Trump's 2020 path gets trickier with US formally in recession
WASHINGTON (BLOOMBERG) – President Donald Trump faces a new obstacle to his case for re-election – the US is now officially in recession.
The “recession” label, made official on Monday (June 8), cements the pain that many voters are already feeling from the economy – and will feed into their choice in November for who will be able to steer the economy back.
For Democrat Joe Biden, the proclamation from the National Bureau of Economic Research is further evidence that the economy was on shaky ground even before the worst of the coronavirus hit.
Mr Trump, he said, has “squandered” the booming economy he inherited from President Barack Obama and himself.
For Mr Trump, the recession declaration came on the first weekday after the May jobs report showed 2.5 million jobs were created and the unemployment rate declined when it was expected to jump.
On Friday, he touted the numbers as a sign of “the greatest comeback in American history”.
For now, the recession comes as polls show the President’s standing slipping across the board with the country reeling from the pandemic, its economic impact and racial justice protests.
Mr Trump is hoping to regain his footing by relaunching his signature rallies in the coming weeks, where he will tout his economic record.
And, while ignoring the recession announcement on his Twitter feed, Mr Trump is maintaining his re-election argument that he built the strong economy once, and he can do it again.
“TRANSITION TO GREATNESS!” he tweeted on Tuesday, followed by, “THE REAWAKENING OF AMERICA!”
Mr Biden, for his part, argues that as vice-president in 2009 he inherited the recession that began under Republican George W. Bush. He says he led the recovery efforts that began the economic expansion that ended in February and that he can do it again, this time as president.
A CNN poll released on Monday shows voters still give Mr Trump the edge over Mr Biden in managing the economy, 51 per cent to 46 per cent, even though Mr Biden is leading the race by 14 points.
The NBER, the official scorekeeper of when business cycles begin and end, said on Monday that the recovery that began under Mr Obama concluded its record 128-month run in February.
But the committee also suggested that it may not last, noting that the pandemic has “resulted in a downturn with different characteristics and dynamics than prior recessions”.
But there can be no mistake it’s a recession, the committee said, given the “unprecedented magnitude” and “broad reach” of the job losses.
Mr Trump spent most of his presidency taking credit for the booming economy, and now Mr Biden is hanging the recession around his neck.
“The President isn’t responsible for the virus,” Mr Biden said in a statement. “But he is responsible for a completely bungled response that not only cost thousands of lives, but millions more jobs than should have been lost.”
“That’s on Donald Trump. It did not have to be this way,” he said.
In fact, the timing of the announcement could actually help Mr Trump.
“Usually, the recession is over before they declare that it started,” said Princeton University economist Alan Blinder, a former Federal Reserve vice-chairman appointed by President Bill Clinton.
The more quickly the economy reaches the bottom, the more quickly it can begin to recover.
The economy could be in recovery now, he said, meaning that it would likely be official by Election Day.
But that doesn’t mean overall employment and economic output will be back to their pre-Covid levels.
“If you fall down 17 flights of stairs and climb back up three, you’re in recovery,” Mr Blinder said.
“But you’re still 14 flights down from where you started.”
Trump campaign spokesman Andrew Clark made clear that Mr Trump will continue to run on the economy, recession notwithstanding.
“Biden’s pathetic attempt to argue that the economy was in free fall before the coronavirus is a lie,” he said. “Before the global pandemic, the US economy was delivering explosive wage growth for US workers – including black workers and others who had been left behind when Biden was vice-president – and job growth was smashing expectations.”
Job growth and household incomes have the most direct effect on presidential approval ratings – not whether economists say there’s a recession.
But recession dates are important to economic historians, who generally believe that Democratic presidents have been better for the economy than Republicans.
That’s the conclusion of an analysis by Mr Blinder and his Princeton colleague Mark Watson.
Since Mr Harry Truman’s election in 1948, Democratic presidents have spent an average of one quarter in recession for each term in office. Republicans have spent an average of 4.5 quarters in recession.
Other economists have noted that Congress and the Federal Reserve have as much control over the economy, and that decisions taken by one president can continue to affect the economy long after they’ve left office.
All that might not matter much to voters, who tend to hold the president responsible for the economy.
“There’s a lot of stuff that’s out of the control of the president that influences these things,” said University of Texas Professor Christopher Wlezien, who studies public opinion and the economy.
“And voters don’t always discount that stuff.”
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