What Candidate Trump Knew That President Trump Forgot

(Bloomberg Businessweek) -- Donald Trump got elected in 2016 in no small part because he had the good sense to recognize a bad deal—and to offer voters a better one. One afternoon in May 2016, soon after knocking off 16 Republican challengers to cinch his party’s presidential nomination, Trump matter-of-factly explained how he’d done it. Sitting in his Trump Tower office beside a replica model of a Trump airliner, the future president described for me a confrontation he’d just had with soon-to-be-House Speaker Paul Ryan, a proud avatar of small-government conservatism.

Trump realized that Ryan’s plan to finance a tax cut for the rich by cutting programs such as Medicaid and Social Security would harm the GOP’s White, blue-collar base. It offered voters a lousy deal, while Democrats promised a better one. “I told Paul, ‘We’ve got to win an election,’ ” Trump said. “There’s no way a Republican is going to beat a Democrat when the Republican is saying, ‘We’re going to cut your Social Security,’ and the Democrat is saying, ‘We’re going to keep it and give you more.’ ” In the GOP primary, Trump had differentiated himself from the rest of the field by assiduously vowing to preserve those popular programs. It worked. Polls showed voters perceived him to be the most moderate candidate in the field and the likeliest to look out for their interests. As Trump told it, he’d rejected his party’s orthodoxy and made voters a better offer—one they’d gladly accepted.

Four years later, Trump is in big trouble. With Election Day less than two months away, polls show him losing to Joe Biden. Battered by a stubborn pandemic, persistent unemployment, and a reeling economy, voters by a 3-to-1 margin tell pollsters the country is headed in the wrong direction. Trump has little time to turn things around. If ever there was a moment to employ his dealmaking savvy, it’s right now.

Once again, Democrats are offering a more generous deal than Republicans: a $3 trillion coronavirus relief package the House passed in May vs. the $300 billion alternative that Senate Republicans failed to push through earlier this month. But unlike in 2016, Trump’s salesman instincts have failed him. Instead of spurning Republicans’ parsimony and using the Democrats’ lifeline to turbocharge the economy, Trump—consumed by his litany of grievances—has forgotten his electoral self-interest and acceded to his party’s desire for austerity. He doesn’t have to. As the unquestioned alpha dog of the GOP, Trump has shown he has the power to force Republican lawmakers to defend and support almost anything. If he pushed them for a bigger stimulus package with anything like the public vigor he’s shown in going after Biden or Bob Woodward, he’d undoubtedly get it.

Instead, as the recovery slows, bankruptcies loom, and aid for workers and businesses dries up, Trump looks set to willingly preside over something that once seemed unthinkable—abandoning further recovery efforts and cutting off millions of Americans just weeks before they cast a vote to decide if he merits another term.

There was never any doubt that the pandemic would be Trump’s greatest challenge as president and the main obstacle to his reelection. “This will be the biggest national security threat you face in your presidency,” national security adviser Robert O’Brien told him, according to Woodward’s new book, Rage. “This is going to be the roughest thing you face.”

At first, Trump was able to mitigate the economic fallout from the crisis, with help from Congress. In March he signed the $2 trillion Cares Act—more than he’d asked for—supplying $1,200 stimulus checks to 159 million Americans; adding $600 a week to unemployment benefits; and dispensing hundreds of billions of dollars more to rescue airlines, cruise companies, and hotels, while propping up more than 4 million small and midsize businesses (and their employees) through the Paycheck Protection Program. Economists marveled at how well the Coronavirus Aid, Relief, and Economic Security Act worked in blunting the effects of a steep recession. While earned income plummeted in the spring as jobs vanished in the pandemic, Americans’ real personal income increased. Thanks to the government’s emergency spending, many people had more money in their pockets than they did before the crisis.

That stimulus has largely run its course. The $600 expanded unemployment benefit expired on July 31. The funding spigot for small and midsize businesses was shut off on Aug. 8. Aid to state and local governments has also run out, leaving a projected funding shortfall of $500 billion by 2022, according to Moody’s Analytics. Governors and mayors in both parties say failure to extend it could force layoffs that would put millions of teachers, policemen, and firefighters out of work.

Millions of other American jobs are at risk in the private sector, particularly in industries that were buoyed by the government rescue. MGM Resorts International, reeling from declines in travel and tourism, is laying off 18,000 workers. American Airlines says that if federal payroll aid isn’t renewed by month’s end, it will cut 19,000 jobs, adding to the thousands already eliminated by United and Delta. “The one possibility of avoiding these involuntary reductions on Oct. 1 is a clean extension of the PSP,” Chief Executive Officer Doug Parker and President Robert Isom said in a letter to employees, referring to the government’s Payroll Support Program.

There’s no sign help is on the way. Congress returned to Washington in early September with both parties claiming that further aid was necessary but unwilling to bridge their multitrillion-dollar gap. In fact, Senate Republicans scaled back an earlier $1 trillion relief package and then failed to pass even this slimmed-down measure. Without pressure from Trump, Congress appears ready to give up on additional support, despite the danger this would pose to the shaky recovery. “Ultimately, the recovery in the economy and the job market will depend on a medical solution to the coronavirus,” Nancy Vanden Houten, senior economist at Oxford Economics told the Associated Press. “In the near term, we think the lack of further federal support poses serious downside risks to the outlook.”

Abandoning rescue efforts could usher in a painful reversal. Although the unemployment rate dipped below 10% this month for the first time since March, the Labor Department’s latest jobs report indicates that losses once thought to be temporary are becoming permanent. Almost 30 million Americans already rely on some type of unemployment benefit. A new wave of bankruptcies, layoffs, and evictions would dash any dream of a V-shaped bounce back and force Trump to contend with what might, in the best-case scenario, resemble a W-shaped recovery.

Even if the economy treads water, Trump will soon face a new electoral risk if he doesn’t persuade Congress to deliver another round of stimulus checks and augment unemployment benefits. A sizable body of academic research finds that voters judge incumbent presidents based on the state of the economy in an election year—no surprise—but in particular on the state of their personal income. Preserving people’s personal income is precisely what Trump accomplished by signing the Cares Act. But that support has ended.

Larry Bartels, a Vanderbilt University political scientist who studies the economy’s effect on elections, says changes in people’s personal income, even more than the overall state of the economy, are what will shape their impression of Trump. He and Princeton University professor Christopher Achen “found a strong relationship between changes in real disposable income per capita in the second and third quarters of presidential election years and the incumbent party’s electoral fortunes,” Bartels told me. That window is closing fast. With Congress set to adjourn in early October, Goldman Sachs Group Inc. economists wrote in a Sept. 8 note to clients, “September is likely to be the last opportunity to pass fiscal measures until well after the election and potentially early 2021.”

The Donald Trump of four years ago knew better than to head into an election without a compelling sales pitch. Back then, he gloried in tearing apart the self-interested delusions of movement conservatives such as Ryan who were willing to bleed ordinary workers—not because Trump had moral qualms, but because he instinctively understood that it was bad politics. “So you’re gonna cut [programs] for most of the population, you’re gonna cut, and Democrats are gonna say, ‘We’re giving you more,’ ” Trump marveled to me, incredulous. “I said, ‘Paul, are you crazy?’ ”

But this time around, Trump has been gulled by many of the same conservatives and affiliated gadflies into opposing what they’ve branded “blue-state bailouts” for coronavirus relief, causing him to swap kitchen-table economic concerns for a campaign of cultural warfare. Trump’s hostility to state and city governments and his strategy of trying to scare suburban voters into reelecting him by portraying those areas as violence-ravaged hellholes have led him to overlook the mounting need that threatens to subsume recent economic gains. In this way, Trump’s campaign resembles the Republican effort he led in 2018, when his claim that marauding “caravans” of migrants would soon overrun the southern border shaped the midterm elections. Democrats won 41 seats and control of the House of Representatives.

This time, Trump’s own name is on the ballot, but his approach hasn’t changed. Instead of overriding Republican preferences and offering Americans a better deal, as he did four years ago, he’s trying to convince them that they’ve already gotten a great one. So far, he hasn’t closed the sale. Americans seem skeptical about the sustainability of the recovery: In August consumer confidence fell to a six-year low.

Trump may get one last shot to sweeten the deal when Congress negotiates a bill to keep the government from running out of money at month’s end. The old Trump would have exploited the opportunity to improve his electoral position; the new one isn’t convinced he has to. His fate in November, which looks more dire with each passing day, could hinge on whether or not he changes his mind.
 
Read next: The Nine Types of Voters Who Will Decide 2020

©2020 Bloomberg L.P.