'Never had such a thing': will Trump's achievements help re-elect for a second term

"The United States is experiencing an economic miracle... In just over two years, we have achieved an unprecedented boom in the economy... Never seen before." This is how Donald Trump praised himself in his February address, summing up the interim results of his first presidential term.

Photo: Twitter screenshot

After a year and a half, he expects to be re-elected for the second, and start his campaign this week showed that the success of the world's largest economy will remain the main argument in the struggle for the right to stay in the White House for another four years.

The economy is Trump’s natural trump card in light of low ratings. A June Reuters/Ipsos poll paints a familiar picture: 40% of Americans approve of his job as president and 57% disapprove. In key states for victory, Trump is still significantly behind the main Democratic contenders.

“If the economy doesn’t let us down, he will most likely be re-elected,” says former Speaker of the US House of Representatives and close ally of the President Newt Gingrich, quoted by Reuters.

To win, Trump needs to win the hearts of undecided voters, which requires a unifying idea from a president who is more prone to conflict and division.

Photo: Twitter screenshot

His domestic policies—hunting for illegal immigrants, supporting white supremacists, attacking the press, the judiciary and the opposition—endure Trump's popularity with longtime fans but do little to expand the electorate.

The nation cannot be united by successes in foreign policy: so far there are no bright victories there. Trump has picked squabbles with adversaries like China, friends like the EU and neighbors Canada and Mexico. The high-profile campaign to appease Kim Jong-un ended in nothing, and politics in the Middle East only fueled the Palestinian-Israeli conflict and brought the world to the brink of a new war - this time with Iran.

And in this chaos polarizing society, one unifying goal stands out - the American dream, the nation's desire for wealth and prosperity. According to a May Ipsos poll, US residents believe that “what makes America great” are its judicial system (88%), education (87%) and economy (86%). In their opinion, they are more important than a strong army (76%), a political system (74%) and the right to bear arms (57%).

Therefore, the economy will remain the main theme of the campaign started. Under two conditions: if Trump is entrusted with the status of the chief engineer of the economic miracle, and if the economic boom does not turn into another crisis for the remaining 16 before the elections with a little months.

In search of an answer to these questions, the BBC Russian Service studied Trump's legacy and scenarios.

Thanks to Donald for this?

The US economy feels great. Here all economists and statistical bulletins agree with Trump. But is it his merit?

Photo: Twitter screenshot

Currently, US GDP is growing at an annualized rate of about three percent, which is excellent compared to other major developed economies: Europe is growing at half the rate and Japan is three times as fast.

However, this recovery did not begin yesterday: economic cycles stretch over time, and the United States is experiencing the longest expansion phase in history - it turned 10 years old in June. It began under Barack Obama, who entered the White House in 2009 at the height of a massive financial crisis.

Obama's second term economy stabilized thanks to large-scale government support and active printing of money by the US central bank, the Federal Reserve System. Since then it has been growing, but sluggishly from a historical point of view.

Over 10 years, GDP increased by 22%, while during the previous, also ten-year, phase of recovery in the 1990s it added 43%, and in the shorter recovery of 1961-69 - even 54%.

Фото: Depositphotos

And even if growth is noticeable, fresh macroeconomic indicators rarely excite voters. People are more interested in their personal income and confidence in the future.

“He’s done so much for the country: wages are rising, jobs are being created, Americans are buying houses again,” listed Trump’s achievements from insurer Robert Adamson, one of those who came to support the launch of Trump’s election campaign at a stadium in Florida on Tuesday.

Unemployment in the United States actually reached its lowest level in half a century - 3,6%. However, this indicator only covers people of working age who are actively looking for work. It does not take into account those who would like to, but cannot find a permanent place and get by with odd jobs and part-time jobs.

And also those who in the prime of their lives prefer not to look for work. And there are a lot of them: for example, almost 11% of men are 25-54 years old. As a result, in May, official unemployment among this category was only 3,1%, although every eighth did not really work.

A similar situation with salaries. Hourly wage increases at a steady pace.

However, asset prices are rising even faster, because the Fed, which has been pumping the economy with cheap money for a year. In conditions of low interest rates, against which Trump ardently raises, investors turn to more risky and profitable ways of capital allocation, which traditionally warms up the equity and real estate markets.

From the rise in prices for these assets benefit those who already have both housing and investment. And those who do not have it yet lose.

Democrats are talking about the problem of growing inequality in the United States on all corners. Launching the campaign, Trump dubbed them “a bunch of left-wing radicals” and predicted:

“A vote for a Democrat in 2020 is a vote for the rise of radical socialism and the destruction of the American Dream.”

To live well in the USA

Trump has his own recipes for increasing the well-being of the nation. He has already prescribed the first invigorating injection to the economy - reduced taxes. The cost of treatment is one and a half trillion dollars. The treasury will receive so much less in a decade.

The second recipe was also not cheap - increasing defense spending to a record $717 billion in 2019.

Photo: Facebook /The White House

Trump took money for all this from future generations. The budget deficit, which the United States finances through borrowing, was $2017 billion in 666, increased to $780 billion last year, and will grow to $900 billion this year. The private sector is not far behind—under Trump, Americans are $43 billion in debt per quarter faster than under Obama, Bloomberg calculated.

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From the tax reform benefited primarily the richest Americans and business. So it was conceived, the authors explained the idea: companies will save on taxes, and free up money will be distributed to employees and invested in business expansion.

It turned out a little differently, found the research center Congressional Research Service, which specializes in expert opinions and reports for the US Congress.

American companies returned the lion's share of savings to shareholders rather than paying employees—the volume of announced share repurchases on the market exceeded $1 trillion. Businesses enjoyed a similar tax holiday under previous Republican President George W. Bush in 2004.

Economists argue whether it was necessary to stimulate an already dynamic economy at the expense of the treasury. This did not lead to a steady increase in growth rates, but it supported the stock market, which Trump considers to be the measure of the success of its economic policy.

However, the effect quickly faded away, and 2018 was the worst year for the US stock market over the entire post-crisis decade.

Miracle under threat

Trump blames around the Fed.

The American central bank began to raise rates, as the economy was steadily recovering. He felt that now is the time to turn off the printing press and normalize monetary policy in order to prevent a jump in inflation and reload the instruments to the next crisis.

Trump regarded this as sabotage and turned the full power of his Twitter against the Fed. The independent central bank took a break from raising rates, but not for this reason.

On the horizon loomed the specter of recession. The prophecies of the slowdown in the American economy began to sound louder.

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After his election, Trump promised to achieve economic growth of “4%, maybe 5% or even 6%” a year. Last year it fell short of 3%. According to World Bank forecasts, it will slow down to 2,5% this year and to 1,7% next year.

At this rate, Trump runs the risk of losing his main achievement right before the 2020 fall elections of the year. And you can only blame yourself.

Photo: Twitter screenshot

Now that the rise in loan prices is off the agenda and, on the contrary, the Fed is expected to cut rates, the only serious threat to the US economy remains Trump’s trade wars, primarily the Chinese one. It is they who force economists to race to worsen forecasts, and businesses to be sad about the future.

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Until now, Trump only raised the stakes in the confrontation with China. But the labor market and incomes grew steadily, and it was far from the elections. How he will behave in a situation when the engine of the economy has gone berserk and the election campaign is gaining momentum will be shown next week by his meeting with Chinese leader Xi Jinping.

Its outcome will determine the format of the trade war between the two largest economies in the world: a fight before the first blood or a battle to the last breath.

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