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If the next presidential election was held today, there is a good chance that President Trump will be re-elected. Despite its litany of scandals and its extremely low (but stable) approval rate, it benefits tremendously from a strong economy. GDP grew 4.2% in the second quarter of 2018, the unemployment rate has now reached its lowest level in 18 years and the stock market is booming. The best news for Trump, one of the most convincing indicators of the re-election prospects of an outgoing president, consumer confidence, is at its highest level since 2000.
But, of course, the next presidential election will not be held today. Instead, it will be held in 2020, the year economists predict the next recession.
A decade after the collapse of Lehman Brothers, we have many reasons to believe that we are ripe for a new economic downturn. More than a century of data on economic cycles shows that recessions tend to occur every five to ten years, indicating that the boom may be entering its final rounds .
Other economic trends are worrying. The most obvious is the debt. And as my colleague Jeff Spross pointed out last month, corporate debt can be a ticking time bomb. It is already at a record level and the proportion of risks deemed high is greater now than it was before the financial crisis. Consumer debt has also returned to historical levels and is expected to reach $ 4 trillion by the end of 2018.
The yield curve, which measures the difference between interest rates on US short-term government bonds and long-term government bonds, is another sign of the weak economy. In a good economy, the rate of long-term bonds is much higher than that of short-term bonds, but recently, long-term bonds have been slow to rise while short-term interest rates have risen because of the policies of the Federal Reserve. The yield curve has been a clear predictor of past recessions and is now approaching what it was shortly before the Great Recession.
Finally, there are the president's own policies, which could help trigger an economic crisis. Engaging in a total trade war with China, the second largest economy in the world, is a risky move that could help to explode the global economy, economists say. The Trump administration has also deregulated the financial sector and passed a tax law that "primarily benefits the rich and increases inequality," according to a June UN report. These tax cuts have certainly helped to revitalize the economy, but the stimulating effects will deplete by 2020, which could then lead to a recession (not really the right time for the future). 39, who signed the bill).
An economic downturn would tip Trump's electoral prospects. Just as current presidents like Bill Clinton and Ronald Reagan have benefited from strong savings in the past, incumbent Presidents like Jimmy Carter and George HW Bush have seen their re-election offers depreciated due to weakness savings, whether from stagflation in the 1970s or rising. In the early 1990s, and given that Trump's approval rating is relatively low despite a booming economy, it could be a historic plunge if things turn south.
But Democrats can not assume that a recession would end Trump. On the one hand, no one can really predict what will happen to the economy. On the other hand, presidential elections are a matter of choice and Trump has a supernatural ability to pull opponents into the mud. (Just ask Hillary Clinton.)
Democrats could start developing an economic message that will resonate. This means exposing now the weaknesses of Trump's economy and highlighting that the top 1% companies and companies are its main beneficiaries, not the average workers. In other words, Democrats must embrace the categorical progressive critics of the economy expressed by Bernie Sanders and Elizabeth Warren, whether or not they are one of the party's flag bearers. 2020, and reject the groans of Chuck Schumer.
The shape of the economy will look to the elections in favor of a candidate, but it will ultimately be up to the Democrats to defeat Trump.
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