Trump’s coming economic test

Credit: Illustration by Globe staff; Adobe; Globe file photo

It’s a tale of two different economic understandings — and a test of which will prove right. Hanging in the balance: any realistic chance for President Trump’s reelection.

On one side, there’s the Trump team’s predictions of stunning economic and fiscal performance; on the other, there’s mainstream economists’ judgment that those pronouncements amount to so much malarkey.

Make no mistake: Despite his braggadocio about the strength of the US economy, Trump is signaling uncertainty about his own approach. He first did that by delaying a new round of tariffs on some Chinese-made consumer products, and exempting others altogether. Trump says he didn’t want to hurt consumers during the Christmas season. But wait: If tariffs don’t affect consumers, as the president has repeatedly insisted, why delay them?

Then, on Tuesday, the president confirmed he is considering both a payroll tax cut and a capital-gains tax break. All that even though Trump advisers insist the economy is perfectly healthy, with the president himself saying it is “set for a tremendous surge of growth” if only the Fed would cut rates as he wants.

Trump obviously realizes the strong economy, for which he takes undue credit, is what’s keeping him politically afloat. That explains why, at last week’s New Hampshire campaign rally, he framed a vote for him — “whether you love me or hate me” — as the only way to keep the economy humming.

That will no doubt work with the tried-and-true Trump backers, who seem to think he took over during the depths of the Great Depression rather than at a time of relatively low unemployment, middling economic growth, and a stock-market recovery that had bounced 401(k)s back from the gut-churning losses of the Great Recession to reassuring levels.

But it’s unlikely to persuade more discerning observers. Even now, in good times, a new Fox News poll shows the Republican incumbent losing to any of four Democratic presidential candidates. Former vice president Joe Biden beat him most handily, by 12 points. But Bernie Sanders, Elizabeth Warren, and Kamala Harris all bested Trump by at least 6 percentage points. So just imagine what will happen if the economy encounters serious turbulence.

For all his boasting, economic performance is well short of what Trump & Company predicted. Even with the GOP’s large tax cut, the president hasn’t achieved the 4 to 6 percent growth he repeatedly declared was achievable, but which sober observers said was pie in the sky for a mature economy.

Top economic adviser Larry Kudlow, meanwhile, forecast “3 percent growth as far as the eye can see.” So far, the eye hasn’t seen it even once on a yearly basis: 2017 GDP growth was 2.4 percent; 2018 fell a tick short, at 2.9 percent. On an annualized basis, the first quarter of this year hit 3.1 percent, but with the second quarter at 2.1 percent, 2019 doesn’t seem likely to make that mark either. Team Trump had taken to using a different calculation to claim 12 months of 3.1 percent growth. But in July revisions, the Commerce Department downgraded that to 2.5 percent.

Meanwhile, capital spending by US firms, which was supposed to shift into overdrive as a result of the 2017 tax cut and help power a supply-side boom, seems instead to be tailing off . And contrary to the administration’s claim that its big tax cut would pay for itself, revenues lower than they otherwise would be have contributed to the kind of annual deficit that gave the amnesiac GOP the vapors back when President Obama was wrestling with the Great Recession.

So Trump’s economy has fallen well short of his promises and predictions. That said, other presidents have successfully sold middling economic improvement as “morning in America.”

But if the economic tide turns, it’s hard to see how this underwater incumbent struggles back to shore.