On Wednesday, Donald Trump delivered a series of remarks on the economy in a webinar event hosted by The Economic Club of New York.
The talking points were familiar. The economy is coming back, a safe, effective vaccine is coming before year-end, and so on. All you have to do is reelect him.
Some of what the president said was true. Some of it wasn’t. As a general rule, the longer he talks, the more misinformation comes out of his mouth. And not always because he’s consciously misleading anyone. The fact is, Trump likes to riff, and when he goes off script, the narrative invariably strays from reality.
Unlike many of the president’s detractors, I don’t think he everywhere and always endeavors to purposefully lie. Sometimes he does. Maybe even most of the time. But lying (and especially keeping up with one’s lies) is a ton of work. And Trump isn’t one for work. So, when he says things about the economy or the stock market during relatively mundane events like a webcast for the ECNY, I tend to doubt there’s anything particularly nefarious going on. (The same cannot be said for his rallies or his Twitter feed, of course. Those are his platforms for stoking societal unrest, exacerbating racial tensions, etc.)
Remember (and I think this gets lost sometimes), Trump is a man who in some cases believes his own narrative. Not in all cases. He’s not religious, for example, so that narrative is false. And while the president is racist, he’s not a racist, in my judgement. That’s a distinction worth making. Trump’s racism is just like everything else associated with his name — cheap, lazy, and vacuous. That doesn’t make it forgivable by any stretch, but it’s different from the virulent, dangerous strain he not-so-subtly pushes to his base. As I often put it, you won’t find Trump awake in the wee hours of the morning penning manifestos by candlelight. You might, however, find him eating a Klondike bar by the glow of his Twitter app.
But when it comes to business acumen and the economy, he believes it. Or at least he wants to believe it, where “it” means his own balderdash. If he accepts the reality of his business career and economic record, then what would he have to lean on when it comes to positive personal affirmation? The facts (e.g., the figure below, which I use quite often) elude him, in some cases because he refuses to engage with them. And he understandably expects his base to exhibit a similar aversion to the truth. After all, they’ve always had a penchant for suspending disbelief, so why should that stop now?
A common refrain among market participants, economists, analysts, and both candidates for the highest office in the world, is that the economy matters, and it matters quite a bit.
Indeed, when we talk about factors that played a role in Trump’s unlikely 2016 win, we often cite the plight of the American middle-class, stagnate wages, disappearing manufacturing jobs, the decline of labor’s bargaining power, and various other manifestations of the populist economic narrative.
It was always a laughable proposition that Trump was “just the man for the job” when it came to addressing those issues, but that’s part of being a demagogue — you play on people’s fears and emotions with no regard whatsoever for the plausibility of holding yourself up as a problem solver.
But was it (and is it) actually “the economy, stupid,” as James Carville famously put it? Maybe not, according to an interesting new piece from Rabobank’s Philip Marey.
“Trump supposedly tapped into the economic hardship of blue collar Americans who lost their jobs to globalization and technology, and were experiencing ever increasing income inequality,” Marey wrote, in a piece published Wednesday. “Economic narratives can be powerful and internally consistent. However, they may have nothing to do with reality,” he went on to say.
Marey uses the county-level outcome of the 2016 election to investigate the relationship between economic variables and Trump’s victory, and conducts a similar statistical analysis to analyze demographic, sociological, and psychological variables.
I’d be inclined to scrutinize Rabobank’s analysis more than is probably warranted given that it isn’t meant to be published in any academic journals, but I’m going to do everyone a favor and eschew that tendency in the interest of brevity.
The interesting bit is Marey’s assertion that based on the regressions, “the demographic model predicts more counties correctly than the economic model.” Furthermore — and this is highly amusing — he notes that “knowing the percentages of physically inactive white men living in a county is a better predictor of the Trump vote than changes in the unemployment rate, real personal income, and manufacturing employment.”
Marey drives the point home. “The more a population exercises in their leisure time, the less likely they are to vote Republican,” he says.
To be sure, the analysis doesn’t totally write off economic variables as insignificant. Rather, it questions the advisability of relying too heavily on economic factors to explain voting behavior.
Narrowing down the list of economic and demographic variables by choosing only those that are statistically significant produces the model below, which predicted 89% of counties correctly.
There’s much more in the full piece, some of which I agree with and some of which I don’t, but irrespective, it’s a worthwhile exercise.
As usual, Marey delivers the broad-strokes conclusion in a compelling, emphatic cadence.
“While both narratives appear plausible, the data provide more support for identity than for the economy as the decisive factor in explaining the Trump vote in 2016,” he writes, adding that “the ongoing social unrest of 2020 suggests that four years later, identity remains a decisive factor.”
That will either scare you, or embolden you, depending.