Monday, December 5, 2016

Political implications of Trump's Carrier deal

Donald Trump worked out an arrangement with Carrier that kept a tiny number of jobs in the US, in exchange for some tax breaks for Carrier.  He got great press coverage.  Alarmists suggest that he can distract the press this way for an entire presidency while doing stupid stuff and get away with it.  It doesn't work that way.

Remember, he won because Alan Abramowitz was right.  Alan Abramowitz's presidential forecasting model is the "Time for a Change" model.  The gist is this:  one party has a really hard time winning three elections in a row, which only happens when the economy is going gangbusters.  It happened in 1988, but that's the only time in the post-WWII era that a party has won a third term.  In 2016, we had tepid economic growth.  Underlying conditions favored the Republicans.

How do we measure conditions?  Abramowitz favors GDP growth as his measure of the state of the economy, but other political scientists, like Doug Hibbs, prefer measures like Real Disposable Income growth, which factors in both unemployment and inflation.  Either way, they measure the broad economy.

Small-bore deals, like the Carrier deal, cannot affect the national economy, and if the economy does poorly while Trump stages stunts like this, the kind of analysis that really did predict a Republican victory suggests that things will go very badly for him.

So, yeah.  Go for it, Donny boy.

Now, what will Trump's actual macroeconomic policy look like, and what will the implications be?  Um, who knows?  The state of the economy is largely out of the president's hands.  However, he will be unable to respond intelligently to exogenous shocks, both because he knows nothing about economics, and his team of cronies knows nothing.

Oh, and here's GDP growth for the last 20 years, according to Federal Reserve Economic Data.  We could very well have a recession soon.

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