is all an overwrought media hoax, that the virus is just the typical annual winter flu. That was the Trump line.
Trump made the same mistake twice. He associated himself with a future outcome not under his control, a good stock market and a happy outcome on the virus. That sets him up for potential failure.
Warning to Democrats: Don't make the same mistake. Don't climb on a bandwagon of doom, and don't appear like you welcome the bad news. Bad news is bad news. People die from the flu. People lose their jobs in recessions.
Moreover, Trump may well just be lucky enough that the stock market reverses and the coronavirus is either contained or turns out to be no big deal.
Regarding the virus, simply attach blame to Trump. Trump in fact bears some responsibility here for the sluggish response to the COVID-19 virus. Trump had not been concerned about pandemics and his budget proposal was for a 13% cut in emerging and zoonotic infectious diseases, and he had already cut the disease oversight staff at the National Security Council and the Department of Homeland Security.
There is no upside for Trump, unless Democrats overplay their hand and predict catastrophe. Then anything less than catastrophe is a victory for Trump.
There is no need for Democrats to predict doom to make Trump look bad. The media is doing it for them. Let it play out.
For the past two weeks Trump did exactly what the Chinese leaders did: suppress the news, assure everyone things were under control, and condemn the people who accurately described the problem, calling them "troublemakers." It blew up on the Chinese government. The "troublemaker" died of the virus.
Rush Limbaugh and the conservative press say this is all an overwrought media hoax, that the virus is just the typical annual winter flu. That was the Trump line.
Trump made the same mistake twice. He associated himself with a future outcome not under his control, a good stock market and a happy outcome on the virus. That sets him up for potential failure.
Warning to Democrats: Don't make the same mistake. Don't climb on a bandwagon of doom, and don't appear like you welcome the bad news. Bad news is bad news. People die from the flu. People lose their jobs in recessions.
Moreover, Trump may well just be lucky enough that the stock market reverses and the coronavirus is either contained or turns out to be no big deal.
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| Friday morning update. The hits keep coming. |
There is no upside for Trump, unless Democrats overplay their hand and predict catastrophe. Then anything less than catastrophe is a victory for Trump.
There is no need for Democrats to predict doom to make Trump look bad. The media is doing it for them. Let it play out.
3 comments:
The Trumpvirus Gambit Will Benefit Trump, not Democrats
Trying to blame politicians for a worldwide pandemic is absurd, and Democrats who are now on the "Trumpvirus" bandwagon will themselves become targets. What did Sanders, Klobachar and Warren do to respond to the virus? What have the Governors of New York, California and Oregon done? The CDC and World Health Organization are adamant that trying to lock down national borders and stop inbound flights is not just ineffective but is perceived as racist and xenophobic. No credible Cemocrat is going to campaign that Trump should have shut out the world.
The politicization of the pandemic will backfire on Democrats as voters increasingly accept that there is nothing we can do to prevent the epidemic. Trump-- just like Democratic governors-- will be judged one and all on their effectiveness in providing medical care to the infected. So will big blue city mayors. Should Kate Brown and Gavin Newsome close the public schools as Japan just has, and if they don't and kids die will those Democrats be blamed for not having closed the schools? If they close the schools and the pandemic is not as catastrophic as feared, what price will Brown and Newsome pay by voters whose lives were turned upside down by closed schools and childcare nightmares.
Other than the Democratic candidates (whose voices are by definition the least credible of government officials), we will see few if any Democratic governors or mayors attempt any serious Trumpvirus political gambit. They know that will come back to bite them, and their safest position is that the virus is an act of God that no politician can be expected to control.
Corona virus politics is a dangerous game and politicians with survival instinct are going to steer clear of it.
An overpriced market meets a tipping point.
Who'da thought?
The Obama administration's "steady" monetary policy and careful economic messaging was abandoned in 2017 for an "all in" approach that combined easy money (margin buying) and tax cuts with incessant cheerleading and bragging about "my incredible economy". It was a gamble that might have paid off, so one is left with the question of whether or not it was a considered political calculation or...what?
In any event Wall Street, no doubt eager to bust out of a calm but boring market, jumped on board what was sure to be a roller coaster on the edge of a cliff. For better or worse stock brokers are salesmen, and no salesman ever tells a customer not to buy so what we are seeing now could be more a case of buyer's remorse than bat flu.
I agree that Trump can distance himself and assign blame elsewhere, so I am left wondering if a bear market will have a political impact. Trump supporters may not feel the pain directly and in fact may celebrate the comeuppance of their well-off neighbors, unless and until layoffs begin, but even then I doubt they will make the connection.
Interesting also is Pence being put in charge of the flu response. It could be a set-up, or he could come out of this looking, dare I say..presidential?
Peter, spot on re. the "sugar high." As you said, "Trump successfully jawboned the Fed into continuing a very easy credit regimen which has the effect of inflating assets and encouraging cheaper and therefore easier borrowing." IMHO a crash was coming anyway, baked into the cake after 2008; Trump just accelerated it with more easy money. Wise Democrats will steer clear of the virus.
Andy Seles
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