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Who Should Be More Freaked Out About The Economy — Trump Or The Democrats?

Welcome to FiveThirtyEight’s weekly politics chat. The transcript below has been lightly edited.

micah (Micah Cohen, politics editor): With the Dow nosedive on Monday, here’s our topic for today:

Should President Trump be freaking out about the stock market, and/or should Democrats be freaking out about the economy?

Let’s take those in order!

clare.malone (Clare Malone, senior political writer): Trump should be a little worried about how he’s framed the stock market vis a vis his presidency.

On the Democratic side of things … I have no idea, to be honest! In some ways, I could see it helping them politically.

micah: Let’s focus on the Trump part first.

natesilver (Nate Silver, editor in chief): But I think both sides should be freaking out, in the sense that the economy is likely to be more important to the midterms than a lot of stuff people freak out about.

julia_azari (Julia Azari, political science professor at Marquette University and FiveThirtyEight contributor): It’s lucky for Trump that it’s happening now and not in like October 2020.

clare.malone: But wait, don’t financial reporters keep telling me that the fundamentals of the economy are still relatively strong?

micah: Yeah, I don’t think both sides should be freaking out. That can’t be right.

natesilver: Wait, what do you mean? The economy could have a large impact on 2018 (and a larger one on 2020) and there’s a pretty clear upside and downside case for both parties.

So it may not be a bad thing if we had more news cycles devoted to the economy and fewer to the fuckin’ Nunes memo. For instance.

micah: Can we back up a moment? Can someone give a super brief primer on how the economy affects voters?

In general, good economic news helps Trump/Republicans and hurts Democrats because Trump/Republicans are the incumbent party (they control the White House and Congress), right?

natesilver: OMG

“Slack Chats for Dummies”

Of course good economic news helps the incumbent party.

clare.malone: OK, but can we differentiate for the dummies whether we think this stock market thing will be bad for Trump in the long run? Because, as previously stated, people keep telling me not to worry too much about a crash of the market as long as other economic factors are stable.

And I am one of those dummies, to be clear.

julia_azari: So, election models based on fundamentals like the economy tend to focus on employment, real income or GDP.

There is also a school of thought that suggests that people’s perceptions of how the economy is doing — not their own personal income/economic situations — matter for how likely they are to punish the incumbent party at the ballot box.

A flood of bad economic news, even if combined with a sweet $1.50 raise each week, could change those perceptions.

natesilver: I have Very Strong Feelings about fundamentals models in this context.

Specifically that I think trying to specify exactly which economic variables move public perceptions is a fool’s errand. And that most of the attempts to do so reflect overfitting and p-hacking.

julia_azari: But, like, conceptually, can’t we sorta posit that the stock market is different from, say, unemployment?

natesilver: Historically the unemployment rate has one of the weakest relationships with presidential popularity.

In part, that’s because people look at trends rather than levels. So if the unemployment rate goes from 4 percent to 5 percent, that might actually be worse for the president’s party than if it goes from 8 percent to 7 percent.

Anyway, in my view, the “correct” view of the relationship between the economy and elections is as follows:

  1. The economy matters more than a lot of things, but is not deterministic;
  2. A better economy helps the incumbent party, other things held equal;
  3. There’s no one economic magic bullet — you have to look at a broad series of economic indicators across various segments of the economy;
  4. Both perception and reality matter and it’s not always clear which is more important;
  5. Trends matter more than levels;
  6. People have a relatively short time horizon for evaluating economic performance.

julia_azari: I’m disappointed to admit that I mostly agree with all of that. Can I talk about Trump?

micah: Yeah, so let’s grant all that. Isn’t the correct view, based on all that, to dismiss the Dow plummet as something Trump shouldn’t worry about?

We know the stock market does not equal the economy. Especially the Dow!

natesilver: No, not at all. It could affect perceptions a lot. It’s a trend rather than a level. And it’s very salient and news-y.

micah: It’s a one-day drop, Nate!

natesilver: Wait, you’re strawmanning me again, Micah.

You just switched me from “The stock market could matter” to “Yesterday’s one-day drop does matter.”

micah: “It’s a trend,” said Nate Silver.

natesilver: A prolonged period of volatility — with mostly downward-shifting numbers — could matter a lot.

If this week is a one-off, much less so.

micah: Ah, OK.

julia_azari: The Dow is not only news-y but measurable in dramatic-sounding numbers. (I still have very vivid memories of the Dow reaching some benchmark in the 1990s. I was in high school and knew even less than I know now about stocks, but I remember it being a huge news story.)

Also, I think a downturn splits the Trump coalition — or at least has the potential to.

Trump has a very delicate political coalition of the people who liked him in the primary, and those who didn’t but voted for him in the general anyway. It’s not clear that his primary supporters were necessarily poorer than people who preferred other candidates (per some work Nate did at the time). So what made reluctant Trump voters vote for him in the general election in 2016? Some of Clare’s work shows that the economy is a priority for this group. If we’re looking at stories about why Trump was able to consolidate (more or less) the Republican coalition, you have a combo of the cultural folks and the outcome-oriented/economy-focused folks. The latter group came to Trump reluctantly, but perhaps liked that he was a businessman, and saw him (or any Republican) as good for the economy. I see this as a vulnerability in his coalition. The cultural Trumpists, on the other hand, are pretty happy.

natesilver: I agree with that. I think Trump’s sales pitch on being a competent manager of the economy is pretty important to a fairly wide group of voters. And it’s also fairly important that the economy has, in fact, done fairly well.

clare.malone: That is interesting. Those reluctant Trump voters, as we started calling them, might see a trend form over a couple of months — if this is the start of something — and that could help them form opinions that could, say, affect the midterms.

natesilver: One thing to note is that consumer confidence is quite high. Not only high in an absolute sense, but also high relative to merely good-ish numbers in other sectors.

People feel fairly bullish, and it seems like Trump is a part of that.

julia_azari: So I heard one of Trump’s campaign advisers speak in January, and he basically started out with the stock market as a key justification for the administration’s first year

micah: Yeah, I think our reluctant Trump voters would be the most vulnerable part of his coalition if the economy went south in any real way.

clare.malone: By the way, I feel it’s pertinent to point out that if you go to, say, the Fox News website, not much stock market coverage.

micah: Agreed, Clare.

I don’t think the economy washes away partisanship in any wholesale way. At the margins, maybe.

natesilver: But if you watch Fox News, there’s a stock market ticker, right? (There’s one on the website too.)

clare.malone: Sure, and there’s still some coverage of it:

But I do think a lot of their stuff is still about the Nunes memo.

micah: The reluctant Trump voter logic I think is like this (remember, these are people who voted for Trump but simultaneously said they had an unfavorable view of him): “I’m very uncomfortable with Trump’s behavior, but he’ll be good for business/the economy and I didn’t want to vote for Hillary Clinton.”

That logic has mostly worked for Year 1.

The behavior is still super problematic, but the trade-off worked for them.

julia_azari: (Also Neil Gorsuch.)

micah: Right.

If the economy part falls out of it … he’s in trouble.

natesilver: I have another theory too. Do you want to hear it?

clare.malone: No.

micah: lol

clare.malone: Kidding. Nate, spout.

natesilver: I’ll warn you in advance that it’s completely unprovable.

clare.malone: LOVE THOSE

natesilver: Or not unprovable, but unproven.

julia_azari: Perfect!

natesilver: My hunch is that one reason why Trump’s approval has risen lately is that people are responding to a “sky is falling” mentality from the media and Democrats.

Reluctant Trumpers are responding to it, that is.

Democrats can huff and puff, but as long as nothing breaks, nothing blows up and no one gets fired, it might seem like a lot of hot air.

micah: Oh, I don’t buy that at all.

clare.malone: Well, it’s interesting

micah: I don’t think voters, including reluctant Trump voters, have opinions about media approaches that are strong enough to affect their political outlook.

clare.malone: I had a friend, who is a Democrat, recently bring up the Department of Labor’s decision to remove data that adversely affected the administration’s position from a proposal to change tip-pooling rules. And he said the Democrats should be messaging hard about all these economic rule changes and how they could adversely affect the working (wo)man, as it were.

Not just about the Trump stuff.

natesilver: But Trump often makes the argument that, e.g., the media never brings up good news. Or that the Russia stuff is a bunch of baloney.

And the question is — what tangible evidence do voters who are not partisan Democrats have to prove him wrong?

julia_azari: Maybe there is a sort of closing of ranks among people who we might consider reluctant Trumpers. They liked Marco Rubio (or whoever) better in the primary, but they feel like the culture has shifted in this really uncomfortable way into a lot of anti-Trump virtue signaling in media and among corporate entities.

And this leads them to rally around Trump/Republicans in a way they might not otherwise do. This is compatible with what Nate just said, right?

micah: It is, yeah.

But I’m skeptical.

I do think Clare’s Democratic friend is right, though.

clare.malone: He said something along the lines of, “If it doesn’t catch fire right away, the Democrats don’t pursue it.”

I do think people tire of the virtue signaling. Democrats too, I’d think, in some ways — i.e., Democrats who aren’t the hardcore, Indivisible volunteers types.

julia_azari: Yeah. So there’s some interesting work in political science that backs this up a bit. I was just at a conference with Lilliana Mason of the University of Maryland, and her research illustrates how much people are motivated by protecting their group status and identity.

micah: Yeah. And there’s truth to the idea that Democrats are shit at building an argument.

natesilver: That’s overrated.

micah: I didn’t even rate it! I just think it’s true — the extent to which it matters is another question.

natesilver: I mean, there are times when it’s right. Like, Democrats’ messaging was kind of shit during the shutdown, even though they started out with more people blaming Republicans by default.

Somebody wrote — I forget who, but I was very jealous of the post — that it’s actually an advantage not to have a clear message at the midterm because it’s one less thing you can be attacked on.

clare.malone: Yeah, but … it’s not like breaking news that Democrats try to fashion themselves as the party of the working (wo)man, historically.

I find that a little facile.

julia_azari: “Democrats suck at messaging” is one of the journalistic tropes that needs to be interrogated.

natesilver: A healthy economy is very important to Trump’s message, though.

micah: OK, let me ask this: Assuming the economy keeps chugging along (and I think that’s probably the safest assumption at this point?), to what extent does that tamp down Democratic gains?

Or, does the economy matter to voters less than normal because Trump is so atypical in other ways?

natesilver: It gives Trump and Republicans an argument.

A credible argument. Something to hang their hat on.

julia_azari: Well, his approval rating is lower than the economy would predict.

And there’s been a ton of Republican retirements despite the good economy.

clare.malone: If we think midterms are about getting an anti-Trump turnout from the Democratic base — because they’re eager to win back Congress so they can impeach him — I think it matters less.

natesilver: That cuts both ways. On the one hand, voters obviously have a lot of information to weigh and there are fewer swing voters than there used to be. On the other hand, a healthy economy is pretty important for a sense of normalcy, and Republicans don’t have a lot of other good arguments to make.

micah: How many voters would agree with this article from The Atlantic, which argued that “the best hope of defending the country from Trump’s Republican enablers, and of saving the Republican Party from itself, is to … vote mindlessly and mechanically against Republicans at every opportunity, until the party either rights itself or implodes (very preferably the former)”?

julia_azari: The two who wrote it.

clare.malone: lol

micah: Like, what if it’s November 2018 and GDP growth is 6 percent and special counsel Robert Mueller has come back with an obstruction of justice finding and some type of not-clear-cut collusion case?

(Six percent is obviously ridiculous, but you see what I’m getting at.)

natesilver: Then Trump and Republicans have a pretty good argument to make.

julia_azari: To think of it a different way, Republicans suffered big midterm losses in 1982 (after a serious economic downturn) and in 2006 (with an unpopular war). Is anything that’s going on now that bad? We don’t know, but opposition to Trump has been pretty clear and well-organized. And, unlike Trump, neither Ronald Reagan in 1980 nor George W. Bush in 2004 lost the popular vote.

micah: I guess what I’m trying to figure out is … does a good economy preclude a Democratic wave or just make it more unlikely?

julia_azari: Less likely, but still possible.

natesilver: If you want to get fairly technical, I think the risks might be slightly asymmetric. A better economy somewhat helps Trump, but a bad economy could really hurt him. That’s sort of been true for most presidents, by the way — it isn’t anything unique to Trump. Sometimes other factors can overcome a good economy and make a president unpopular. But it’s very hard for a president to be popular amidst a bad economy, unless he’s inherited it and isn’t seen as responsible.

But the thing is … it’s not that easy for Democrats to flip the House and the Senate, given the Senate map and the way districts are drawn. So having a little bit of a wind at his back, in the form of the economy, might be enough for Trump.

julia_azari: If Democrats are fired up and Republicans aren’t, that might have wave implications. To put it another way, were the two successive waves during Obama’s presidency about the economy? Or about strong responses to Obama, with his voters being less motivated to come out and defend Democratic candidates?

micah: Both?

OK, we gotta wrap. Final thoughts?

clare.malone: I still need to read more about the state of our economic fundamentals, but I think that we all need to be keeping an eye on the business section over the next few months.

julia_azari: It’s February. At this time two years ago, we were still trying to figure out which establishment Republican would pull ahead in the primaries. A lot can change.

natesilver: My final thought is that my lunch order is late and my stomach needs a stimulus.

Nate Silver founded and was the editor in chief of FiveThirtyEight.

Clare Malone is a former senior political writer for FiveThirtyEight.

Julia Azari is an associate professor of political science at Marquette University. Her research interests include the American presidency, political parties and political rhetoric. She is the author of “Delivering the People’s Message: The Changing Politics of the Presidential Mandate.”

Micah Cohen is FiveThirtyEight’s former managing editor.