OFF TO THE RACES

High Expectations Could Bedevil Trump

But Democrats must choose their fights wisely or risk sharing the blame.

A stock trader has taped a one dollar bill to his computer screen at the New York Stock Exchange, Thursday, Dec. 22, 2016, in New York. U.S. stocks are lower Thursday morning as health care companies take more losses.
AP Photo/Mark Lennihan
Charlie Cook
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Charlie Cook
Dec. 29, 2016, 8 p.m.

Some things in polit­ics are hard to re­con­cile. Since Don­ald Trump’s elec­tion last month, eco­nom­ic op­tim­ism has skyrock­eted. The Con­fer­ence Board re­por­ted earli­er this week that its Decem­ber Con­sumer Con­fid­ence Sur­vey hit its highest levels since Au­gust 2001, and that while feel­ings about the cur­rent eco­nomy de­clined slightly, ex­pect­a­tions for the eco­nomy over the next six months were high­er than at any time since Decem­ber 2003. These num­bers are sim­il­ar to the Re­u­ters/Uni­versity of Michigan’s In­dex of Con­sumer Sen­ti­ment that earli­er this month reached its highest level since Janu­ary 2004. The mid-Decem­ber NBC News/Wall Street Journ­al poll showed that 42 per­cent of Amer­ic­ans be­lieve that the na­tion’s eco­nomy will get bet­ter over the next 12 months, the highest level in four years, while 19 per­cent thought it would get worse and 38 per­cent thought it would re­main about the same.

With all that in mind, con­sider that Pres­id­ent Obama’s job-ap­prov­al rat­ings are way up. In Gal­lup Or­gan­iz­a­tion track­ing polls, his ap­prov­al hit 56 per­cent last week, the highest since the earli­est months of his pres­id­ency. This was con­sist­ent with his 52 per­cent ap­prov­al in the last NBC/WSJ poll and 53 per­cent in the last Fox News poll. In fact, Obama’s job-ap­prov­al num­bers have been at or above 50 per­cent in all 12 Fox News na­tion­al polls taken since early June.

So how can voters be happy with Obama’s job in of­fice and yet al­most eu­phor­ic about the dis­tinctly an­ti­thet­ic­al Trump who is about to take of­fice? Good ques­tion.

Here’s how a Uni­versity of Michigan re­port ex­plained the ap­par­ent con­tra­dic­tion: “An all-time re­cord num­ber of con­sumers (18%) spon­tan­eously men­tioned the ex­pec­ted fa­vor­able im­pact of Trump’s policies on the eco­nomy. This was twice as high as the pri­or peak (9%) re­cor­ded in 1981 when Re­agan took of­fice. To be sure, nearly as many con­sumers re­ferred un­fa­vor­ably to an­ti­cip­ated changes in eco­nom­ic policies, but those ref­er­ences were less than half as fre­quent as the peak level re­cor­ded just three years ago (16% vs. 37%). Con­sumers an­ti­cip­ated that a stronger eco­nomy would cre­ate more jobs, al­though ex­pec­ted wage gains were quite mea­ger. Smal­ler in­come gains were off­set by re­cord low in­fla­tion ex­pect­a­tions. Need­less to say, the over­all gain in con­fid­ence was based on an­ti­cip­ated policy changes, with spe­cif­ic de­tails as yet un­known. Such fa­vor­able ex­pect­a­tions could help jump-start growth be­fore the ac­tu­al en­act­ment of policy changes, and form high­er per­form­ance stand­ards that will be used to judge the Trump pres­id­ency.”

This Michigan ana­lys­is echoes the Con­fer­ence Board re­port find­ing that views of the cur­rent eco­nomy di­min­ished slightly. As Dir­ect­or of Eco­nom­ic In­dic­at­ors Lynn Franco put it, “Con­sumer Con­fid­ence im­proved fur­ther in Decem­ber, due solely to in­creas­ing ex­pect­a­tions which hit a 13-year high.” Franco went on to re­port that “the post-elec­tion surge in op­tim­ism for the eco­nomy, jobs, and in­come pro­spects, as well as for stock prices which reached a 13-year high, was most pro­nounced among older con­sumers. Con­sumers’ as­sess­ment of cur­rent con­di­tions, which de­clined, still sug­gests that eco­nom­ic growth con­tin­ued through the fi­nal months of 2016. Look­ing ahead to 2017, con­sumers’ con­tin­ued op­tim­ism will de­pend on wheth­er or not their ex­pect­a­tions are real­ized.”

In short, at least a size­able num­ber of Amer­ic­ans are quite hope­ful that things will get bet­ter over the next year, at least in part be­cause of Trump’s elec­tion. It also might be worth not­ing that the sur­veys showed that much of the op­tim­ism was among older Amer­ic­ans. With the stock mar­ket run­ning pretty much at re­cord highs since Novem­ber, and older Amer­ic­ans gen­er­ally more in­ves­ted in the stock mar­ket than young­er people, this op­tim­ism may be re­lated to or caused by the mar­ket’s per­form­ance. But it’s not quite clear which is the cart and which is the horse. Are people feel­ing bet­ter be­cause the stock mar­ket is do­ing well, or is the stock mar­ket do­ing well be­cause people are feel­ing bet­ter, or maybe both?

Ob­vi­ously how the eco­nomy per­forms over the next year is key. Just be­fore Christ­mas, the Com­merce De­part­ment’s Bur­eau of Eco­nom­ic Ana­lys­is re­leased its “third” es­tim­ate of real change in the gross do­mest­ic product (the first es­tim­ate is pre­lim­in­ary, the second based on more data, the third vir­tu­ally com­plete, with fi­nal num­bers out in Ju­ly). The third quarter showed an up­wardly re­vised rate of 3.5 per­cent, and pre­lim­in­ary num­bers for the fourth quarter will be out on Jan. 27. The Blue Chip Eco­nom­ic In­dic­at­ors sur­vey of 53 top eco­nom­ists sug­ges­ted that the eco­nomy was likely to slow to 2.2 per­cent real GDP growth rate; the 10 most op­tim­ist­ic es­tim­ates av­er­aged 2.9 per­cent, while the 10 most pess­im­ist­ic av­er­aged 1.5 per­cent. For each quarter of 2017, the av­er­ages were in the 2.2-to-2.4 per­cent range, with the op­tim­ists av­er­aging 2.7 to 3 per­cent and the pess­im­ists av­er­aging around 1.7 and 1.8 per­cent.

For the Trump team, the les­son in all of this is that things bet­ter im­prove a lot or they bet­ter have someone or something else to blame. Re­pub­lic­ans will now hold the pres­id­ency and ma­jor­it­ies in the House and Sen­ate. They will con­trol the pres­id­ency and the House, but con­trol of the Sen­ate de­pends on at least 60 votes to de­feat a fili­buster. With just 52 seats in the Sen­ate, Re­pub­lic­ans will only be able to con­trol meas­ures that go through the budget-re­con­cili­ation pro­cess, which is not sub­ject to fili­busters.

While this puts a lot of pres­sure on Re­pub­lic­ans, it also puts some on Sen­ate Demo­crats. To the ex­tent that they are seen as ob­struc­tion­ists, they take on culp­ab­il­ity for any­thing that goes wrong. Trump and Re­pub­lic­ans can use them as a foil, blam­ing them for get­ting in the way of gov­ern­ing. That’s why Sen­ate Demo­crats need to pick their fights wisely. A strategy of giv­ing their op­pon­ents enough rope to hang them­selves is something they ought to ser­i­ously con­sider.

It’s go­ing to be very hard for Pres­id­ent Trump to make good on the high ex­pect­a­tions of his sup­port­ers. If he dis­ap­points them, who will they blame? But if Trump does de­liv­er, Demo­crats won’t be rel­ev­ant any­way. Happy New Year.

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