Speaker 1: Bloomberg Audio Studios, podcasts, radio News.
Speaker 2: I'm seventy Flanders, head of Government and Economics at Bloomberg.
Speaker 2: This Trumpanomics the podcast the looks at the economic world
Speaker 2: of Donald Trump, how he's already shaking up the global economy,
Speaker 2: and what on earth is going to happen next. This week,
Speaker 2: we're taking a first look at how the US economy
Speaker 2: could affect the midterm elections coming up in November. In
Speaker 2: the US elections that of course, the Democrats are hoping
Speaker 2: will favor the out of power party them even more
Speaker 2: than usual, potentially giving them control of one house even
Speaker 2: conceivably both houses of Congress. When you look at the
Speaker 2: world economy, there's a sort of feeling that it's been
Speaker 2: remarkably resilient in the face of continued inflation, Donald Trump's
Speaker 2: tariffs war, and Ukraine the Iran war most recently, and
Speaker 2: related to all that, some pretty big energy shocks. We
Speaker 2: still see stock markets going up, and we have now
Speaker 2: in the last few weeks seen oil price has come
Speaker 2: down quite sharply, despite the Iran agreement seeming to be
Speaker 2: quite tenuous. But how much damage has already been done
Speaker 2: and how can the Republicans make voters feel more positive
Speaker 2: about the economy, because when you look at the polling,
Speaker 2: they seem to be pretty down on it at the moment.
Speaker 2: We're going to get into all of that with our
Speaker 2: usual kind of two sides of the street. Here at Bloomberg.
Speaker 2: We have Nancy Cook, senior national political correspondent in Washington. Nancy,
Speaker 2: thanks very much for joining. It's been a while.
Speaker 1: Actually, yeah, thanks for having me, Stephanie, I'm delighted to
Speaker 1: be here.
Speaker 2: And Stu Paul, based in New York, who covers the
Speaker 2: US and Canadian economies for Bloomberg Economics. Stu, nice to
Speaker 2: have you.
Speaker 3: Thank you for having me, Stephanie.
Speaker 2: So, Nancy, you're sitting in DC. You're writing often about
Speaker 2: how Republicans are thinking about the midterm some of the
Speaker 2: sort of ways in which they're hoping to rebuild Republicans support.
Speaker 2: Is the economy the main thing they're worried about at
Speaker 2: this point?
Speaker 1: Well, I think that Republicans take a very overconfident stance
Speaker 1: when you talk to them publicly or when they talk
Speaker 1: about things, but privately they are pretty worried about the
Speaker 1: state of the economy. It's not that the actual economy
Speaker 1: is poor in the US. For instance, the labor market
Speaker 1: remains really healthy. Unemployment is hovering around four percent, and
Speaker 1: so there are like a lot of really bright spots
Speaker 1: in the economy. However, American voters are in a bad
Speaker 1: mood about the economy and that has just been persistent.
Speaker 1: I have done some traveling in this spring to very
Speaker 1: red districts in Texas. I went to Kentucky in May,
Speaker 1: and people are just not happy. And these are people
Speaker 1: who are really core to the Trump base, and they
Speaker 1: feel like the cost of living is too high. I've
Speaker 1: talked to a late twenty something couple in Kentucky. They
Speaker 1: want to buy a house, they want to have children,
Speaker 1: They're worried about the cost of childcare. So these voters
Speaker 1: are just in a bad mood and no matter what
Speaker 1: the Trump people say, they're having a hard time overcoming that.
Speaker 1: And so they privately are very freaked out about this.
Speaker 1: And I was at a conference on Friday last week
Speaker 1: of evangelical voters who are some of the most hardcore
Speaker 1: supporters of the Republican Party, and they're not in a
Speaker 1: good mood. So that to me is just a real
Speaker 1: warning sign. And I think that there's a few things
Speaker 1: at play one, people are not happy about gas prices,
Speaker 1: people are not happy that the war and Iran seems
Speaker 1: to be going on. And then a lot of people
Speaker 1: are just really mad about the cost of living. They
Speaker 1: feel groceries are still high. They just feel like everything
Speaker 1: costs more, and they held President Biden responsible for that.
Speaker 1: But now the economy squarely belongs to Trump and they
Speaker 1: are holding him responsible.
Speaker 2: I remember he has said in the past when they
Speaker 2: say which bits of the economy your responsible for, and
Speaker 2: he says very clearly, well, the good bits and the
Speaker 2: bad bits are all. He's as upfront about it STU.
Speaker 2: So let's get into this a bit about what the
Speaker 2: damage might be and the particular groups that might be affected.
Speaker 2: Because part of this is gas prices have always been
Speaker 2: a concern for all presidents, but there was a specific
Speaker 2: aspect to the Trump coalition that really was quite new,
Speaker 2: and then that affects maybe the voter blocks that we're
Speaker 2: looking at when we think about the impact of things
Speaker 2: like inflation and rising gas prices. Remind us what was
Speaker 2: different about his coalition.
Speaker 3: The Trump coalition that really formed before the twenty twenty
Speaker 3: for election was one in which the Republicans gained even
Speaker 3: more of unadvantage among men, particularly young men, and the
Speaker 3: Trump coalition included a larger share of Hispanic and Black
Speaker 3: voters in twenty twenty four, So we wanted to dig
Speaker 3: into the data to see a little bit how each
Speaker 3: of those voting blocks have been faring since President Trump
Speaker 3: took office. Of course, it's easiest to start with men
Speaker 3: and to think about employment for men versus women, for example,
Speaker 3: and if you look at the industries that are dominated
Speaker 3: by men, things like construction or manufacturing, or transportation and warehousing,
Speaker 3: all of those industries overall basically lost jobs. The industries
Speaker 3: that have been gaining jobs are those that are primarily
Speaker 3: dominated by women, education and healthcare in particular. And so
Speaker 3: the durability of Trump's coalition starts to come into question
Speaker 3: when you look at the data with a little bit
Speaker 3: of a finer toothcomb. Where he might still have a
Speaker 3: little bit of an advantage or where the data have
Speaker 3: swung somewhat in his favor, is that the unemployment rate
Speaker 3: for black men and Hispanic men has fallen just slightly
Speaker 3: by about half a percentage point in and a quarter
Speaker 3: percentage point respectively since President Trump took office. That's probably
Speaker 3: not quite enough. That's just one dimension of analysis for
Speaker 3: thinking about maintaining a pretty significant voting block. But that
Speaker 3: is one data point at least that he could point
Speaker 3: to to try to get voters to show up for
Speaker 3: the polls. Nancy brought up a really important point about affordability,
Speaker 3: and of course, gasoline prices, food prices, shelter prices are
Speaker 3: front of mind for everybody. And I'm here in New
Speaker 3: York where the election of Mayor Mom Donnie, that entire
Speaker 3: campaign was entirely focused around that key word of affordability.
Speaker 3: And so we looked at the US voting population by
Speaker 3: income decile, and it's those lowest income households that are
Speaker 3: experiencing the highest inflation. We estimate that cumulative inflation over
Speaker 3: Trump's most recent term in office for those in the
Speaker 3: lowest income decile is about four point eight percent. For
Speaker 3: those in the highest income decile richest households, cumulative inflation
Speaker 3: is just about three point eight percent of full percentage
Speaker 3: point lower for the richest among us. What's interesting, though, Stephani,
Speaker 3: is that gasoline prices seem to be hitting those middle
Speaker 3: class households and upper middle class households relatively more even
Speaker 3: than those at the lowest end of the income distribution.
Speaker 3: These are suburban folks, These are two car households, These
Speaker 3: are suv households that need to fill up and bring
Speaker 3: the kids to schools, commute into the office. And so
Speaker 3: even those households that seem to be faring slightly better
Speaker 3: than the worst among us, those who are faring even
Speaker 3: slightly better are feeling the effects of higher energy prices.
Speaker 2: You and you remind us in that piece this is
Speaker 2: a relatively new phenomenon, but that Trump had got seventy
Speaker 2: percent among voters earning between thirty thousand dollars and one
Speaker 2: hundred thousand dollars a year. So those kind of classic
Speaker 2: working class group, and you're right to point out that
Speaker 2: the inflation rate affects them differently. I guess one more
Speaker 2: thing for you, Stuart, because I know there's some related work.
Speaker 2: We did a little bit more on the geography of
Speaker 2: some of these sort of key races in the Senate.
Speaker 2: There's only there's a sort of just over half a
Speaker 2: dozen I think Senate seats that are in play if
Speaker 2: the Democrats are going to have a chance of retaking control,
Speaker 2: which I think is probably a tough ask. And there
Speaker 2: are some pretty wide differences across states in how much
Speaker 2: gas prices have gone up. It seems that sometimes I
Speaker 2: hear people talking in California seem to have really had
Speaker 2: a massive increase, but that's they're less in the frame
Speaker 2: for the Senate. But just on that do how is
Speaker 2: the difference in gas prices potentially affecting some of those races.
Speaker 3: So on a dollar basis, there's a little bit less
Speaker 3: dispersion in gasoline price increases across states. Among those states
Speaker 3: that have contested Senate seats, Georgia and North Carolina have
Speaker 3: had a relatively small increase in gasoline prices since the
Speaker 3: onset of the war in Iran, Ohio Michigan have had
Speaker 3: a relatively larger increase in gasoline prices. When we talk
Speaker 3: about states like California, of course, state level gasoline taxes
Speaker 3: matter a lot, and I imagine that those voters might
Speaker 3: be blaming their state and local governments more so than
Speaker 3: the president. And as you say, California isn't so much
Speaker 3: in play. But you're right to look at the geographic
Speaker 3: differences for things like gasoline prices. If we look at
Speaker 3: something like unemployment, also, there's pretty stark differences across those
Speaker 3: key battle ground states. So, for example, and Georgia have
Speaker 3: seen a relative increase in the unemployment rate since President
Speaker 3: Trump took office. Of course, pretty important contested Senate seats
Speaker 3: in those states Maine, North Carolina, Michigan have actually seen
Speaker 3: a decrease in their unemployment rate. All eyes on main
Speaker 3: right now with Platner and Susan Collins, but the data
Speaker 3: are faring relatively well for Susan Collins at this point.
Speaker 2: I guess we should say, Nazi. Obviously we're just focusing
Speaker 2: on the economics here, but there's plenty of other things.
Speaker 2: As people always saying, you mustn't make assumptions about how
Speaker 2: all Hispanic people voting it, For example, whether or not
Speaker 2: their unemployment rate has gone up, maybe less important than
Speaker 2: how they're feeling about ice. But still on the economics.
Speaker 2: You highlighted, Nancy, this seemed a bit similar from some
Speaker 2: of the debates we had in the Biden era that
Speaker 2: the numbers didn't look that bad. But as you say,
Speaker 2: there's just a lot of grumpy people around who don't
Speaker 2: really care that inflation is lower because everything's still costs
Speaker 2: a lot more than it did a few years ago.
Speaker 2: Just the fact that the price is not rising anymore
Speaker 2: doesn't mean they're fed up every time they go to
Speaker 2: the grocery store. And the dynamic was that President Biden
Speaker 2: kept telling them they were wrong to be down on
Speaker 2: the economy and the economy was really doing very well.
Speaker 2: That didn't work out so well. There has been this tension,
Speaker 2: and you've talked about it before about the President seeming
Speaker 2: to do the same thing, seeming to just not want
Speaker 2: to recognize that anyone is feeling anything negative about the economy,
Speaker 2: even though his advisors might be suggesting that he feel
Speaker 2: voter's pain a bit more. Is that tension got any
Speaker 2: better they has his advisors had any success on that.
Speaker 2: I feel like there was supposed to be a whole
Speaker 2: affordability tour that didn't really happen. Were seeing that reprieved
Speaker 2: maybe in the fall.
Speaker 1: Interestingly, I feel like President Trump is going even further
Speaker 1: than President Biden did and dismissing American's concerns. I mean,
Speaker 1: Biden tried to actively convince Americans that what they were
Speaker 1: feeling was not true. But Trump is just actively saying
Speaker 1: that he you know, he has called affordability a democratic hoax,
Speaker 1: so oh, he.
Speaker 4: Doesn't realize prices. Prices are coming down very substantially. But
Speaker 4: they have a new word.
Speaker 1: You know, they always have a hoax.
Speaker 4: The new word is affordability.
Speaker 1: Last week, he refused to sign a bipartisan housing bill
Speaker 1: that both Republicans and Democrats on Capitol Hill were very
Speaker 1: excited about because it would have given money to create
Speaker 1: new housing supply, which is a big problem in the US.
Speaker 1: He called that a quote big yawn compared to this
Speaker 1: voter id legislation he wants.
Speaker 4: Here's what I would like to say, much more than
Speaker 4: a bill, that big deal. It's a yawn something. It's
Speaker 4: wonderful to me. Compared to the Save America Act. Just
Speaker 4: about everything is a big yawn.
Speaker 1: And so it's not like that he's trying to convince
Speaker 1: voters of something. He just is not taking it seriously.
Speaker 1: And that's like a whole new level to the problem.
Speaker 1: What has been interesting to me is that Republicans have
Speaker 1: really shifted their strategy in the last month, and so
Speaker 1: they know that the historical headwinds for them to lose
Speaker 1: congressional seats that is very much in play this time,
Speaker 1: and Trump is really not playing ball with them on campaigning,
Speaker 1: on the economy or trying to stand up Republicans for
Speaker 1: House and Senate races. So what they're trying to do
Speaker 1: instead is they're trying to call out the Democrats. And
Speaker 1: so you've seen a lot of top Trump advisors go
Speaker 1: on TV or say, hey, look, the Democrats are crazy now,
Speaker 1: they're too liberal, and they're trying to make Mayor Mondami
Speaker 1: in New York the poster child for all of the
Speaker 1: Democratic Party and basically scare voters into continuing to support
Speaker 1: Republicans even though voters may not be super happy about
Speaker 1: the economy. And that has been a shift we've seen
Speaker 1: in the last six months. They're trying to make it
Speaker 1: not a referendum on Trump, but just a referendum on
Speaker 1: the two parties in general.
Speaker 2: And as far as there's quite left wing candidates in
Speaker 2: some of the Democrat races, they're going to get and
Speaker 2: enormous amount of publicity. I suspect, Stuart, we've been sort
Speaker 2: of backward looking how have these particular parts of the
Speaker 2: electorate been affected by what's happened so far under the
Speaker 2: second Trump administration. But obviously we're also in the business
Speaker 2: of forecasting, and we have seen the old price fall
Speaker 2: pretty sharply, which if sustained, could feed into pump prices
Speaker 2: in the US fairly quickly presumably also have a softening
Speaker 2: effect on inflation. Right now, is it looking like it
Speaker 2: is going to be a slightly better environment just from
Speaker 2: those kind of those basic headline numbers on inflation.
Speaker 3: I think so. It's particularly difficult to forecast in the
Speaker 3: most granular level, so for example, the level of the
Speaker 3: congressional district. But if we look at a more zoomed
Speaker 3: out level and we think out a lot of the
Speaker 3: factors that send voters to the polls, things like living
Speaker 3: standards and as you say, inflation, it actually looks as
Speaker 3: though it's the case that softening inflation throughout the rest
Speaker 3: of the year, paired with solid economic growth fueled by
Speaker 3: a lot of investment and solid hiring plans, will be
Speaker 3: enough to keep it a little bit closer than betting
Speaker 3: markets are currently thinking that the midterms are going to be. So,
Speaker 3: for example, if you just use a strictly top down
Speaker 3: model that forecast the share that Republicans will retain in
Speaker 3: the House of Representatives, for example, based on these high
Speaker 3: level economic statistics, and you plug in some of our
Speaker 3: forecasts for inflation, GP growth and so on. It looks
Speaker 3: like they're just about five House seats flipping from a
Speaker 3: publican to democratic control. Now again, with betting markets assigning
Speaker 3: really high probabilities the Senate flipping or the House flipping,
Speaker 3: the top down statistics, the aggregate economic activity and data
Speaker 3: that are nationwide make it look like it's a bit
Speaker 3: more of a contested set of midterm elections than the
Speaker 3: betting markets are currently supposing.
Speaker 2: And we haven't talked about interest rates. And obviously the
Speaker 2: vast majority of the mortgages are on long term fixed
Speaker 2: rate mortgages, so they're not affected day to day by
Speaker 2: what happens at the Fed. But the President has put
Speaker 2: a pretty big emphasis on getting interest rates down and
Speaker 2: doesn't seem to be much evidence that his new head
Speaker 2: of the Central Bank, Kevin Walsh, is itching to lower rates.
Speaker 2: If anything, he sounded a bit more hawkish on inflation.
Speaker 2: So just on that, remind me, is Donald Trump going
Speaker 2: to get any rate cuts between now and the midterms?
Speaker 3: I don't.
Speaker 1: It's interesting. I've talked with a lot of Trump advisors
Speaker 1: who have spent months actually laying the groundwork to try
Speaker 1: to make sure that Kevin Walsh the new head of
Speaker 1: the Federals has an easier time than Jay Powell, and
Speaker 1: so no one thinks that the interest rates are going
Speaker 1: to drop before the November midterms. And a lot of
Speaker 1: people have spent time trying to explain to Donald Trump
Speaker 1: why that's okay, and let's give Kevin wash some runway
Speaker 1: and this is going to be your guy, because they
Speaker 1: really don't want him to turn against Wash. But that
Speaker 1: is another piece of the economic puzzle that's making voters
Speaker 1: feel bad, really, the gas prices, the interest rates, and
Speaker 1: then people just being mad about the war in Iran.
Speaker 1: And I would pinpoint those three things as when I
Speaker 1: talk to Republican voters the things that people are most
Speaker 1: concerned about.
Speaker 2: Gee, where where are you seeing rates?
Speaker 3: As much as we know Donald Trump to be a
Speaker 3: low interest rate guy, I'm glad to hear from Nancy
Speaker 3: that a lot of his staff is setting him up
Speaker 3: to be a little bit disappointed. I do not think
Speaker 3: that we are going to get any interest rate cuts
Speaker 3: from the Fed through year end. I expect also to
Speaker 3: get a significant amount of jawbwning from our central bankers
Speaker 3: that's more hawkish in nature to try to anchor inflation.
Speaker 3: Expectations and to try to buy quite a little bit
Speaker 3: of time and credibility on the inflation price stability front.
Speaker 3: And so it is good to hear from Nancy that
Speaker 3: folks in the White House and the Treasury have been
Speaker 3: clearing a path to allow Kevin Walsh to maintain policy
Speaker 3: rates where they are and to try to assert his
Speaker 3: independence and to try to retain some price stability and
Speaker 3: inflation credibility, which hopefully could lead to a little bit
Speaker 3: of softening of long term interest rates over which they
Speaker 3: only have loose control, which of.
Speaker 2: Course would also then help anyone who's getting a new
Speaker 2: mortgage or remortgaging. Nancy, I'll give you the sort of
Speaker 2: last word. As I said at the start, I don't
Speaker 2: think this will be the first conversation we have on
Speaker 2: this topic. But you know, we have the summer. Congress
Speaker 2: is now out, we have the summer, we have there's
Speaker 2: going to be sort of mad July fourth celebrations. I
Speaker 2: was just hearing from colleagues how hard it is to
Speaker 2: get around DC at the moment with all the Ferris
Speaker 2: wheels and the construction works and everything else. But we
Speaker 2: have that assuming that you end up that you're still
Speaker 2: in a sort of uneasy stalemate when it comes to
Speaker 2: the Iran situation, where no one feels particularly good about it,
Speaker 2: but all price is stay reasonably low. How Democrats are
Speaker 2: going to play this in the summer. Are they just
Speaker 2: going to keep on banging the drum for everything that's
Speaker 2: happened so far and they're convinced that the bad news
Speaker 2: is going to stick even if the headlines get a
Speaker 2: bit better, or is there an opening for Republicans to
Speaker 2: make this a bit better.
Speaker 1: I think that there's an opening for Republicans to make
Speaker 1: this better than people are anticipating, just because the Democratic
Speaker 1: Party continues to be in such disarray since the twenty
Speaker 1: twenty four election. There's just an extraordinary amount of infighting
Speaker 1: in the Democratic Party right now. There's no clear leader
Speaker 1: of it, not that there would be at this point,
Speaker 1: but there's major disagreements over policy, particularly over the like
Speaker 1: support of Israel, how far people should go on the
Speaker 1: cost of living agenda. And what we're seeing is there
Speaker 1: in primaries, particularly in Colorado for instance, there are people
Speaker 1: who are part of the Democratic Socialist Party, this is
Speaker 1: the party Mayor Mandami's part of in New York that
Speaker 1: are winning primaries, and there's these major upsets in these
Speaker 1: Democratic primaries, and what that does is it a makes
Speaker 1: centrist Democratic voters really uncomfortable, but b it furthers this
Speaker 1: notion that Republicans are trying to advance that Democrats are
Speaker 1: super super liberal. And so there's just huge infighting between
Speaker 1: the progressive wing of the Democratic Party and the more
Speaker 1: moderate wing. And I think that is going to potentially
Speaker 1: hurt them in the midterms because the more left leaning
Speaker 1: candidates who end up running for House and Senate races,
Speaker 1: it's just going to potentially alienate swing voters who are
Speaker 1: really up for grabs. Some of what Stuart was talking
Speaker 1: about with these young men and black men and hispanics,
Speaker 1: those are voters that were part of the Trump colid
Speaker 1: in twenty twenty four, but they were, you know, I think,
Speaker 1: sort of borrowing them. They're not solidly Republican. And so
Speaker 1: in order for Democrats to appeal to a wider coalition,
Speaker 1: they need policies that are a little bit more centrist
Speaker 1: or moderate. And I think that Democrats just continue to
Speaker 1: tear each other apart just.
Speaker 2: As a final thing. But those of us who thought
Speaker 2: once every four years was really enough for conventions. You're
Speaker 2: going to have the delight of a midterm convention, is
Speaker 2: that right?
Speaker 1: That's right. This is President Trump's idea. The Republican National
Speaker 1: Committee had to change their by laws in January to
Speaker 1: accommodate this new idea. And really, normally conventions are a
Speaker 1: place where the party nominates the candidate who's actually going
Speaker 1: to run for president. Trump really wants a made for
Speaker 1: TV showmanship party that he can put on TV before
Speaker 1: the fall when voters really make up their minds who
Speaker 1: they're going to vote for. And so it's going to
Speaker 1: be two days in Dallas, Texas, September ninth and tenth.
Speaker 1: And it's really there's not going to be party business
Speaker 1: that's conducted. No one's going to sign off on a
Speaker 1: party platform, no one's going to nominate a candidate. It's
Speaker 1: really just something to try to juice Republican voters to
Speaker 1: go to the polls.
Speaker 2: What's the difference between that and all the other Trump
Speaker 2: sort of rallies that he does.
Speaker 1: It's going to be like a two day rally in Texas,
Speaker 1: and Texas has a huge number of Republican donors, huge
Speaker 1: oil and gas industry. This is a new thing. This
Speaker 1: midterm convention and we'll see how it goes. Stephanie, you
Speaker 1: should come to Dallas.
Speaker 2: I'm just looking at my calendar. I don't think I
Speaker 2: think it's looking terribly busy in that week, but I
Speaker 2: will leave it to you, NATSI, Stu, Paul, Natcy Cook.
Speaker 2: Thank you so much, Thanks Stephanie, thank you, thank you,
Speaker 2: Thanks as ever for listening to Trumponomics from Bloomberg. It
Speaker 2: was hosted by me, Stephanie Flanders and I was joined
Speaker 2: by Now and See Cook from Bloomberg News and Stuart Paul,
Speaker 2: economist at Bloomberg Economics. Trumponomics was produced by Summer Sunni
Speaker 2: and Mostes and IM with help from Amy Keen and
Speaker 2: sound design is by Blake Maples and Aaron Casper. And
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