Though derided by history, Calvin Coolidge was on to something when he observed in 1925 that “the chief business of the American people is business,” adding: “They are profoundly concerned with producing, buying, selling, investing and prospering in the world.”
As Silent Cal went on to say, that doesn’t mean we have no morals. But we expect the government to foster prosperity, and we tend not to let sentiment get in the way. Just look what happened to poor Herbert Hoover. Known as the “Great Humanitarian” for his work in saving 10 million starving Europeans after World War I, the United States tossed him from the White House like spoiled leftovers when the stock market crashed on his watch. Conversely, the American people will tolerate many foibles in a leader who presides over a boom.
When President Donald Trump goes before the voters next year, he’ll need a truckload of that toleration to squeak out a victory. Will the economy save him?
A year ago, he had reason to be confident. Now, that’s not so clear.
Take the stock market. “The reason our stock market is so successful is because of me,” the president once tweeted. And it has been a good run - but in two very different phases. Virtually all the steep gains under Trump came in the first year of his presidency. Anticipating a tax cut, deregulation and maybe a big infrastructure initiative, the S&P 500 rose by nearly one-third from the time of Trump’s election to the first anniversary of his swearing in.
Since then, the S&P index has more or less been in a holding pattern. There have been sharp ups and downs, thanks mainly to Trump’s unconventional trade policies. Some Wall Streeters have made bank on the volatility. But ordinary folks nursing retirement savings have gained little over the past year and a half. The index was around 2,900 in January 2018, and as of Friday’s close, it has barely budged: 2,918.65.
Ditto the Dow Jones industrial average, which soared from south of 20,000 on Inauguration Day to north of 26,000 in one dazzling year. Nearly 19 months later, there it still sits.
Perhaps the success of the stock market had more to do with the hopes investors had for Trump, rather than his actual performance. Once the tax cut was history (much of it used to shore up high stock prices), deregulation was priced in and the infrastructure dream dissolved, what remained of Trumponomics was just tariffs and the Twitter feed. Naturally, the market cooled.
Certainly, anyone who had a nest egg invested in the broad stock market when Trump was elected, and calmly rode the roller coaster of the past year, has done well. A close to 40% gain in a single year makes up for a few subsequent flat years.
On the other hand: Voters have short memories. Trump, of all people, knows it. As a candidate in 2016, Trump savaged President Barack Obama for lackluster economic growth. Yet in the prior year, 2015, the U.S. economy had grown 2.9% - which happens to be exactly the rate of Trump’s best year so far. He’s not going to match it this year. And next year’s voters will care about next year’s economy.
Other measures tell a similar story: Trump’s economy has slowed because of his self-caused head winds. Unemployment is low, but wage growth is lackluster, slower than during President George W. Bush’s second term and far below the Clinton years. Household debt continues to soar past pre-recession records. Consumer confidence has seesawed, but not risen, since Trump’s first year in office.
What’s striking about this jog-trotting economy is that it’s juiced like Jose Canseco. Federal deficit spending fell from record levels during Obama’s second term, but Trump has cranked open the spigot again: $665 billion of red ink in 2017, $779 billion in 2018, $896 billion in 2019 and a projected $1.1 trillion in 2020. The Federal Reserve administered another dose of steroids recently with its first interest-rate cut in years. Given so much stimulus, you’d expect economic home runs.
Finally, there’s the loudly ticking clock. Last month, the economy broke the record for the longest economic expansion in history. It won’t go on forever. Trump is gambling that he can avoid the next recession for another 15 months, at least. But for soybean farmers, whose prices were dropping even before China announced a retaliatory halt to U.S. agriculture purchases, the recession feels like it is already here. The same can be said for Trump’s beloved coal industry. After spiking on hopes that the new president would deliver an economic resuscitation for coal miners, prices have sagged back to pre-election levels.
Another year is a long time to expect business-minded Americans to ignore the obvious cooling of the economy. By fall of 2020, the high hopes of 2017 will seem far in the past, and Trump will be judged on his actual results.
David Von Drehle is a columnist with The Washington Post.