The Dow is down over 1,150 points for the week. It’s hard to know how much of this is a weakened tech sector, how much is driven directly by Trump’s hamfisted saber rattling on trade, and how much is simply investors preparing for the downside of the business cycle. But the inversion of the yield curve suggests that the market is anticipating a downturn.
Recessions have many deleterious effects on people’s lives, all the more so when most are stretched thin with little savings buffer to sustain a job loss or drop in fixed investment income. It is all the more frustrating when increasingly only the wealthy reap the gains from a bull market, but everyone suffers the effects of a bear market. The widening gap between the economy as experienced by most workers and that experienced by the investor class has begun to affect politics as well: in addition to the racist anxieties on display among (mostly exurban and rural) white voters across the developed world, we are also increasingly seeing the sort of grassroots anger even in nominally “good” economies over kitchen-table issues that we typically see in recessionary environments. This is particularly true among people under 40, a generation whose prospects have been crushed under the weight of student debt, low wages and artificially inflated housing costs due to shortsighted and self-serving policies enacted by their elders. Most of the young tend to be multi-racial, urban without nostalgia for a past that never was, and thus look to socialism as a fix for a dramatically unequal and unsustainable economic system. Meanwhile, the declining fortunes of rural and white working class communities in contrast to the record wealth of the urban investor classes are also exacerbating prejudices around race, gender and class among mostly older voters everywhere from the Gilets Jaunes riots in France to Brexit to deleterious Trumpian trade wars.
Ironically, however, one of the consequences of both economic equality and demographic change has been the hardening of partisan stances. The siloing effects of social media bubbles have only served to reinforce this trend. Even strongly cross-pressured voters are sorting themselves into one camp or the other. While there are still many Democratic voters who have prejudiced views but continue to align with their economic interests, racist and sexist voters are increasingly aligning with conservative politics overall while less prejudiced voters are aligning with liberal policies in all respects. In fact, recent data show that this sorting effect is serving to heighten these effects: political self-sorting is creating a virtuous circle among liberals in which prejudice decreases with partisan affiliation, while the opposite is true among conservatives for whom mild prejudices are becoming more virulent.
Thus, the number of undecided voters has shrunk dramatically–and with them, many of the assumptions that have undergirded traditional political analysis have had to change as well. Local politics have become nationalized to an unprecedented degree. The advantages of incumbency have been severely weakened: it is now difficult even for long-time respected incumbents to hold seats in states and districts whose partisanship crosses in the opposite direction.
We may see the same effect in the economy. Traditionally, the party in power during an economic recession tends (justly or unjustly) to suffer the wrath and discontent of the voters. Nearly every election prognosticator and political science builds economic effects into their prediction models.
But it’s entirely possible that unequally distributed effects of both boom and bust economies may combine with hyperpartisanship to soften or even negate traditional economic influences on voter behavior. It’s possible that Trump maintains a 40% approval rating because of an economy that is performing strongly by traditional measures. But it’s also quite possible that few of his supporters would be abandoning him even in a recessionary environment. After all, as the endless string of journalistic ethnographies never cease to remind us, Trump’s rural supporters seem to be sticking with the self-proclaimed “Tariff Man” even when his trade policies drive them out of business. Nor is it clear that even an economic downturn would do much to foment anti-Trump sentiment even more fervently than it is already felt on the left.
So for potentially the first time in American history at least since the Civil War, it is possible that underlying economic conditions may not be quite the predictive factor they once were.
The problem for Trump and the Republicans is that they already didn’t have much margin to begin with. Winning the electoral college without the popular vote is a fairly difficult feat, and it requires no small amount of luck. Republicans have done it twice in the last six cycles, but doing it again will be difficult. The 2018 midterms demonstrated that Trump has alienated large groups of voters who may have supported him previously, especially upscale suburban voters, those with college degrees, and a large number of Obama-Trump switchers who seem to be coming back home to the Democratic Party. Trump will have the advantage of incumbency, but as we have seen that advantage has shrunk. The economy may not be quite the factor it used to be, but even a small effect would be devastating given the headwinds faced by the GOP.