By Erick Erickson
President Donald Trump has backed off tariffs on toys made in China. His commerce secretary, Wilbur Ross, said the administration did not want to hurt Christmas. This is an admission against interest that the trade war with China is hurting the American people.
Last week, the yield curve inverted. Normally, the yields, or interest rate, on long-term bonds are better than the short-term bond yields. The government is now having to pay higher rates on two-year bonds than on 10-year bonds because investors are losing confidence in the short-term economy. This “inverted yield curve” has happened before every recession in the past 50 years.
Janet Yellin, the former chair of the Federal Reserve, said she thinks the economy is strong, but she is troubled by this development. The President blames the current head of the Federal Reserve, Jerome Powell, for having raised interest rates only to lower them. The problem for the President is that no one elected Powell. President Trump appointed him. Trump claimed he only hires the best people but now blames his own appointee. If Trump does not do something positive for the economy, already agitated voters may revolt.
Unfortunately, there may be little the President can do. China is happy to wreck its economy to hurt Trump. They intend to embarrass the President in the trade war. The Europeans are mad at Trump for his trade war and have no interest in working with him. The British are mad at the Europeans as they're going through Brexit. The British and the Europeans are also mad at China for what is happening in Hong Kong.
Normally, when the inverted yield shows up, world leaders work together to prevent a recession. Thanks in large part to the President's foolish trade war, which every sane economist — including most who work for the President — warned could cause a recession, world leaders have no intention of cooperating to stave off a recession. It has become in every country's best interest for every other country to lose, especially us, as President Trump first imposed tariffs.
Many Americans have wondered why, with such a great economy, the President's poll numbers have never been strong. The reality is the good economy has most likely kept the President's poll numbers from going even lower.
In practical terms, the President's team thinks the United States has more wiggle room in the global economy than most. They also think that as the Democrats trend left, the President has an opportunity to claim their policies would make the domestic economy even weaker. Lastly, they intend to engage in a culture war campaign, just as Democrats and much of the media seem intent on launching a campaign of white guilt and shame across the nation. Democrats and their friends in the press are suggesting everyone is a white supremacist unless they vote Democrat. The President's team presumes that will go badly in suburban America.
But suburban Americans are not primarily culture warriors. In their communities, the screeds and screams of the left do not reverberate. Suburban Americans tend to consider themselves socially conservative, but these issues do not make them passionate in one way or another. They may have not supported gay marriage, but they also did not really care when the Supreme Court imposed it. They may not support abortion rights, but they do not go vote to advance the pro-life cause. They may own guns and like to shoot, but they are not too worked up by politicians' seeking to make it harder for others to buy guns.
The one issue that fires up suburbia is the value of 401(k)s. Any politician who screws up people's investments will see suburban hordes descend on ballot boxes across America to destroy the politician and their party. In the best-case scenario, they may just sit home. Either scenario should worry the GOP if the economy begins to struggle. President Trump won with 70,000 votes in Michigan, Pennsylvania and Wisconsin. He and his party could see a revolt in those very areas if voters blame his trade war for the decline in their retirement funds.