Donald Trump is on a roll. Forget the polls, which show the president’s popularity to be somewhere in the 30 percent range. He knows that’s about twice as high as Congress rates with voters and that what matters is:
The economy grew at an annual rate of 3 percent in the quarter just ended, the fastest rate in two years;
Macroeconomic Advisers is forecasting that growth will hit a rate of 3.4 percent in this quarter;
For the first time in a dozen years more than half of American workers say they are satisfied with their jobs and feel safe from layoffs;
Business investment is growing, at annual rates of 7.2 percent in the first quarter and 6.7 percent in the second quarter.
Unemployment is low, 4.4 percent overall (4.1 percent and 4.0 percent for adult men and women, respectively), and the economy has added an average of 185,000 jobs per month in the past three months according to Friday’s job report, bringing the total added since Trump moved into the White House to a bit below the one-million mark, about in line with the economy’s performance in the last six months of his term. (This latter fact is not mentioned by Trumpeteers.)
Share prices as measured by the S&P 500 are up almost 20 percent since Trump won the presidency.
Voters may be grumpy about what their politicians are doing or not doing, but confidence is high and consumer spending has risen in every month this year. Not for American consumers warnings from the practitioners of the dismal science that the current growth rate will prove to be a blip, after which growth will return to 2 percent or less, in part because of supply constraints – labor shortages and low productivity — that will stifle growth.
Also, the Federal Reserve Board’s policy gurus are set to tighten monetary policy, to do what central banks are supposed to do at this stage of an economic cycle and “take away the punch bowl just as the party gets going,” as a former chairman of the Fed once famously said. Interest rates are headed up and Fed holdings of mortgages and bonds are headed down.
Then, too, the auto industry, a key driver of the American economy, is not able to move vehicles from showroom floors into consumers’ garages at the pace of recent years. Ford in particular is facing rising inventories of unsold vehicles, and responding by relaxing credit standards even further. Finally, there is the threat of a trade war.
Which brings us from the real world of work and spending to the surreal world of Washington, where the unconsummated marriage between Donald J. Trump and the Republican party has ended in divorce. The party is claiming infidelity to its principles, the president betrayal of Republican promises to repeal and replace Obamacare. The president and Senate majority leader Mitch McConnell have engaged in shouting matches over the phone, and House Speaker Paul Ryan has repeatedly distanced himself from the tweeter-in-chief. The congressional leadership has decided to act as if the president is not a Republican, but an independent with a shrinking political base and no sense of obligation to his partners-in-governing. Its plan is to proceed to craft legislation that it can persuade the members of the Republican family to support, put it on the desk of the independent president, and let him veto it if he dare.
Trump is at war not only with Congress, but with members of his own team. Commerce Secretary Wilbur Ross, a man who parlayed his knowledge of steel markets into a fortune, cajoled the Chinese into agreeing to reduce steel capacity to achieve Trump’s goal of rising prices. His reward was a dressing down from the president who shouted, “I want tariffs. And I want someone to bring me some tariffs. For the past six months, the same group of geniuses comes in here all the time and I tell them, ‘Tariffs. I want tariffs …’” Rather like a little boy savoring the shock effect of his use of a newly discovered “dirty word.”. Poor Ross had to reconnect with China’s negotiators and renege on his agreement to a capacity-reduction deal.
The Chinese know a loss of face when they see it, and other nations know loss of a negotiator’s credibility when they see it. Mexican and Canadian negotiators are now wondering whether America’s NAFTA negotiators are more than notetakers for an unpredictable boss.
Trade policy is not the only area in disarray. The president has launched a nationwide speaking tour to drum up support for his tax reform proposals. But Republican leaders have already decided that Trump’s plan to cut the statutory corporate tax rate from 35 percent to 15 percent is a non-starter; they are aiming for somewhere between 20 percent and 25 percent. As for reform as opposed to tax cuts, Republicans are said to be going their own way, which they hope will include an end to many so-called “loopholes” to provide money to pay for the tax cuts.
There’s more. Gary Cohn, the president’s key economic adviser, made no secret of his horror at Trump’s claim that there were “very fine people” among the Nazi thugs who rioted in Charlottesville, and his boss’s insistence on tariffs. He has been dismissed by the president as “a globalist,” not a good thing to be in an America First administration. Cohn is widely believed to have ruined any chances he might have had to succeed Janet Yellen as chair of the Federal Reserve Board of Governors. That has reignited speculation that the president will re-appoint Yellen, a move that would reduce the likelihood of a monetary policy as relaxed as Cohn is said to favor.
So here is the lay of the land in Washington as we enter a crucial period in which important economic policy decisions are to be made. The president is at odds with his commerce secretary and chief economic adviser over trade policy. He is at odds with Congress over his demand for a border wall with Mexico, and is threatening to allow a government shutdown this month if Congress doesn’t fund that wall. He is at odds with the leadership of Congress over tax policy. His ambivalent attitude toward right-wing hoodlums has prompted business leaders to withdraw from his advisory committees.
It comes down to this: A majority of Americans are unhappy with their government and happy with the economy and their jobs. Trump is gambling that come the congressional elections next year, Americans will vote their wallets, that “It’s the economy, stupid.”
This post originally appeared on Weekly Standard