While there will be heated debate about if the economy will go into a recession in 2020, I think most economic analysts believe that the recent yield curve inversion on interest rates does signal a slowing economy. And if the economy begins to slide next year, Trump has already started to blame the Federal Reserve for any slowdown or possible recession. Too bad for Trump that voters will not fall prey to this BS line of his. And it isn’t because voters are so discriminating or well informed either. They simply hold the sitting president responsible when the economy tanks.
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Yes, the Federal Reserve may contribute to an economic downturn or financial collapse — Paul Volker’s Fed helped cause two recessions and Alan Greenspan helped create the financial crisis of 2008, but who catches the incoming when the economy goes south? Carter lost his reelection bid in 1980 because of stagflation, and Republicans lost the White House in 2008 partly because of Greenspan (the Iraq War was another factor).
Now, Trump will argue that the Federal Reserve is an — cough — independent agency, and the president can only appoint people to the Federal Reserve. And he is correct in this. The Federal Reserve was set up as an so called independent agency to serve the needs of the banking industry not the American people. This was the corrupt deal by the likes of J.P. Morgan when the Federal Reserve was established. The BS argument was that we didn’t want politicians to be controlling the economy through monetary policy.
Supposedly, this reasoning was accepted by the political establishment because when things went bad presidents could say, “It’s not my fault we have a recession! The Federal Reserve jacked up the interest rates and killed the economy! “ It was designed for buck passing. Unfortunately for presidents, American voters blame the guy in the White House not the Chairman of the Federal Reserve when things go bad. Besides, no American voter voted in the Fed Chair. All they can do is vote against the guy in the White House.
And yes, Trump’s guy is in charge of the Federal Reserve. Democrats will be pointing this out with glee everytime Trump screams about the Fed not doing enough for the economy. Now, this will make no nevermind to Trump supporters, but it will not work with the rest of the voters.
And the economy doesn’t even need to go into a recession to undermine Trump. If I am not mistaken, voters look at the economic trends during an election year. If the economy is growing enough during an election year, voters reward the president with reelection, even if times are still tough — think of FDR and Obama. Trump is underwater with the American people now with a supposedly good economy. How are they going to respond if the economy slows next year?
There are already a number of issues with the present economy: people working two jobs to make ends meet, few or no benefits in those jobs, income inequality, and a rural economy that is clearly suffering from Trump’s trade wars. A slowing economy will exacerbate those economic issues. And I think that the economy will at least slow next year.
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Then, the question becomes how much will voters blame Trump for their economic standing. But it’s safe to say that the Federal Reserve will not be voted out of office next year. However, I expect to hear blame heaped on the Federal Reserve between now and November 2020 coming out of Trump’s mouth. It won’t work though.