Recently, the interest yield of the 10-year US Treasury bond dipped below the interest yield of the 3-year US Treasury bond. The difference between these two yields is plotted on a graph and called a curve. When the curve dips below zero, i.e. the yield of the 10-year bond is less than the yield of the 3-year bond, that indicates that investors think it is riskier to keep money in the 3-year bond (and thus, in simple terms, you will make more money on the interest if you risk putting your money there) than in the 10-year bond (so you will make less money if you put your money there, because it is safer bet). The bond yield curve is a good indicator that a recession might be coming soon, within the next 3 years, or at least that investors and the market generally expect that a recession is likely. The curve inverted like this in 2007 before the 2008 recession, and again before every recession going back for decades.
Of course, with news that the bond yield curve is inverting now, the news is buzzing with recession worries. Add to this the falling DOW Jones Industrial Average and bad news coming out of Trump’s trade war with China, and the nation is feeling economic anxiety that it hasn’t felt in 10 years. After a decade of booming growth during the Obama years, Americans are afraid that Trump is going to ruin the economy the way he has bankrupted many of his other businesses. He is infamous in the business world for taking over companies, pumping up their value artificially, running them into the ground, and then selling off the parts for profit. Why would he do anything else as President? Can he do anything else?
The popular wisdom about recessions is that they have the power to end presidencies. This has been born out in most past recessions. They have historically happened during Republican administrations and they often lead to a Democratic victory in the next round of elections. If that pattern holds up and there is another recession in the next 12 months, then Democrats could be looking at an easy victory in 2020, so the thinking goes. Of course, that does not mean that Democrats want a recession. It simply means that if a recession happens, the silver lining for Democrats will be that they will be ushered back into power. Since Democrats have so far failed to impeach Trump or take him down via a scandal, they are eager to vote him out in 2020, and a recession would boost their chances to do that.
However, popular wisdom is often wrong. Of course, the chances that a recession would not take Trump down are low. His approval ratings are already way down and he is facing several potentially strong primary challengers in 2020. Adding a recession to that would basically be a nail in his golden coffin. But Democrats have historically underestimated Trump’s ability to survive in the face of adversity, and not just survive, but flourish. He seems to have a knack for gaining power despite threats from all sides. Democrats have repeatedly felt absolutely certain that some scandal or tweet or polling number would indicate or lead to Trump’s downfall. Such an event has never happened. Trump is still President. As a result, as unlikely as it might be, it is worth considering how Trump’s presidency could survive even an economic recession.
Probably the most likely way Trump would be able to survive a recession is by blaming it on the Democrats in Congress. Generally, Americans dislike Congress much more than Presidents, and they are always ready to blame lawmakers who they feel are trashing the country. Trump has already started blaming Democrats for opposing the United States-Mexico-Canada Agreement (USMCA), Trump’s new replacement for NAFTA. If that deal falls through, Trump can easily turn around a blame Democrats for a recession. This would obviously be nonsense, but what matter is in the age of fake news is not the truth, but the narrative. All Trump has to do is create a false narrative that, by thwarting the USMCA, the Democrats doomed an otherwise booming economy.
Another way Trump could build a narrative that scapegoats an enemy in order to escape the wrath of the voters would be to blame China. This is a bit of a weaker narrative than the other possible narratives that Trump could fabricate since Trump is clearly responsible for starting the trade war with China. But blaming China gives Trump the ability to say that Americans need to suffer in the short term in order to gain in the long term. He can blame the recession on older trade deals from Obama’s administration and previous administrations while claiming that he is working out deals that will fix what was already broken before he took office. "Someone has to take China on," Trump told reporters during a meeting with the Romanian president. "Whether it is good or bad for our country short term, it is bad for our country long term. Whether good or bad short term is irrelevant."
Finally, Trump can blame his favorite non-partisan scapegoat: the Federal Reserve. Trump loves to bash the Fed when it makes responsible moves to adjust interest rates and control the flow of cash through the economy. The Fed raises interest rates when the economy is strong in order to build a cushion for when the economy is suffering so that they can lower it again if needed. Does this move slow the growth of the economy? Yes. But it can also prevent the economy from overheating, in a manner of speaking. Interest rates make it cheaper to borrow money from banks, and this can lead to runaway inflation rates. Adjusting interest rates is a very complicated move, but the Fed does not make such a decision for partisan reasons. Trump disagrees and has called the Fed an ‘enemy’ of his administration. If he ramps up that line of attack, he could easily trick his supporters into inappropriately blaming the Fed for a recession that the Fed is trying to prevent.
The main thread through all of these moves is that Trump has an amazing ability to rile up his supporters and control what they believe. He can make them believe whatever he wants and blame anyone for their troubles. His supporters tend to be more disposed to conspiracies and are easily influenced by Trump paranoid flights of fancy. If he trains them on a scapegoat, they could ignore logic and reason, and insulate Trump at the polls. If Trump is wildly successful with this strategy, he could even convince voters to blame Democrats completely for a recession, and there is a good reason to think he could have that ability. Given his supporter's ability to delude themselves into believing his lies on a range of topics, there is no reason to think they couldn’t also execute the mental gymnastics that would be needed to blame Democrats for a recession that Trump creates. This would be a stronger possibility if the Democrats block the USMCA and other similar economic initiatives. The Democrats would be doing the correct thing in blocking the USMCA since it is such a bad deal, but Trump can spin it put Democrats on their heals.
Democrats could end up taking the brunt of the criticism for a recession. When recessions happen, people get angry and look for someone to blame. Trump has such a strong cult of personality around him that it is possible that voters would be unable to see him as responsible for a recession that he creates because they buy into that personality cult so deeply. If worst comes to worst, Trump could even blame immigrants and scapegoat minorities. He has already demonstrated his willingness to put immigrants into concentration camps and his supporters have already demonstrated a willingness to scapegoat minorities for their own problems, as indicated by the rise of the far-right and white nationalism all over the US. Since the Democrats tend to defend immigrants, the right could tie the Democrats to the immigrants, and merge all of the above narratives together into a potent xenophobic anti-democratic movement.
Is all of this speculation alarmist? Yes, in part it is alarmist and unlikely to happen. But it is important that Democrats acknowledge this possibility because we are living unlikely times. Things that were thought of as alarmist just 4 years ago are now common sense. In 2016, who would have reasonably expected that there would be concentration camps on American soil in 2019? Only alarmist fringe activists were saying that this was an unbelievably shocking possibility, and now it is barely an afterthought for most Democrats. Democrats need to be ready to counter the narratives that the President is already putting out there for his supporters to gobble up. Sure, a recession in 2020 will make it easier to take Trump out. Is a Trump loss in 2020 a sure thing if a recession does happen? No, not at all.
