WASHINGTON — To have a recession or not — that is the question.
It also encompassed last week's most important political news, notwithstanding all the public attention understandably focused on the mass shootings in El Paso and Dayton. There is growing evidence of a possible recession. If one materializes, President Trump could lose his most powerful argument for reelection: a strong economy.
As is well-known, Trump's approval ratings have stubbornly remained well below 50%. Typically, they've hovered in the high 30s and the low 40s. Even this weak support depends heavily on a buoyant economy.
Consider a Washington Post-ABC News poll taken in late June and early July. Trump's overall approval rate was 44%, with 53% disapproving. But this poor showing already included public support for his economic stewardship, with 51% approving and 42% disapproving. On every other issue, the public disapproved of his performance.
On immigration, the public disapproved by a 40%-to-57% margin. (In all these comparisons, Trump's approval number comes first.) On taxes, the margin was 42% to 49%. On health care, it was 38% to 54%. Here are the remaining results: On women's issues, he trailed 32% to 56%; on abortion, 32% to 54%; on gun violence, 36% to 52%; on foreign policy, 40% to 55%; on climate change, 29% to 62%.
For Trump to lose his edge on the economy would clearly make it harder for him to win the general election. One obvious possibility would be perverse: Democrats might become so overconfident that they'd nominate someone too far to the left for most Americans.
For most of Trump's presidency, the economic news has been favorable. At its current 3.7%, the unemployment rate hasn't been lower since the 1960s.
In July, the present economic expansion became the longest in U.S. history at slightly more than 10 years, as determined by the National Bureau of Economic Research. The NBER usually declares a recession if the economy contracts for two consecutive quarters — that is, unemployment rises and output falls.
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What threatens this rosy picture is growing economic strife over trade. Last week was chaotic. Trump threatened to slap a 10% tariff on roughly $300 billion of Chinese exports to the United States. Rather than submit, China retaliated by letting its currency, the renminbi (RMB), depreciate below the symbolic rate of 7 to the dollar. A cheaper RMB would make China's exports more competitive, offsetting some of the effect of Trump's tariffs.
Trump responded by declaring China a "currency manipulator" — an ominous-sounding label that merely requires the administration to open negotiations with China, something that it's already doing and has led nowhere. Reflecting mounting uncertainty, the stock market fluctuated wildly during the week.
All this is curbing already-sluggish economic growth. Higher tariffs raise prices to consumers and businesses, reducing their purchasing power. In late July — before the most recent turmoil — the International Monetary Fund downgraded its economic outlook and warned that "risks to the forecast are mainly to the downside." The main danger seems a loss of confidence that delays business investment and consumer spending. The plunge in interest rates is seen as evidence that investors are seeking safe havens for their money.
Most economists aren't yet predicting a recession, but they're drifting in that direction. Lewis Alexander of Nomura Securities International expects the economy's growth to slow to less than 2% but not to enter recessionary territory. Joel Prakken of IHS Markit says its models put the odds of recession within a year at 1-in-3.
Mark Zandi of Moody's Analytics seems more pessimistic. "The U.S. and global economies are headed for a downturn unless President Trump backs away from his latest tariff threat," he writes in a commentary. The combination of higher tariffs, higher prices and other factors have already cost almost 300,000 U.S. jobs, he estimates.
Trump seems acutely aware of the threats to his reelection. He's repeatedly assailed the Federal Reserve for not lowering short-term interest rates sooner; he's also accepted a federal budget with huge deficits. These constitute traditional "stimulus" designed to keep the economy advancing.
If they don't work, it's a safe bet that Trump won't blame himself. The Fed and China are being set up as the fall guys for the next recession.
Robert J. Samuelson is a columnist for The Washington Post.