Is Trump failing in the fight against the pandemic and the shattered economy?
US election campaign in the final phase
by Joachim Bischoff
[This article published on Oct 23, 2020 is translated from the German on the Internet, https://www.sozialismus.de/kommentare_analysen/detail/artikel/us-wahlkampf-in-der-endphase/.]
According to the Fed, the US economy continued its slow to moderate recovery in the fall. Consumers* increased their spending, the Federal Reserve announced in its "Beige Book" economic report. However, there were large differences between the individual sectors.
The Fed relies on surveys in its twelve districts from September to October 9. The central bank explained that the mood in most districts had proved to be fundamentally optimistic or positive. However, there was also a considerable degree of uncertainty. The corona case numbers have recently risen again, which means that restaurants and stores are likely to have fewer customers.
This mixed situation a few weeks before the US presidential election is also reflected in the weak recovery on the job market. A total of 787,000 Americans* applied for unemployment benefits for the first time in the week at the beginning of October, 55,000 fewer than in the previous week, according to the Department of Labor in Washington. Economists interviewed by Reuters had expected a total of 860,000. Despite the decline, the number of applications for state support remains very high by U.S. standards: the more meaningful four-week average was 811,250.
The effects of the corona pandemic are particularly evident in the labor market. Before the corona crisis broke out at the beginning of the year, just over 200,000 applications were on the agenda before the number rose rapidly in March. The politically triggered lockdown to combat the pandemic caused 22 million people to lose their jobs abruptly in spring. The subsequent easing of restrictions during the summer months brought back a large part of these jobs, but by no means all of them.
The recovery in the USA is clearly losing momentum. Employment growth is slowing down. About 36% of the unemployed are currently classified as "permanently unemployed". The unemployment rate dropped to 7.9% in September - not due to an increase in job creation, but mainly due to an exodus of people from the working population. Due to the dualism of the U.S. labor market, unemployment rates are higher for African Americans* (12.1%) and Hispanics (10.3%), and another 6-8 million people have fallen into poverty.
With this mortgage, U.S. President Donald Trump enters the race for the White House on November 3, where his Democratic challenger Joe Biden is given a better chance of winning. The U.S. economy had slumped sharply in the spring under the pressure of the corona infection - the gross domestic product (GDP) collapsed by 31.4% projected for the year. From January to March inclusive, economic output for the year as a whole fell by 4.8% compared with the previous quarter - and there were no restrictions in January and February.
Since March, Congress and the US government have introduced economic stimulus packages amounting to around 2.7 trillion Euro to support the weakening economy. Of this amount, around USD 650 billion alone is available for a credit program that largely replaces wage costs for small and medium-sized companies in order to limit the rise in unemployment. Although a strong recovery is now underway due to the massive government support packages, and experts* expect annualized growth of 32.5% for the third quarter, the economy is still in a state of crisis. However, in view of the consequences of the ongoing pandemic and the continuing misery on the job market, the central bank believes that the economy will continue to be dependent on help - from the Fed and politicians.
There are now increasing signs that Republicans and Democrats are moving closer together on a new economic stimulus package. Nancy Pelosi, President of the US House of Representatives, said she was confident that she could achieve a breakthrough. White House Chief of Staff Mark Meadows, in an interview with Fox Business, said there were still differences, but both parties had made progress recently. President Donald Trump would like to announce new aid before the election.
When asked by reporters* whether an agreement could be reached in October, Pelosi replied: "I hope so. That is the plan." Minister of Finance Steven Mnuchin and she had agreed on further points during a 45-minute conversation, Pelosi's spokesman Drew Hammill tweeted. The talks would continue and "both sides are serious about finding a compromise".
Meadows also said that the Republican Trump-led government and the Democrats in the House of Representatives were seeking an agreement within the next 48 hours. Meadows said the negotiations had entered a new phase. The biggest sticking point was the financing of the accumulated deficits at the state and local levels.
Fed central banker Lael Brainard warned Congress that the absence of further stimulus would pose the greatest risk to the economic outlook. The Fed itself, she said, was prepared to play its part by pursuing a policy of sustained economic stimulus - for as long as necessary. It must succeed in putting the upswing on a broader basis. So far, this has so far tended to pass many households and smaller companies by.
It is now undisputed that the US economy will not recover as quickly as many experts* and Trump had initially predicted. Average unemployment in the USA has risen to a much higher level. The indebtedness of private households has increased and - as the long queues in front of the emergency food supply points prove - the purchasing power of consumers is also providing insufficient impetus for an economic revival.
In recent months, the socio-economic crisis in the wake of the pandemic has increasingly been at the expense of the incumbent president:
Trump has recently been given bad marks in the fight against the health crisis, which is America's central social problem. According to a survey institute, only 40% of Americans* rate the president's action in connection with the pandemic as good, while 57% reject it. These figures have remained constant for months.
Corona management remains US President Trump's weakest flank in the election campaign. Most recently he denounced his chief virologist Dr. Fauci as a "disaster": People would be fed up with "Fauci and those idiots". The US president reaffirms: "The pandemic will soon be over."
The consequence of the restrained economic development, as well as the high unemployment, the depressing development of household incomes and the dissatisfaction with the pandemic fight is that over 60% of the population have the feeling that the country is developing in the wrong direction. This is the second-highest figure in Trump's entire term in office to date, and it is almost 10 percentage points higher than at the beginning of March. This is dangerous for the president, because in the end it is exactly the question that voters* ask themselves. Remarkably, not even all die-hard Trump supporters* think that the US is on the right track. While its base makes up 35 to 40% of the population, only 30% of the population say yes.
The decision on re-election is based on the president's impression of how he has led the country through the state of emergency in recent months. Not least under the impression of Trump's erratic policies, his rival candidate Biden was able to unite his own party of Democrats behind him. He has succeeded in doing so better than Clinton did four years ago.
An important aspect for this surprisingly united party is probably also the widespread insight that billion-dollar renewal and transformation projects in the coming years are illusory in view of a massive disruption of the social reproduction process.
Trump's re-election is on the brink
"It's the economy …"
by Joachim Bischoff
[This article published on Oct 10, 2020 is translated from the German on the Internet, https://www.sozialismus.de/kommentare_analysen/detail/artikel/trumps-wiederwahl-steht-auf-der-kippe/.]
Shortly before the presidential election in the USA, the recovery on the labor market is running out of steam. After a dramatic economic slump in March and April, the labor market recovered strongly in May and June as many companies called back their employees* after business restrictions were lifted.
This process slowed down in the following months, as the spread of the pandemic in many regions of the United States led to a further slowdown in business activity. The incidence of infection in the USA had temporarily decreased, but then increased massively again. Experts believe that this is due to a hasty relaxation of the corona restrictions.
In the election year 2020, US President Donald Trump urged a rapid return to normality in order to revive the economy. Although more than half a million jobs were created nationwide in September, the rate of increase has slowed noticeably recently: Almost five million jobs were created in June, and between one and two million in July and August.
At 7.9% for September, the unemployment rate in the U.S. is at its highest level since 1948 in the run-up to a presidential election. Figures on the development of the labor market in October will not be published until after the election in early November.
Over 22 million jobs were lost as a result of the corona pandemic. Despite the recovery, the labor market has made up only half of the losses since February. Initially, many companies hired people again just as quickly as they had cut back during the lockdown phases. But more and more companies are running into new difficulties due to the renewed high incidence of infection.
The entertainment company Disney wants to cut about 28,000 jobs, mainly in the US amusement parks. Marathon Petroleum, the country's largest oil processor, wants to part with 12% of its workforce, and the chemical company Dow wants to cut 6% of its jobs. Because of the uncertainty about further corona aid, the airlines American Airlines and United Airlines want to send 32,000 employees* on forced leave.
At the beginning of October, more than 800,000 citizens* again applied for unemployment assistance. In the week up to October 3, the number of new applications was around 840,000. These indicators are the only indication for an evaluation of the short-term trends on the US labor market. Another warning signal concerns the number of people who are withdrawing completely from the labor market: In September alone, there were almost 700,000 people. The lion's share of dropouts are women.
In the week to September 19, 25.5 million people received unemployment assistance, according to the Department of Labor. The central bank Federal Reserve (Fed) assumes that the unemployment rate is de facto 10 to 11 %. The Fed therefore advocates extending federal aid to the unemployed. Most recently, household incomes and, as a result, consumer spending in the USA fell after government subsidies for unemployment benefits expired. If further aid money were to fail to materialize, many American private households and companies, from restaurants to hotels, casinos, cinemas, theater and concert organizers to airlines, would continue to run into financial difficulties in the coming weeks.
U.S. President Donald Trump initially had the government and his Republican Party not to negotiate with the Democrats about another Corona aid package until after the election. In return, Trump promised on Twitter that there would be a major economic stimulus package immediately after his election victory.
Trump complained that the Democratic leader in Congress, Nancy Pelosi, was not prepared to compromise. His side had a package of 1.6 trillion dollars. US dollar package. But the Democrats insisted on 2.4 trillion, he claimed. Pelosi condemned Trump's announcement. He was showing his "true face" and putting his political interests above those of the country. He denied poor children, the unemployed and hard-working families desperately needed help.
Since March, the US Congress has already passed economic stimulus packages with a volume of around three trillion dollars. US dollar, which corresponds to more than 10% of economic output. These aid measures went mainly to companies and private households - in the form of reduced-interest loans and cash checks for families with low and middle incomes. A second package was initially planned to follow, but the two sides were unable to reach agreement before the summer break.
For weeks, the two parties have been arguing about a further aid package to finance the expired supplementary payments to unemployment benefits, further support for companies and also for federal states particularly affected by the crisis. Among the most controversial points were, for example, state-financed allowances for clinic employees*, subsidies for rents and food checks for low-income citizens* and additional funds for the postal service for handling postal votes.
The Republicans, who control the White House and the Senate, have a smaller stimulus package in mind. The Democrats, who have a majority in the House of Representatives, want a comprehensive package that will also help states and municipalities that have suffered major revenue losses due to the Corona pandemic.
The head of the Fed, Powell, had earlier made a public appeal to Democrats and Republicans to conclude negotiations on a new package of aid for businesses and consumers. Should an agreement fail, the consequences for the economy could be dramatic.
First, US President Trump announced the end of negotiations on a new Corona aid package, hours later he corrected this decision. The measures that the Democrats are proposing and that Trump, like the Republican Party, wants to adopt are undoubtedly necessary and popular. They include the continuation of the 0 per week unemployment benefit grants - a measure that has been extremely well received, especially in the voter-changing states that are crucial to the election. This also applies to the aid for clammy municipalities and federal states demanded by Democrats.
In the meantime, talks between the government and the Democrats on further state aid to overcome the Corona crisis have resumed. "Now they are starting to run," Trump announced on Fox Business News. There was a good chance of an agreement, Nancy Pelosi also spoke of progress in the negotiations. While Trump's economic advisor Larry Kudlow discussed separate, targeted packages, including a support pact for the massively stricken airlines, Pelosi called for more comprehensive aid measures in a comprehensive package. State aid for the airlines could only be provided in conjunction with a guaranteed comprehensive aid package.
Whether the negotiations can be brought to a conclusion in the remaining weeks before the election is still open. Trump's political actions are not convincing. Four weeks before the election he is behind Joe Biden in most polls and the American economy is not running smoothly despite all the propaganda. This could cost the Republicans and Trump considerable votes. In the past, parts of the electorate* have withdrawn support from the incumbent president and his parties in disappointing economic times. The announcement of a large economic stimulus package, which is to be realized only after his victory, will not convince the hard-working Americans and small businesses.
Trump initially wanted the Republican party to focus "fully" on the confirmation of Supreme Court nominee Amy Coney Barrett. Certainly, the expansion of the right-wing conservative majority in the Supreme Court is also an important aspect for many voters* (see the article by Friedrich Steinfeld, Dangerous Conflict in the U.S. Election Campaign on this website), but securing the economic framework for social control of the pandemic and a consolidation of the U.S. economy is essential for the outcome of the election.
Fed President Jerome Powell rightly stressed that the US economy urgently needs further support from fiscal and monetary policy in order to continue the current recovery at the same pace. To have broken off negotiations so close to the elections could prove to be a serious mistake for Trump. Correcting this step cannot blur the bad impression.
The state of the economy is rightly considered the most important factor influencing the re-election or de-election of an American president. Voters* tend to blame the leader in the Oval Office for their personal situation in the labor market and the economic situation in general. The power of the incumbent president during and after his corona illness cannot hide the fact that neither he nor the Republican leadership has a concept for shaping the future.