intelligencer chats

Trump’s Re-Election and the Recession Risk

Here’s one person who wouldn’t be happy about one. Photo: Drew Angerer/Getty Images

Ben: President Trump’s approval ratings have remained within a remarkably consistent range in the two and a half years he’s been in office. But one major variable he hasn’t had to deal with is an economic downturn — which may or may not be on the horizon right now. Trump is already unpopular, and he is likely to get more so if the economy turns south, perhaps to the point of all but ensuring his opponent wins next year.

We all would like to see Trump gone in 2021. If we also believe that a recession would significantly boost the odds of that happening, should we be rooting for one, despite the pain it would cause millions of people?

Josh: No. Recessions aren’t just numbers on a page. They cause millions of people to lose their jobs. People go bankrupt, they lose their homes, all sorts of personal disasters ensue. Recessions also weaken workers’ ability to demand higher wages. So even if you don’t lose your job, they hurt your material condition.

One of the most important things the government does, especially through the central bank but also through fiscal policy, is manage the economy to reduce the frequency of recessions and reduce their severity. This is for a reason.

This talking point comes from financially comfortable political obsessives. For most people, keeping the economy out of recession and the labor market strong is more important to quality of life than the “right” party winning an election.

Besides which, while a recession would reduce Trump’s odds of winning, it doesn’t move them from 100 to 0. His polling is remarkably weak despite the good economy, and while a recession would reduce his odds of winning it would not lead to a surefire loss.

Eric: If the question is “If you had the power to engineer an avoidable recession between now and 2020 — knowing that doing so would reduce the probability of reelection by 20 percent — would you do so, despite the human cost?” I agree with Josh that the answer is a resounding no.
But I’m not sure whether that’s what “rooting for” a recession means. For example, if one assumes that a downturn of some kind (i.e., not a 2008-style event but a garden-variety recession) is inevitable at some point in the next five years, is it reasonable to hope that it comes at a time that reduces the probability of a racist imbecile occupying the most powerful office in the United States? I would say “of course.”

Josh: I dispute the premise that recessions are “inevitable” over any period, or the implied premise that we’re going to have a fixed number of recessions over a given period and so it’s just a matter of when they come, now or later. Recessions don’t come because they’re due. They come because of bubbles or external shocks. Australia hasn’t had a recession in 25 years. One upside of the painfully slow recovery since 2009 is it’s made it more difficult for bubbles to form in this economy.

Recessions happen every so often for the same reason throwing doubles on a pair of dice happens every so often — because it’s something that might happen at any given time. It’s wrong analysis to say “if we’re going to get doubles inevitably, might as well be now.”

Eric: That’s fair. I guess my overall feeling is that ordinary people should do whatever makes them happy in this situation. If you are a person who has no power to shape macroeconomic events — and you want to respond to otherwise unpleasant economic news by telling yourself that a downturn would ensure Trump’s defeat, give Democrats  the Senate, and thereby mitigate the tail risk of an increasingly authoritarian right-wing party entrenching its power over the federal government, such that a recession would ultimately be a net positive from a utilitarian perspective — then knock yourself out

Josh: I think it’s true that ultimately what ordinary people wish and hope for in terms of economic outcomes is not very important.

I do think it’s a little strange that Bill Maher — who again raised his desire for a recession when I was on his show two weeks ago — keeps talking about this at the same time he’s emphasizing how important it is for Democrats to run against Trump on popular issues instead of unpopular ones.”I want a recession” is not a popular idea.

Ben: I don’t think Maher is advising Democrats to run on THAT idea.

Josh: No, but he’s a prominent commentator and he runs the risk that conservatives will try to associate his ideas with Democrats. He doesn’t have the same responsibilities that a candidate does. But by his own terms, I don’t think he’s helping when he talks about this. I would also note, there are some people who have a great deal of influence over whether we will have a recession or not. They sit on the Federal Open Market Committee. And I think most liberals have been good about sticking to their positions on monetary policy, even though it would be in Democrats’ political interest for the FOMC to screw up and underreact to recession risk.

Eric: Yeah. I mean, I feel strongly that no one with policy-making power should be trying to engineer a recession. I would personally like the Democrats to see if they can leverage Trump’s anxiety about the flagging economy into a bipartisan deal for deficit-financed green-energy investments. Not gonna happen, obviously. But would be a no-brainer from the perspective of both policy and Trump’s political interests, imo, given the severity of the climate threat and low costs of borrowing.

Josh: If Trump were smart, he’d channel his concern over a recession into a bipartisan, deficit-financed infrastructure bill.

Ben: My take is that if you believe a second Trump term would be a true disaster for the country and for the world — and I count myself among those who do — it’s not insane to have mixed feelings about all this. Josh, to your point, I agree that the conversation is probably happening primarily among financially fortunate people, and that most would probably not sacrifice their financial well-being for the cause of getting him out. But I also think a lot of people would, and that it’s not just well-off elites who fall into that category. Four more years of this president scares the absolute hell out of tens of millions of people.

Josh: But he’s shown no ability to end-run around Republican leadership on legislative initiatives. I think the Trump administration has been broadly similar to other Republican administrations in terms of actual governance. So I don’t buy the idea that a national emergency overrides the usual idea that good economic conditions are a good thing.
A healthy democracy needs to be able to live through transitions of power between parties and we seem to be continuing to do that.

I also think if you look at who has been most activated politically by the Trump presidency, in terms of activism and turnout, it’s middle-class and upper-middle-class suburban women.

That’s not well-off elites (mostly) but it’s a sign that where the alarm is greatest doesn’t always align with where you would think the risk is greatest —  and it’s not among the groups who would be the very most vulnerable to a recession.

Ben: Political engagement among people who generally are the first to get screwed by economic events tends to be low. I don’t know if that means people one step up aren’t right to be extremely concerned.

Josh: No, but that’s my point — we’re having a discourse among people who are relatively insulated from a recession about whether a recession would be worth it.

Eric: I think it is true that the timing of economic shocks can have massive political consequences, and if one isn’t a policy-maker with the power to influence whether such a shock happens, it’s perfectly normal to hope that, if one appears in the offing (i.e., if a bubble comes into view), that it happens in August 2020 instead of February 2021
As Bartels and Achen document in Democracy for Realists, across almost every country, whichever political faction happened to be in power when the Great Depression hit ended up in the wilderness for a couple decades at least.

I guess I do think that American democracy will not qualify as healthy until the existing incarnation of the Republican Party is defeated badly enough to force it to reform.

Josh: I think the line you’re arguing here implies too much. If that’s true, why shouldn’t the FOMC engineer a recession?

Eric: Uncertainty of success.

Josh: That’s it?

Eric: Well, I mean that in the broadest sense. Uncertainty about whether it results in the GOP’s resounding defeat, uncertainty that the GOP’s resounding defeat makes it accept the Niskanen Center as its personal lord and savior, uncertainty about the broader political consequences.

Josh: ONE reason the FOMC shouldn’t engineer a recession is that (in addition to the recession being bad) that would undermine future support for Fed independence, which would mean more and worse recessions in the future. Which goes to my broader point that the system as it stands now is not so bad that it’s worth breaking.

The government and the political system do a lot of useful things and essentially declaring bankruptcy on it — that we must break the GOP at all costs — would make people worse off by harming the institutions that continue to protect us.

Eric: But I don’t really understand why asserting “American democracy will not qualify as healthy until the existing incarnation of the Republican Party is defeated badly enough to force it to reform” would require me to support the FOMC engineering a recession.

I don’t see the health of a polity as a binary thing. I agree an American democracy in which it was discovered the Federal Reserve had tried to engineer the defeat of the sitting president by willfully harming ordinary citizens would be less healthy than the one we currently live in.

I just think most people “rooting” for a recession are rooting for the timing of an event that they regard as inevitable (having taken the business cycle a bit too literally). And that’s a perfectly understandable thing to do given the odiousness of the GOP, and perfectly harmless given that such people have no power over the macroeconomy.

Josh: I think that’s a good argument for coming up with a new term to replace “business cycle.”

Eric: Agreed.

Trump’s Re-Election and the Recession Risk