If the next presidential election were held today, there's a decent chance that President Trump would be re-elected. Despite his litany of scandals and his abysmally low (yet stable) approval rating, he is benefiting enormously from a strong economy. The GDP experienced 4.2 percent growth in the second quarter of 2018, the unemployment rate is now at an 18-year low, and the stock market is booming. In perhaps the best news for Trump, one of the strongest indicators of an incumbent president's re-election prospects, consumer confidence, is at its highest level since 2000.
But, of course, the next presidential election won't be held today. Instead, it will be held in 2020, the year economists are predicting the next recession will hit.
A decade after the collapse of Lehman Brothers, there are plenty of reasons to suspect we are ripe for another economic downturn. More than a century of data on business cycles show that recessions tend to come every five to 10 years, indicating that the boom may be entering its final innings.
There are other economic trends that are cause for concern. The most obvious one is debt. And as my colleague Jeff Spross pointed out last month, corporate debt may be a ticking time bomb. It's already at a record high and the portion of it that's considered high risk is larger today than it was even before the financial crisis. Consumer debt has also returned to historic levels and is set to reach $4 trillion by the end of 2018.
Another sign that the economy is weaker than it first appears is the so-called yield curve, which measures the difference between interest rates on short-term U.S. government bonds and long-term government bonds. In a good economy, the rate for long-term bonds is significantly higher than short-term bonds, but recently long-term bonds have been slow to rise while short-term interest rates have been rising due to Federal Reserve policies. The yield curve has been an accurate predictor of past recessions, and it's now close to what it was shortly before the Great Recession.
Finally, there is the president’s own policies, which could help trigger an economic crisis. Getting into an all-out trade war with China, the second largest economy in the world, is a risky move that could help blow up the global economy, economists say. The Trump administration has also deregulated the financial sector and passed a tax bill that “overwhelmingly benefited the wealthy and worsened inequality,” according to a United Nations report from June. These tax cuts did help juice the economy, but the stimulating effects will run out by 2020, which could then result in a recession (not particularly good timing for the man who signed the bill).
An economic downturn would send Trump’s electoral prospects into a tailspin. Just as incumbent presidents like Bill Clinton and Ronald Reagan have benefited from strong economies in the past, incumbent presidents like Jimmy Carter and George H. W. Bush have seen their re-election bids derailed by weak economies, whether from the stagflation of the 1970s or the rising unemployment of the early 1990s. And given that Trump's approval rating has been quite low despite a booming economy, it might take a historic dive if things turn south.
But Democrats can't assume a recession would finish Trump off. For one, no one can truly predict what will happen with the economy. For another, presidential elections are about choice and Trump has a preternatural ability to pull opponents down into the mud. (Just ask Hillary Clinton.)
Democrats might get started on honing an economic message that will resonate. That means exposing the weaknesses of the Trump economy now and highlighting the fact that corporations and those in the top 1 percent have been its main beneficiaries, not average workers. In other words, Democrats have to adopt the full-throated progressive critiques of the economy expressed by Bernie Sanders and Elizabeth Warren, whether or not either ends up as the party's standard bearer in 2020, and reject the whimpering compromises of Chuck Schumer.
The shape of the economy will tilt the election in one candidate's favor, but it will ultimately be up to the Democrats to defeat Trump.