Trump’s hope: a recession might put him in the White House

Larry Kummer, Editor

10 years ago

Summary: The great and wise believed that Trump was a sideshow fool. Now that he decisively leads in the Republican race, they believe he might get the GOP nomination, but has no chance against Clinton. A simple example shows why that is not correct. If the polls are even roughly accurate, an easily imaginable event could put Trump in the White House.

The GOP contest: Trump on top.
Hillary vs. Trump: it’s close.
Trump’s hope: a recession.
Conclusions.
More about the Trump revolution.
For More Information.

(1) The GOP contest: Trump on top

Trump’s ratings have risen despite opposition of the news media and the GOP leadership. Now he has to translate that into votes in the primaries. Civis Analytics, a Democratic data firm, has published detailed demographic data about Trump’s supporters. It is quite broad, showing that he has the necessary base. His ability to build the necessary organization remains unknown.

The message of the polls is clear. See the timely and comprehensive data at RealClearPolitics.

(2) Hillary vs. Trump

Hillary’s lead over Trump is only slightly larger than these polls’ typical 3 percentage point margin of error with a 95% level of confidence. The most recent three polls show Clinton’s lead as +7%, +2%, and then +1%. This makes the confidence of the great and wise in Hillary’s victory seem exaggerated. The election could be close if Trump builds a campaign machine and just maintains his current strength in the polls. But he might need a lucky break to win…

(3) Trump’s hope: a recession

The Atlanta Fed’s GDPnow model forecasts Q4 GDP at 1.3%; the estimate (green line) is falling. Updated graph as of Jan 6: their forecast is now +1.0%.

Real GDP has been running close to “stall speed” since 2010. Only repeated bouts of stimulus and good luck prevented a recession, which shows the deep weakness of the US economy. The red line on the following graph adds the GDPnow forecast of 1.3% for Q4. Continued slowing could easily give us negative GDP in Q2 or Q3 — for maximum effect on the election,

(4) Conclusions

Many things might tip the election to Trump — such as a serious scandal or a terrorist strike — but a recession seems the most likely of these.

Predicting recessions 6 – 9 months out is beyond the current state of the economic art. With only 17 presidential elections since WWII, we have too little evidence to determine the effect of the economy on election results (see this article by Nate Silver).

But we do know a few things. A recession is quite possible in 2016. Given the the economy’s weakness after this slow recovery, we might get a severe downturn. The economy in the year before the election clearly has a large impact. Hillary, as the candidate of the incumbent party, would suffer most from a recession. So if Trump retains his strength in the polls, this might put Trump in the White House.

This election has been a series of unexpected events. We might look back at it as the beginning of a A Series of Unfortunate Events.

(5) Other posts about the new populism

(6) For More Information

See my Jan 6 article at Seeking Alpha about the odds of a recession in 2016.

A rare mention (quickly dropped) in the major media that Trump is a populist candidate: “The Great Republican Revolt” by David Frum in The Atlantic — “The GOP planned a dynastic restoration in 2016. Instead, it triggered an internal class war. Can the party reconcile the demands of its donors with the interests of its rank and file?”

If you liked this post, like us on Facebook and follow us on Twitter. See all posts about our economy, and especially Recession Watch: the economic indicators that show what’s coming.

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