April 12, 2024

the economy stupid

Today’s Events in Historical Perspective                                                                     
America’s Longest-Running Column Founded 1932
“It’s the economy stupid”
By Douglas Cohn and Eleanor Clift         
          WASHINGTON — When asking voters what they think of the U.S. economy, the response is generally negative even if they think their own situation is good, they believe everybody else is suffering. That may be about to change.
          At the upcoming meeting of the Federal Reserve Open Market Committee, interest rates could be coming down. And if that happens, it will mark a turning point in the economy, and in the public’s view of the economy.
          The Fed beginning in March of 2022 raised interest rates at the fastest rate in history, shocking the home realty market into near paralysis as the Fed pursued its goal of bringing inflation down to 2 percent.
          The annualized rate of inflation today is 3 percent, but several Fed governors have suggested that is close enough. With unemployment up slightly, which the Fed likes because it signals a cooling economy, and GDP at 3.3 percent when analysts were expecting 2 percent, the Fed is poised to declare victory and cut interest rates.
          The conditions seem perfect – a slightly cooling economy but with unemployment still low, wages holding their own, and the predicted recession not occurring.
          If this comes to pass, it will be a boon for the housing market, which has been frozen as buyers can’t obtain or sustain loans with higher interest rates, sellers don’t want to settle for less, and unwilling to give up their existing low-interest mortgages.
          The negative views that a majority of voters have about Biden and his handling of the economy have helped fuel Trump’s third bid for the GOP nomination. Trump talks up his four years as president as the best time ever for the U.S. economy, and a lot of people believe that if it were not for the Covid pandemic, Trump was on his way to reelection.
          When he failed to win reelection, Trump simply rewrote the script to say he had won, and the election had been stolen.
          This time around, a rewrite will not be so easy. Interest rates coming down means home mortgage rates coming down along with car loans and credit card debt – a trifecta when it comes to kitchen-table issues affecting voters.
          Meanwhile, the last several months have felt like a coronation for Donald Trump as he consolidates his strength among Republican primary voters. But New Hampshire had some good news for President Biden as well. He won as a write-in with 70 percent of the vote against two minor candidates without his name even being on the ballot.
          Trump had a good night too, winning with an 11-point spread over his only competitor, Nikki Haley. But a third of Republican voters in New Hampshire indicated they would not vote for Trump in the general election, signaling trouble ahead for Trump once he leaves the comfort of GOP primaries and encounters the broader electorate.
          Historically. It is the economy that decides elections. In 1992, Bill Clinton defeated an incumbent president, George H.W. Bush, with a campaign laser focused on the economy. “It’s the economy, Stupid,” was the slogan.
          Analysts have been puzzled why a generally good economy is perceived so poorly by so many Americans, and it’s partly because they are not feeling its benefits in their daily lives. Lower interest rates can change that in a nano-second, and the moment the public realizes the economy is improving, voters should look at Biden with a more positive perspective.
          The likelihood of a Trump-Biden rematch seems all but certain – unless former First Lady Michelle Obama enters the race or former President Trump ends up in jail. But how the economy is performing, and how voters regard the economy, will play a significant, and likely decisive, role in the eventual outcome.
          Other issues like immigration and abortion and crime and cultural issues advantage one party or the other, but it is always “morning in America” for the candidate who can lay claim to the economy. 
          Eleanor Clift’s latest book Selecting a President, and Douglas Cohn’s latest books The President’s First Year: The Only School for Presidents Is the Presidency and World War 4: Nine Scenarios (endorsed by seven flag officers).
          Twitter:  @douglas_cohn
          © 2023 U.S. News Syndicate, Inc.
          Distributed by U.S. News Syndicate, Inc.

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