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As economic warning signs flash, Trump, Democratic rivals recalibrate messages

[August 22, 2019] By Ginger Gibson and Joseph Ax

WASHINGTON (Reuters) - After two years touting a booming economy as his own doing, U.S. President Donald Trump is test driving a new message on the economy: Any chance of a recession is not his fault. But Democrats, who are shifting their message too, seem to be saying "not so fast."

Trump has moved from touting positive economic indicators since his 2016 election to now trying to blame someone else for a possible economic slowdown, while his advisers and officials are scrambling to insist there is nothing to worry about.

From the moment he was elected, Trump took credit for the strong economy. Until early 2019, advisers saw it as the biggest selling point for his campaign to be reelected president in November 2020. But softening economic data of late is raising concern his economic message could lose its punch.

Some of his Democratic rivals for the White House were quick to smell blood, although other candidates and party strategists warned they should be careful so as not appear to be rooting for economic disaster.

Most of the nearly two dozen Democrats running for the White House have been largely reluctant to talk about the broader economy this election cycle, viewing it as a losing battle given strong economic data.

Instead, they spent the past six months arguing that Trump's economy left behind the working class.

But in recent days, several Democrats, including front-runner Joe Biden, have changed tack.

"Donald Trump inherited a growing economy from the Obama-Biden administration, just like he inherited everything in his life," Biden, a former vice president, said on Tuesday while campaigning in Iowa, adding that he is not hoping for a recession. "And now he's squandering it, just like he squandered everything he inherited in his life."

Beto O'Rourke said Trump "has made a complete mess of the American economy," by entering a trade war with China.

"It is devastating farmers and ranchers and producers around this country," O'Rourke, a former U.S. congressman, told reporters on Tuesday. "Do not allow him to escape the accountability that he deserves for what he is doing to this economy - to working Americans - the peril in which he has placed us. He’ll try to blame every other person. The blame rests with Donald Trump."

Others have been more circumspect, suggesting talking down Trump's economy is a political tightrope for his rivals given still largely strong fundamentals such as low unemployment.

Asked by reporters after his speech in Iowa on Wednesday whether the country was headed for a recession, U.S. Senator Bernie Sanders of Vermont pivoted to a discussion of workers who lived paycheck to paycheck even in a strong economy.

Senator Amy Klobuchar of Minnesota, who did not address recession fears like most other candidates at the same Iowa forum, said: “You beat this president by having an optimistic economic agenda."

Former U.S. Representative John Delaney, another Democratic candidate, was more blunt about it. "It feels like some Democrats are cheering on a recession because they want to stick it to Trump," he told reporters on Wednesday.

'DESPERATE SPINNING'

Much of the political debate on both sides seems to be centered less on whether there will actually be a recession, but rather on whom voters should blame.

Trump has been castigating Federal Reserve Chairman Jay Powell for not cutting interest rates, while blaming the media for trying to "'create' a U.S. recession, even though the numbers & facts are working totally in the opposite direction."

"This is the best economy that most Americans alive have ever experienced, and no desperate spinning from Democrats or the media can change that," said Tim Murtaugh, communications director for Trump's campaign.

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President Donald Trump answers questions from reporters sitting in front of former U.S. presidents George Washington and Thomas Jefferson as he meets with Romania's President Klaus Iohannis in the Oval Office of the White House in Washington, U.S. August 20, 2019. REUTERS/Kevin Lamarque/File Photo

For Trump, it is largely about convincing voters he, not Democrats, is telling the truth about the economy, said a source familiar with discussions inside the White House, who asked to speak anonymously.

Regardless of the actual conditions, voters act on how they "feel," the source said. Trump believes that if Democrats are able to convince voters of a recession, it could be just as harmful as an actual downturn, the source said.

As Trump and his aides publicly maintain the economy remains strong, discussions about whether to stimulate the economy with various tax cuts reflect growing concern internally.

On Wednesday, Trump flipped his positions on whether to cut the payroll tax, saying he is no longer looking at that option, a sharp reversal from just a day earlier.

"The challenge is that inconsistent messaging on the economy projects weakness, and if we know one thing about Donald Trump, it is his aversion to any perceived weakness," said Doug Heye, a Republican strategist who formerly worked in Congress.

"There is still a lot of good news this White House can emphasize about the economy. Focus on that."

Unemployment remains at historic lows, the economy continues to grow and so far, there has been no actual contraction. But there is some sign of weakening in the manufacturing sector, including in states important to his reelection like Michigan and Pennsylvania.

'STICK TO THE PERSONAL'

Despite some economic warning signs flashing yellow, several Democratic consultants said candidates are better off emphasizing specific kitchen-table issues, rather than the broader economy.

"Inequality, health care – these are all interconnected. In my mind, there is no way to divorce the larger economy from the issues that Democrats have been talking about," said Jennifer Holdsworth, a veteran Democratic strategist who supports South Bend, Indiana, Mayor Pete Buttigieg but is not advising any campaign.

Several candidates, such as U.S. Senator Elizabeth Warren, have argued that some measures of economic success are biased against working Americans, noting that a booming stock market and corporate profits disproportionately benefit the wealthy.

"The Trump administration's definition of a 'strong economy' is essentially based on the stock market," said Mark Nevins, a Democratic strategist from Pennsylvania. "The people who benefit from that are more like Donald Trump than a worker from Scranton, Pennsylvania."

Nevins said Democrats need to address the economic insecurity still plaguing many working-class voters – the same feeling that helped Trump's populist message resonate with that group in 2016.

Absent a prolonged downturn, the economy writ large is likely to remain a winning issue for Trump, but focusing on specific groups who are not seeing the benefits could pay off for Democrats, experts said.

In Iowa, a key early voting state, that could include farmers hurt by tariffs on Chinese goods or factory workers whose plant shut down, Timothy Hagle, a political science professor at the University of Iowa said.

"In general, the macroeconomic issue isn't going to be a winner for Democrats unless you get to the point where it’s just a huge problem and affects pretty much everybody," said Hagle. "Right now they need to stick to the personal kinds of things."

(Reporting by Ginger Gibson and Joseph Ax, Editing by Soyoung Kim and Cynthia Osterman)

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