How Trump can still win

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Today the US GDP figures for the third quarter are published. Most economists expect growth of between 22% and 33%. The Federal Reserve, the system of US central banks, is also making its own estimates. The latest forecast of the Fed was a growth of no less than 37%, the highest in the history of the United States. Note: this is annualised growth compared to the previous quarter. Annualised means that growth is converted to a period of one year. This is not common outside the United States. Converted, therefore, the Fed’s forecast is a growth of 8.2%.

It has never happened before that an incumbent US president who stood for a second term was not re-elected when there was economic growth in the two years preceding the elections. At the same time, a recession in the two years preceding the elections almost always means that the incumbent president has to step down. This phenomenon gained importance during the 1992 elections. In March 1991 Bush senior started a ground war in Iraq which increased his popularity to 90%, but just before the elections a year later his popularity had fallen to 64%, and Bush was not re-elected. The main reason was the recession and the associated high unemployment. Bush tried to win the elections with his foreign policy but lost out on the economy. That was exactly what a Clinton campaign leader had set his sights on with the slogan ‘The economy, stupid’. Americans too often turn out to vote with their wallets. For Bush, Presidents Carter, Ford, Hoover, and Taft suffered the same fate. On the other hand, there is a long list of presidents who were given a second term: Wilson, Roosevelt, Truman, Eisenhower, Johnson, Nixon, Reagan, Clinton, Bush junior, and Obama. All because they had the economic tide with them.

In practice, it is usually referred to as a recession when two or more consecutive quarters shrink. That is the case this year. In the first quarter, the US economy contracted by 1.3% and in the second quarter by 9.0% (both figures are not annualised). This means that even with the growth of 8.2% in the third quarter, the size of the US economy is still smaller than at the beginning of this year. Recession literally means decline or setback, and in this respect, it can be said that the US economy is not yet out of recession. Trump likes to measure its policy from the development of the economy and the US stock exchange. The Coronavirus threw a spanner in the works. As a result, the elections now seem to be mainly about his approach to combating the virus. The reporting of record GDP growth may help him at the last minute. It is just a pity for him that more than 60 million Americans have already voted.

There is one president who has been re-elected, despite a recession in the two years prior to the elections. That is Calvin Coolidge in 1924. From May 1923 to June 1924, there was a mild recession. During the elections, the economy was already out of recession, the moment which, moreover, was the kick-off for the ‘roaring twenties’. An annualised growth of 37% could be an excellent starting shot for the new ‘roaring twenties’. But of course, Coolidge also had a very strong slogan: ‘Keep Cool with Coolidge’. Trump’s slogan is now ‘Keep America Great’. I would quickly add the word ‘again’ for a second term.

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