There’s a Far Greater Threat to Trump Than Mueller
Author: Greg Valliere
July 25, 2019
DEMOCRATS WERE DELUSIONAL to anticipate a breakthrough in yesterday’s hearings; if they want to make a case for impeaching Donald Trump, they will have to do it, not Robert Mueller. Trump, gloating as usual, now sees a clear path to re-election, but a new issue is about to emerge that will pose a greater threat to him than Mueller.
IT’S THE ECONOMY STUPID: That famous mantra, coined by James Carville, may resurface as early as tomorrow, when GDP data for the second quarter is likely to confirm a deceleration of economic growth. A figure below 2% is possible (the closely watched Atlanta Fed forecast is for growth of 1.6%).
WE DON’T ANTICIPATE AN IMMINENT RECESSION, but clear signs of an economic slowdown will complicate life for Trump, who wants growth of 3% or better. He will blame Fed Chairman Jerome Powell, of course, but a major reason the economy isn’t growing by 3% is Trump’s trade war; U.S. business leaders and farmers are uncertain about tariffs, which are likely to persist for many months to come.
THE LIKELIHOOD OF A GLOBAL ECONOMIC SLOWDOWN seems to be growing, especially in Europe, where yields continue to fall. U.S.yields are slipping again, as the Federal Reserve prepares for a rate cut next week, but that’s a mixed blessing for the economy. More monetary and fiscal stimulus should delay a recession, but the savers — primarily senior citizens — want higher yields.
RATHER THAN OBSESS OVER IMPEACHMENT, the Democrats have a more potent argument, in our opinion — GDP is softening, economic uncertainty is growing, and there’s a persistent belief within Trump’s blue collar base that tax cuts largely helped corporations and the wealthy. The economy, in our opinion, may not be an enormous plus for Trump in 2020.
TRUMP SURELY MUST REALIZE that a 2% GDP growth path will erode his assertion that this is the strongest economy in U.S. history — that’s why he will leave no stone unturned: higher spending, Fed bashing, jawboning against the dollar, an eventual trade deal with China, and even a proposed tax cut. He knows his re-election depends on more economic stimulus.
THE DEMOCRATS HAVE AN OPENING on the economy, starting tomorrow; whether they will seize that opening remains to be seen. If they do, Pennsylvania, Michigan and Wisconsin will be in play, as Trump struggles to win 270 electoral votes. If the Democrats continue to play the impeachment card, that will backfire, allowing Trump to assert that there’s a “witch hunt” against him.
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ONE LAST COMMENT ON YESTERDAY: Our main take-away (other than the cringe-inducing decline of Robert Mueller) is that there still is no serious effort to curb foreign interference in the 2020 election. This was the real scandal in 2016, and — incredibly — that scandal has not produced any policy changes.
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