Macro Roundup

Bruce N. Gyory, "Trump As The Wizard Of Oz Can't Win Re-Election, But Democrats Could Still Lose The Presidency," Empire Report, April 7, 2019, https://empirereportnewyork.com/bruce-gyory-donald-trump-wizard-of-oz-2020-part-1/

Trump As The Wizard Of Oz Can't Win Re-Election, But Democrats Could Still Lose The Presidency

Rick Wilson is correct: Donald Trump can’t win re-election, but the Democrats could still lose the 2020 presidential election. That was the conclusion of Never-Trump Republican strategist Rick Wilson, in his excellent op-ed in last Sunday’s Daily News.

I had reached the same contradictory conclusions in doing the research for this column. A subsequent column will examine how the Democrats can reduce their risk of losing to Trump in 2020.

Why can’t Donald Trump win re-election? That assertion rests upon the plain fact that no one has actually explained to Donald Trump why he was elected President in 2016. Trump’s base was the bright tip of his Electoral College iceberg, but that it is not what elected Trump President. By playing only to his base, rather than trying to expand his support as President, Trump has done grievous damage to his re-election prospects.

Trump was elected because of a small but significant slippage in the Democrat’s share of white vote (Clinton got 37% of white vote according to exit polls vs. Obama’s 39% in 2012 and 43% in 2008) combined with a lower black turnout (African Americans turned out at 56% of all eligible voters in 2016 vs. turnout percentages among African Americans at 65% in 2008 and 66% in 2012; the white turnout percentage was 65% in 2016 vs 64% of all eligible white voters in 2012) and Clinton getting a lower share of the Hispanic vote(65% of Hispanics voted for Clinton in 2106 vs 71% for Obama in 2012).

Nevertheless, Trump still would not have carried a majority in the Electoral College had third party voting not been the balance of power in Pennsylvania, Michigan, Wisconsin and Florida (e.g., Jill Stein’s vote was greater than Trump’s margin of victory in Pennsylvania, Michigan and Wisconsin).

When you delve deeper into the exit poll numbers from 2016, it becomes clear that there were four swing voting blocs underlying Trump’s victory. First, the late swing against Clinton among married white women in the suburbs. Second, the near third of the electorate that had some college but not a four year degree—the so-called kids who stayed home (Trump according to the exit polls carried these voters by 9% whereas Obama carried this bloc by 4% in 2012). Third, middle aged Hispanic men gave Trump 35% of their vote (as opposed to Latino voters over 65 and under 45 in age who both gave Clinton 71% of their vote). The overall slippage among Hispanics (which included 6% of Hispanics who voted for third party candidates) cut off any chance Clinton had of holding Florida and carrying Arizona, North Carolina or Georgia (Clinton’s top raid targets in the Electoral College). Fourth, was independents (31% of the electorate according to exit polls) who Trump carried by 6%: 48-42% with a full 10% of Independents voting for third party candidates (Obama had carried Independents in 2008 and only narrowly lost Independents to Romney in 2012).

When you crunch these numbers, it becomes clear that these four voting blocs on top of the minority slippage in the urban cores had a decisive impact on 83% of the vote (49% of the nation’s vote according to the 2016 exit polls came from the Suburbs and 34% from urban areas), while only 17% of the electorate came from small town and rural communities. So the blue collar male vote from rural and small town America did surge for Trump and it had a clear impact, but those votes would have been mere shards of ice in the ocean, rather than the tip of the iceberg that elected Trump, had those four swing voting blocs (a much larger number of voters in the aggregate), not shifted against Clinton at the close of the campaign in 2016.

Two factors are worth noting in regard to these four swing voting blocs: one, polling data shows us that as President Trump is noticeably weaker today among each of these swing voting blocs than he was in November of 2016. Two, it is likely that these four swing voting blocs from 2016, will remain the swing voting blocs determining the outcome in the 2020 presidential race.

Yet, because Trump and derivatively most pundits, have been obsessed with Trump’s base, rather than the vast number of voters who actually enabled him to squeeze out a victory in the Electoral College, there has been precious little notice attending Trump’s slippage. Don’t take my word for Trump’s declining standing with these swing blocs, study the returns in the 2018 midterm elections both in terms of Democratic gains (Pennsylvania, Michigan, Wisconsin, Virginia, Colorado and Arizona) and the far narrower Republican margins of victory (Georgia, Florida and Texas).

Moreover, while the Mueller report’s finding of no criminal collusion by Trump or his campaign with the Russians, will be a shot of political adrenaline for Trump’s base, events are still threatening Trump’s public standing. The storm clouds threatening the economy (the inversion of the yield curve which has foreshadowed most recent recessions) and disorder in the world (from our relationship with NATO, to the potential for Brexit chaos, to the collapse of the North Korean nuclear arms talks, China’s advances in the Pacific and Europe, not to mention the prospect of turbulence in the Middle East) remain real threats to President Trump’s political standing, heading into next year’s election.

Nor can we be certain, as Judge Napolitano recently pointed out in his Fox News commentary, that there will not be a dragon’s tail from the Mueller report lashing Trump, once it comes out, particularly if Attorney General Barr’s March 24th letter is perceived as having whitewashed Mueller’s report. The traditional bread and butter issues of the economy and health care leavened by foreign policy threats, will of course dominate the electorate’s concerns, but the continuing investigations of Trump remain a dormant threat to his re-election prospects.

Thus, Trump is not a favorite to win re-election, unless economic growth were to jump next year towards the 4% growth level for GDP (i.e., the current Federal Reserve Board projections for 2020 are at the 1.9% growth level for GDP). The polling data bears this out. Trump as President has never hit, much less passed the 50% mark in his job approval rating, according to the Real Clear Averages data.

In Gallup’s data, Trump’s job approval ratings have stayed mostly in between the 38-42% levels (levels too low to sustain a President’s re-election). Four times President Trump has gone below the 35% level in Gallup’s polls, but only for an instant and only once did he hit 46% in job approval, back in his first week in office. That is significant because no President, has won the next presidential election, when their job approval in Gallup’s data has gotten below 35%. (I am using the Gallup polling data here as an illustrative example of the overall trend line, not as a dispositive source tracking public opinion).

Trump seems almost allergic to the concept of expanding his base, which renders his loss of support from the four key swing blocs from 2016 all the more significant. Consequently, if Trump is polling at or under 42% in the Fall of 2020, he will lose re-election, unless Howard Schultz’ candidacy (or a Schultz plus a Stein type candidacy from the left, frays the Democratic coalition from both ideological ends of the spectrum) proves to be the spoiler.

There is a decisive tactical play the Democrats can make in the 2020 presidential campaign: projecting a narrative that defines Trump as the veritable Wizard of Oz (i.e., establishing that there is really nothing behind the curtain). Democrats often abjure the power of narrative campaigning, preferring list campaigns (campaigns which focus upon a check list of issue based platform planks). That would be a mistake.

Narrative campaigning works, precisely because voters are busy and a clear and compelling narrative provides a clean hook for voters to hang their concerns upon. Inevitably, the 2020 campaign will become a referendum upon Donald Trump’s presidency. Democrats would be wise to find and project a narrative which resonates with voters.

The Wizard of Oz is a good narrative choice for three reasons. One, Trump is not on top of the details of either the policies his administration advances or the implementation of those policies. Two, the Wizard of Oz is something very understandable to older Americans, who will be the toughest swing voting bloc for Democrats to carry. Three, if this narrative catches hold with the public, being called the Wizard of Oz, will drive Trump nuts, because it vitiates his self-image as the all-powerful CEO. If Trump senses that people are laughing at him, he could explode, hastening his political demise with swing voters.

So why am I not advising the Democrats to crack open the champagne? Because I am not at all confident that the Democrats can pass their own 2020 math test. Can the Democrats get through the presidential primaries and produce a ticket for President and Vice-President, which simultaneously hits the following six electoral marks critical to winning both the popular vote and a majority in the Electoral College? One, crack 42% of the white vote. Many pundits subliminally convey that the Democratic problems with the white vote are connected to electing President Obama. In fact, Barack Obama got a higher percentage of white voters in his two races than Dukakis, Kerry and Hillary Clinton. The Democrats’ problems with white voters actually goes back to the McGovern era.

Two, next year can Democrats’ nurture a turnout percentage where African American voters turnout at the same levels as white voters (a la 2008 and 2012)? Three, the Democratic ticket needs to once again break the 70 % threshold among Hispanic voters (with an uptick in the Hispanic share of the total vote crossing the 12% threshold, from a 9% share in 2008 and 10% of the total vote in 2012). Four, Democrats need to carry the votes of those with some college but not a four year degree (roughly a third of the electorate, that is crucial in the Midwest and Southern Atlantic Coastal states). Five, juice the turnout of under 30 in age voters, so that their share of the total electorate crosses the 22% share level (given Trump’s chronic weakness with millennial voters). Six, carry independent voters by double digits (i.e., as in 2018, but not 2010, 2012 and 2014 when the GOP carried Independents). Given that the overwhelming majority of Independent voters are white, carrying Independents is an essential ingredient in the Democrats’ ability to shave the GOP’s traditional edge among white voters.

If Democrats hit all six of those targets they can’t lose next year’s presidential election and will win back control of the US Senate, as well as holding the House. If they hit four of those six targets, they will not lose the White House and will certainly hold the House of Representatives, with a chance to narrowly take control of the Senate. But if they hit only two of those six targets Trump could win re-election with accompanying Republican gains in the congressional races.

My fears that the Democrats could blow the chance to defeat Trump were reawakened by the political events emerging in the wake of the federal government shutdown. When following the unified leadership of Pelosi and Schumer, the Democrats drove Trump’s job approval ratings sharply down in the wake of the shutdown standoff (e.g., Gallup had Trump’s job approval down to 37% in its January 2-10th polling with a job approval rating of only 31% among Independents) to levels that could not sustain Trump’s re-election. Then Trump delivered a fumble free State of the Union, followed by the Democrats suffering a stilted roll out attending the Green New Deal and the debacle of Representative Omar’s anti-Semitic spasm of statements.

The political impact of this triad was predictable, for it sent troubling signals to a mix of suburban, faith based and independent voters who are predisposed to believe in institutions. No surprise then when voters eyes were averted from Trump’s repeated assaults on institutions, that Trump’s job approval rating in Gallup bounced back to 44% and his disapproval dropped from 59% to 52% (February 1-10 data). If Trump is at 45% job approval in November of 2020, he could still win re-election.

Once things stabilized, Trump’s job approval in Gallup’s March 1-10 data stood at 39% to a disapproval rating of 57%. It will be interesting to see what the impact is on Trump’s poll ratings from the Mueller report, followed so closely by the Trump administration’s attack on the ACA in the courts and the public’s reaction to all that, as it settles into the body politic.

Actually, Trump’s political standing, as reflected in the polling data, reminds me of a basketball team that is behind the whole game, but only trails by about five points heading into the last few minutes of the game. Experienced basketball fans know if the other team is not careful, that lead could vanish down stretch (e.g., the close of the 2016 campaign).

Democrats therefore have a choice heading into in 2020 presidential campaign. Would Democrats rather be right (in the eyes of their base) or would they rather elect a President by reforming the Blue Wall in the rust belt and by winning at least two of the four tough states starting to tilt away from the Republicans demographically (e.g., Florida, North Carolina, Georgia and Arizona)?

I am uncertain as to the choice Democratic candidates and their campaigns will ultimately make. That is why I feel confident concluding that Trump has no business winning re-election, but the Democrats could still lose next year’s presidential election.

".... But even being maximally optimistic about the wealth tax’s revenue potential by assuming that the estate tax is equivalent to a 0.27 percent wealth tax (the 13.5 percent effective estate tax rate multiplied by 2 percent mortality), we still get a revenue estimate for wealth taxation of only about $75 billion, or approximately 40 percent of the Saez and Zucman estimate....."
Natasha Sarin and Lawrence Summers, "A ‘wealth tax’ presents a revenue estimation puzzle,"Washington Post, April 4, 2019, https://www.washingtonpost.com/opinions/2019/04/04/wealth-tax-presents-revenue-estimation-puzzle/

"....A view deeply entrenched in mainstream macroeconomics is that trend productivity growth is the outcome of technological and institutional factors and can be treated essentially as an exogenous force, unresponsive to business cycles or monetary policy actions. The workhorse macroeconomic models used by international organizations and central banks are built upon this notion. This view, however, struggles to explain some key empirical facts.... recessions tend to be followed by prolonged slowdowns in productivity growth, causing persistent deviations of output from prerecession trends. This evidence suggests that recessions have an impact on long-run output, a phenomenon known as hysteresis...the Great Recession has been associated with permanent drops in the trend path of output in most advanced economies. These facts, as pointed out by several economists....suggest that the conventional wisdom might be incomplete and that trend productivity responds to changes in aggregate demand. In turn, this suggests that traditional views on the link between monetary policy and long-term growth need to be re-evaluated....."

Gianluca Benigno and Luca Fornaro, "The Keynesian Growth Approach to Macroeconomic Policy and Productivity," Federal Reserve Bank of New York, April 1, 2019, https://libertystreeteconomics.newyorkfed.org/2019/04/the-keynesian-growth-approach-to-macroeconomic-policy-and-productivity.html

"....Before the civil war, the South was deeply unequal. Among white households, those at the 90th percentile of the wealth distribution owned 14 times as much as those at the median. By contrast, in today’s seemingly inegalitarian times, the ratio among white households is just 9.5 to one. Roughly 50% of the wealth in the antebellum South was held in slaves. After the surrender of the Confederacy in 1865, all this disappeared: wealth for the top 1% dropped by 76% between the censuses of 1860 and 1870. This had the effect of reducing inequality—but only temporarily.By the next census, in 1880, the sons of slaveholders had recovered the wealth standings of their fathers compared with those who grew up in non-slaveholding households. By 1900, they had surpassed them....."

Economist Staff, "The sons of slaveholders quickly recovered their fathers’ wealth,"The Economist, April 4, 2019, https://www.economist.com/united-states/2019/04/06/the-sons-of-slaveholders-quickly-recovered-their-fathers-wealth

. The 10% of firms with the highest markups are 50% more profitable than their peers, more than 30% more productive and rely more on intangibles. The fund did not find that rising markups slowed innovation, at least using the (admittedly dubious) proxy of patent registrations…”

Economist Staff, "The IMF adds to a chorus of concern about competition,"The Economist, April 4, 2019, https://www.economist.com/finance-and-economics/2019/04/04/the-imf-adds-to-a-chorus-of-concern-about-competition