The Numbers Are In: Trump Has Been Bad For The Economy-- Even Before His Stock Market Collapse-- And There Will Be Electoral Consequences

Trump's economy is coming apart-- and it's not just the coronavirus' impact on Wall Street. Newsweek reported that since Señor Trumpanzee took office, income growth has slowed significantly compared to the growth rate under Obama. Jessica Good heart wrote that "All but two states saw a decline in growth of real median household income under Trump-- including Pennsylvania, Wisconsin, Michigan, and Florida, four states widely regarded as the key electoral battlegrounds that will likely determine the 2020 presidential election. Middle-class incomes grew at a rate of 2.7 percent from 2016 through 2018, compared to a 5.8 percent growth rate from 2014 through 2016 when accounting for inflation." The states that had it worst-- a decline in real median household income-- were Alaska, West Virginia, South Dakota, and Wyoming, although New Mexico and Connecticut were also hurt badly from Trump's economic policies.

Presidents often claim too much credit and take too much blame for the country's economic performance, economists agree. Indeed, David Cooper, a senior analyst with EPI, who led the analysis of Census data, says that Obama benefited from a prolonged low rate of inflation during the last two years of his presidency. A low inflation rate makes it easier for households to stretch a dollar to cover basic necessities.

But, economists also say Trump has squandered opportunities to support greater gains for middle-class families, and, in some cases, he has backed policies that have worked counter to their interests.

"An infrastructure bill would clearly have [had] a marked impact, especially on middle-level jobs," says Mark Muro, a senior fellow at the Brookings Institute's Metropolitan Policy Project. "Manufacturing is going in the wrong direction. I think there are all kinds of policy opportunities that have not been exploited."

Muro sees some warning signs for 2020, such as the manufacturing recession and uncertainty over trade due to the lingering effects of the trade war and now the coronavirus, which has sickened tens of thousands of people in China and shuttered factories. Factory production in the U.S. shrank by 1.3 percent in the past year, according to the Washington Post.

EPI's Lee argues that Trump has taken steps that have hurt the middle class, including the 2017 Tax Cuts and Jobs Act and the overturning of regulations like overtime protection that shore up workers' paychecks. "The current administration's focus on cutting taxes for the wealthy, expanding tax incentives for outsourcing, and undercutting workers' rights has left ordinary working households in most states barely gaining ground," notes Lee.

But we ain't seen nothing yet. Sane people expect the coronavirus disaster to make the economy far worse. One of those sane people, Matt Stoller, wrote for Wired this week that Covid-19 Will Mark the End of Affluence Politics. For example: "we will, in all likelihood, be locking down travel in some areas of the U.S. for several weeks, as they did in China. People may be advised against gathering in large groups. It's not clear what any of this will mean for campaigning or primary voting, whether most of us will vote by mail or have our votes delayed. Moreover, the coronavirus is going to introduce economic conditions with which few people in modern America are familiar: the prospect of shortages. After 25 years of offshoring and consolidation, we now rely on overseas production for just about everything. Now in the wake of the coronavirus, China has shut down much of its production; South Korea and Italy will shut down as well. Once the final imports from these countries have worked their way through the supply chains and hit our shores, it could be a while before we get more. This coronavirus will reveal, in other words, a crisis of production-- and one that’s coming just in time for a presidential election."

We've been through something like this once before. My book Goliath describes the 1932 campaign for president, one that was carried out at the depths of the Great Depression and during an era when our productive capacity was shut down. Though the crisis at that time was caused by a banking collapse, not a pandemic, the political backdrop was analogous. Eighty-eight years ago, “old order” politicians, as they were known, proved unwilling-- even in the face of crisis-- to have the government apply its power toward the broader public benefit. Their recalcitrance prefigured, in certain ways, the reflexively libertarian thinking of today.





A toxic ideology invited disaster in 1932, as policymakers did little in response to the collapse of thousands of banks and businesses. At the depth of that depression, cotton hit its lowest price in 200 years and steel production fell to 15 percent of capacity. The situation became so desperate that in just one city, Toledo, Ohio, 60,000 of the 300,000 residents stood in bread lines every day. Children were competing with rats for food. And thousands were dying of dysentery. The politics too turned desperate, with one labor leader telling Congress that "if the Congress of the United States and this administration do not do something to meet this situation adequately, next winter it will not be a cry to save the hungry, but it will be a cry to save the government.”

And yet, the old order had no answers. Congress held hearings, but businessmen, academics, and bankers proffered only belt-tightening. Within the Republican establishment, President Herbert Hoover worked 18-hour days, exhorting confidence while refusing to take even basic steps such as having the government guarantee bank deposits. Instead, his administration’s army attacked hungry protesters in Washington, DC, a move that prompted an angry Republican congressman, Fiorello La Guardia of New York, to remind the president: “Soup is cheaper than tear gas bombs.”

Meanwhile on the Democratic side, conservatives and progressives in the party were locked in a bitter battle for the nomination. Many Democrats agreed with Hoover. Maryland governor and presidential candidate Albert Ritchie, for instance, argued that we should rely “less on politics, less on laws, less on government.” Another candidate, Speaker of the House John Nance Garner, claimed the greatest threat was the “tendency toward socialism and communism” and pledged a massive cut in government spending, as well as a sales tax increase. Others turned to extreme racism and xenophobia. Only Franklin Delano Roosevelt, who went on to win a contested convention, campaigned on aggressive government involvement in the economy—or as he put it, a “workable program of reconstruction,” which later became the New Deal.

That era’s political desperation is alien to us for a few reasons. First off, we haven’t faced shortages of such magnitude for a very long time. More importantly, we have for decades lived under a political framework known as affluence, a term popularized by economist John Kenneth Galbraith in the 1950s. As an affluent society, America automatically produces a surfeit of jobs and wealth, and the problem is solely one of distributing the bounty.

Under the siren song of affluence, we began offshoring critical production capacity in the 1960s for geopolitical reasons. In 1971, economist Nicholas Kaldor noted that American financial policies were turning a "a nation of creative producers into a community of rentiers increasingly living on others, seeking gratification in ever more useless consumption, with all the debilitating effects of the bread and circuses of imperial Rome." Still, Bill Clinton and George Bush accelerated this trend throughout the 1990s and 2000s.

Affluence politics is not the politics of being wealthy, though, but rather the politics of not paying attention to what creates wealth in the first place. That is to say, it’s the politics of ignoring our ability to make and distribute the things people need. With the banking collapse in 2008, the election of Trump in 2016 and his mourning of empty factories, and now with Bernie Sanders dominating the early primaries, that era may at last be passing. A pandemic disease outbreak would only hasten this progression and force us back into the politics of production.

With potential shortages of goods, and restrictions on people’s movement, both parties are heading into unknown territory. It is likely Democrats will use this opportunity to further their case for Medicare for All. Pandemic surveillance and medical bureaucracies focused on billing do not mix well-- stories about astronomical out-of-pocket costs for Covid-19 testing are already circulating. Republicans are likely to take a more xenophobic approach, emphasizing restrictions on foreigners and infected Americans. When it comes to managing shortages, however, both parties are split, just as they were in 1932, between their Wall Street factions that assume affluence and the less mature populist factions that seek assertive public power. The Democratic Party primaries certainly echo those of the Great Depression, with candidates from Bernie Sanders to Amy Klobuchar trying to wrap themselves in FDR’s mantle.

Regardless, the end of affluence politics means focusing on whether medicine is on shelves, not bitter disputes over bloated and wasteful hospital and insurance billing departments. It means caring about bureaucratic competence in government, and accuracy in media, not because these are nice things to have but because they are necessary to avoid immense widespread suffering. It means understanding that pharmaceutical mergers that benefit shareholders while laying off scientists are destructive, not just because they are unfair, but because they make us less resilient to disease. (Shareholders, as it turns out, also have lungs.) Finally, it means recognizing that wealth, real wealth, is not defined by accounting games on Wall Street, but the ability to meet the needs of our own people.

We came to these realizations once before in 1932, and created a vibrant democratic state over the following few decades-- one that rapidly expanded our life spans, defeated the Nazis, and helped create Silicon Valley. The convergence of the Covid-19 outbreak and the presidential election will force us to do it once again. We've lived in the world of unreality for far too long.

As Richmond Federal Reserve Bank president Tom Barkin recently put it, “Central banks can’t come up with vaccines.” It's time to get ready for what that implies.

Yesterday, Trump was in South Carolina giving his supporters exactly the kind of information that will kill them. He called the coronavirus the Democrats' "new hoax... The Democrats are politicizing the coronavirus. They're politicizing it. They don't have any clue. They can't even count their votes in Iowa. No, they can't. They can't count their votes. One of my people came up to me and said, 'Mr. President, they tried to beat you on Russia, Russia, Russia.' That did not work out too well. They could not do it. They tried the impeachment hoax." He's literally going to kill his own supporters. Listen to this: