Economics as Perception
The Trump campaign seems to have an ace up its sleeve.
Down in the polls, Trump and his surrogates have begun to float the idea that an economic report about third quarter gross domestic product, set to be released a few days before the election, can revitalize the campaign and carry Trump across the finish line to victory.
The economic report for the second quarter, released a few days ago, was rather grim. It showed the US economy shrank 9.5 percent from April to June. For perspective, the worst quarter of the Great Recession saw a shrink of about 2 percent. If the economy shrank at this rate for an entire year, the annual rate of decline would be a staggering 32.9 percent. As an economist for the New York Times noted, the economic report showed “a collapse that wiped out five years of economic growth, with no bounce in sight.”
Perhaps the third quarter numbers will be improved, as Trump and his fellow optimists push the idea of a “v-shaped” recovery. The idea, however, that some economic report published by the Commerce Department will somehow alter the 2020 presidential race is misguided.
First, the economy won’t fully recover until the virus is under control. And the virus is most certainly not under control.
Alaska, Hawaii, Missouri, Montana, and Oklahoma are currently seeing spikes in new infections. Hospitalizations due to the coronavirus have jumped from 36,158 to 52,767 just this past month. Thirty seven states, plus Puerto Rico, are projected to see an increase in death counts over the next two weeks.
The situation has gotten so dire that Johns Hopkins University has called for a “reset,” and the Association of American Medical Colleges warned that “if the nation does not change its course — and soon — deaths in the United States could be well into the multiple hundreds of thousands.”
There is also a psychological factor as well. New York City, for example, has reopened but many workers are electing to stay home anyway.
Second, there aren’t many “up for grabs” voters. At this point, about 1,300 days into Trump’s presidency, voters like him or don’t. Given the events of the last four years, it is difficult to imagine a hypothetical voter that is undecided about Trump, and would be swayed by a single economic report right before the election.
“Very few people are on the fence about the president,” said Stephen Farnsworth, a political science professor. Currently, 50 percent of voters say that there is “no chance at all” they would support Trump, while 37 percent say they would never support Biden. About 12 percent are uncommitted but leaning towards one of the candidates, and only one percent of voters are truly unsure.
Maybe this one percent is waiting on that economic report.
Third, economics is about perception, not bureaucrat written analysis. Facts on the ground trump government projections. Social science doctrine establishes that our personal perception — rather than objective data — drive our economic outlook.
For example, the United States and Mexico had the same growth rate in GDP per capita, 7.1 percent, between 2011–2016. Yet over half of Americans considered the economy good while only a quarter of Mexicans did.
Only 15 percent of South Koreans consider their country’s economy to be good, even though the economy grew 12 percent over a five year period. Over the same five year period, 87 percent of Dutch respondents claimed their economy was good, despite a growth rate of just 2.2 percent.
Economics must be perceived through our partisan lens. According to Pew, the month prior to Trump assuming office, only 18 percent of Republicans viewed the economy as “good” or “excellent.” A month after Trump assumed office, this number more than doubled. Prior to the 2016 election, only about one in five Republican voters thought that the economy would be better a year from now. After Trump’s victory, this number soared to 75 percent.
A 2018 survey published in Electoral Studies found that “while it is well-established that economic perceptions are correlated with voting behavior, it is unclear whether these perceptions are rooted in the real economy or whether they simply reflect voters’ partisan biases.”
With so much of our economic views arising from personal perception and partisanship, it remains highly unlikely that a single Commerce Department report would help re-elect Donald Trump.
With 93 days to go, maybe it’s time for a new strategy.