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 25 October 19 It's Live on the HomePage Now: Reader Supported News Sure, I'll make a donation!
FOCUS: Paul Krugman | The Day the Trump Boom Died
 Paul Krugman, The New York Times Krugman writes: "Last spring Donald Trump and the people around him probably thought they had a relatively clear path to re-election."
EXCERPTS:
However, important parts of the economy are lagging. Manufacturing production is down over the past year; combined with weakness in shipping and very hard times in agriculture, around a fifth of the economy is effectively in recession. In particular, manufacturing employment has been falling in Michigan, Wisconsin and Pennsylvania, states that chose Trump by tiny margins in 2016, giving him a win in the Electoral College despite losing the popular vote.
And overall growth, while still positive, is definitely slowing: “nowcasts,” which use partial data to estimate what official economic data will say when it’s eventually released, suggest an economy growing at an unimpressive annual rate of less than 2 percent. Since elections turn more on the economy’s growth rate than on things like the level of unemployment — unemployment was still more than 7 percent when Ronald Reagan won his 1984 landslide — this is not good news for Republicans.
Probably even more significant, there has been a dramatic decline, almost a collapse, in business confidence.
And 10-year bond rates have plunged, from more than 3 percent last year to 1.75 percent as I write this. The last time we saw this kind of plunge was 2010-11, when investors finally realized that recovery from the Great Recession was going to be slow and painful, not a repeat of “morning in America.”
So what happened to the Trump boom? The collapse in confidence began late last year, when it became clear that Trump was serious about waging trade war on China; it continued as evidence accumulated that the 2017 tax cut was a big fizzle, doing basically nothing to boost business investment and providing at most a brief sugar high to overall growth.
But the truth is that even pessimists expected the tax cut to do more good, and the trade war less harm, than they did. Why have things turned out so poorly? One answer, to which I’ve subscribed, is that in addition to its direct impacts on U.S. exports and businesses that rely on Chinese suppliers, the trade war has created damaging uncertainty. Businesses that rely on global supply chains won’t invest for fear that the trade war will get even worse; but businesses that might move in to replace imports also won’t invest for fear that Trump will eventually back down.
I suspect, however, that there’s even more to the story. Business interests spent a long time in denial, but now even they are facing up to the reality that Trump and his team are very strange people who have no idea what they’re doing — and the uncertainty that reality implies.
I mean, considering that trade confrontation with China is the centerpiece of Trump’s economic policy, it’s not reassuring to learn that his trade war czar, Peter Navarro, has an imaginary friend — a source named “Ron Vara” whom he has repeatedly cited in his books, but who doesn’t exist, and whose name is in fact just an anagram of “Navarro.”
Next year’s election should be about Trump’s betrayal of his oath of office. Realistically, however, it also matters that the economy probably won’t be his friend.
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