Three Months Until the Election

In the midst of a crisis, it is easy to lose sight of the medium term. Currently, as the FOMC noted, “The path of the economy will depend significantly on the course of the virus.”

But at some point, the virus will be under control, and we will need to address the significant long-term economic damage caused by the pandemic (and compounded by the ineffectual Federal response).

Three months from today there will be an election, and the outcome of that election will determine how quickly the US recovers from this crisis. First, we need to disabuse people of the idea that Mr. Trump has been good for the economy. That is not true.

Back in 2016, my outlook was very optimistic, and I wrote that the “cupboard is full”. I argued that from a short-term economic perspective, it didn’t matter who was President, the economy was poised for further steady growth.

GDP Obama Trump Click on graph for larger image.

This graph shows the year-over-year change in GDP from 2010 through 2019 (leaving out the Great Recession, and the Pandemic). GDP growth has been fairly consistent, and didn’t pickup much with the 2017 Tax and Jobs Act (this act failed to deliver the promised pickup in growth and investment).

And the second graph shows the unemployment rate for the same period.

Unemployment Rate Obama TrumpClaiming credit for the low unemployment rate is a rooster taking credit for the sunrise.

The unemployment rate is a function of the length of an economic expansion – and just the continuation of a trend.

The economy was mostly on cruise control until there was a crisis. The incompetent Federal response to the crisis has exacerbated both the health crisis, and the economic damage.

With advisors like Kudlow and Moore, there is no question Mr. Trump will bungle the recovery just like he mishandled the response to the pandemic.

Mr. Biden will receive much better economic advice, and he will also listen to a variety of opinions. But electing Mr. Biden in November – although critical – is not enough.

To achieve faster economic progress after the health crisis, Mr. Biden will need the support of both the House and the Senate. You can make a difference: Pick a race – for the Senate or the House – and support the Democratic candidate. This is the best for the economy – and for America.