Trump’s Economy in a Time of Scandal

How much will the economy matter to voters in November?

The congressional leaders of his Republican party want President Trump to stop his-and now is indeed his as much or more than theirs-incontinent tweeting, arguing that it unsettles independent voters. They want him to restrict his campaigning to scripted speeches extolling the virtues of his and their tax and deregulation policies. The president, who has been in the business of politics for 1,054 days, if we count from the time he announced his candidacy for the Republican nomination, thinks he knows better than Senate majority leader Mitch McConnell (about 12,000 days) and House speaker Paul Ryan (about almost 9,000 days). With some reason. After all, they trek to the White House to meet with a man whose presidential campaign professional politicians considered a joke.

Trump is probably right that his tweets rally his base, the 35 to 40 percent of voters unperturbed by alleged liaisons with a porn actress and a conspiracy with the Russians to rig the 2016 election in his favor, or his erratic behavior. He is gambling that the performance of the economy will add enough voters to that tweet-loving core to produce Republican majorities in both houses of Congress later this year and re-elect him in 2020. He had better be right about the congressional races. If the Democrats gain control of the House, they will almost certainly impeach him: Charge him with crimes that make him unfit to hold office. Like Andrew Johnson and Bill Clinton before him, he will probably be acquitted by the Senate, where it takes a two-thirds vote to convict. Still, impeachment is not likely to be a pleasant process for a man who craves more than acceptance-adoration.

Most analysts are unperturbed by the fact that the economy seems to have grown at a rate of only 2.3 percent in the first quarter, below both the 2.9 percent achieved in the final quarter of last year, and the 3 percent that is Trump’s target (which in moments of ebullience is 4 percent, and has been as high as 6 percent). The 2.3 percent is a preliminary estimate, likely to be revised, and the effects of the tax cut and Trump’s deregulatory policies are only now starting to make themselves felt.

In the next two quarters, the crucial months preceding the November congressional elections, the economy will likely move forward at a 3 percent clip, with inflation running at a rate of about 2 percent. That’s the target of the Federal Reserve Board’s monetary policy gurus, who have indicated that after years in which inflation under-shot its target, even a bit of over-shooting would not prompt them to accelerate the slow pace of its interest rate increases. So there is no threat that the central bank will rain on the president’s parade.

Very wise. Although independent, the Fed has to keep a wary eye not only on an unpredictable president, but on a Congress that might not take kindly to interest rate increases that slow growth just as workers are starting to share in the recovery.

Polls show that the top issue for Americans-Democrats, Republicans, and independents alike-is the economy. And Trump has a reasonably good story to tell. The economy added 164,000 jobs in April, bringing the average in the past three months to 208,000. The unemployment rate fell to 3.9 percent, the lowest since December 2000, in part due to exits from the work force, largely by retirees. Average hourly earnings are 2.6 percent higher than they were a year ago. Add to that tame inflation and a healthy growth in corporate profits, with about half of the increase coming from the tax cuts Trump pushed through Congress.

In short, Trump is presiding over a Goldilocks economy: not too hot, not too cold. He promised jobs, jobs, jobs, and will take credit for having made the labor market great again, not unreasonable since presidents get the blame for recessions, in this case even though job openings were quite high when Trump took office.

I have spent the past couple of weeks interviewing employers. The tale is the same in every industry: can’t find staff. One employer in the service sector advertised in local papers and on craigslist what for his business is generous compensation, and had not a single applicant. Another, in the home furnishings business, is reluctant to take on new business because he can’t fulfill existing orders and can’t find workers. And one builder told me that any workers with the skills he needs to get houses built for demand he knows to exist are in Houston, earning double wages for repairing homes hit by recent floods. All say they are having trouble competing with the benefits paid those workers who choose a couch in their parents’ home to regular work.

Further proof of the availability of jobs is provided by the Wall Street Journal survey of several towns, once blighted by the flight of factories. Hamilton, Ohio, is offering any young workers who will move into the “spruced-up, waterfront loft apartments” $5,000 to pay student loans. Grant County, Indiana, matches that toward a new house. The chamber of commerce of North Platte, Nebraska, will present an even larger check at a public welcoming ceremony to any worker who chooses to move to that city. The town of Marne, Iowa, is offering free parcels of land to people who move there.

All of these incentives might just lure still more workers off the couches and back into the labor force, in which case the shortage is a temporary blip. If not, and the bottleneck does slow growth and trigger inflation, that won’t happen for the next few years. Which is all Trump cares about. It is said that in politics timing is everything. And Trump’s timing-a run for office when the opposition candidate was the weakest in decades and the electorate was fed up with politics-as-usual-has so far been impeccable.