In public, President Donald Trump and top White House officials keep extolling the strength of the U.S. economy. In private, they’re increasingly worrying about a global economic slowdown triggering a U.S. recession — and weighing options to shore up the economy ahead of an election year.
At a fundraising luncheon this week in Jackson, Wyo., headlined by both Jared Kushner and Ivanka Trump, acting White House chief of staff Mick Mulvaney acknowledged the risks to the GOP elite behind closed doors. If the U.S. were to face a recession, it would be “moderate and short,” Mulvaney told roughly 50 donors, according to an attendee.
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White House officials are discussing a broader package of measures than previously disclosed, including a cut of an additional percentage point or two to the corporate tax rate. That’s on top of a potential payroll tax cut, which the Obama administration had used to shore up the economy, and a move to index the capital gains rate to inflation, which potentially could be done through an executive order and has internal support from the National Economic Council, the vice president’s office and Mulvaney. Pegging the capital gains rate to inflation would exempt some gains from taxation.
“We have been talking about indexing for a long time,” Trump told reporters Tuesday afternoon. “I can do it directly.”
Any other tax cuts would have to pass Congress, an unlikely endeavor given the Democratic-controlled House. One close White House adviser called the idea of additional tax cuts a “talking point” to show the White House is considering options to help the economy, while a Republican operative called proposing additional tax cuts right now “quixotic.”
“I’ve been thinking about payroll taxes for a long time,” Trump added. “Whether or not we do it now or not is — it’s not being done because of recession.”
The president and his aides are well aware that Trump’s strongest selling point heading into his 2020 reelection bid is the state of the economy. Any threat to it could endanger Trump’s fragile approval ratings, especially among voters who say they are willing to overlook the president’s incendiary rhetoric provided they feel confident about their own financial security.
The administration is also urging the Federal Reserve to cut interest rates sharply, a move Trump has long sought in his public attacks on the central bank, and it is pursuing a trade deal with China amid various tariffs that some businesses say are posing substantial economic risks.
“The only thing they have in their control is China and putting out regulatory rules,” said one former senior administration official. “Beyond that, there is very little that they can do — but that does not mean people are not brainstorming options.”
Trump advisers concede that aides are feeling uneasy about the global economy’s effect on the U.S., as the president prepares to travel to a G-7 meeting in France this weekend.
“It is hard for us to grow when the rest of the world isn’t,” said Stephen Moore, a distinguished visiting fellow at the Heritage Foundation who Trump once considered for a spot on the Federal Reserve Board. “This has increased the administration’s desire to get a trade deal on China. That is key. Once you get a trade deal with China, it puts you back on the 3 percent growth path.”
The White House spent Tuesday selling its happy economic message. Top economic adviser Larry Kudlow hosted two calls with local and state officials and conservative groups to offer his own analysis and assurances, discussions that one White House official said had been planned for several weeks. Officials also reached out to business groups with a message that included stressing the stock market‘s resilience.
The president is intent on convincing voters that the economy is in fine shape because he knows voters often cast ballots based on how they feel at the time of the election about their own economic situation.
“People do not vote on numbers. They vote on whether they feel good, and the president understands that. He is selling the feeling,” a second White House adviser said. “It is like any other sales pitch: He is constantly trying to play off people’s feelings and emotions on the economy.”
He’s not the only one. Kudlow, counselor to the president Kellyanne Conway and deputy White House press secretary Hogan Gidley all appeared on TV over the past few days to deliver the administration’s upbeat, public-facing message, while Vice President Mike Pence spoke to the Detroit Economic Club on Monday to tout the administration’s record featuring low unemployment and healthy wage growth.
“Despite the irresponsible rhetoric of many in the mainstream media, the American economy is strong, and the U.S. economic outlook remains strong as well,” Pence said in Detroit. “Last week, despite some volatility in global markets, leading retailers also reported strong sales and earnings, and consumer spending posted its strongest reading since March.”
A recession is generally considered to be two straight quarters of economic contraction. While the U.S. is not experiencing a recession, given steady growth in jobs and wages, some common warning signs have emerged in financial markets including the inversion of a measure known as the yield curve, which can signal a downturn ahead.
Some parts of the economy have also suffered of late from weak business investment and Trump’s trade wars. On top of that, a federal deficit that is expected to exceed $1 trillion this year limits the administration’s options to cushion against a downturn.
Trump spent Tuesday stridently defending his administration’s trade standoff with China, which many economic experts and Republicans pinpoint as the main driver of any U.S. economic troubles.
“You should be happy that I’m fighting this battle, because somebody has to do it. We couldn’t let this go. I don’t even think it’s sustainable to let go on what was happening,” Trump told reporters as he detailed the way China steals U.S. intellectual property and argued none of his presidential predecessors were willing to confront China as he has.
“My life would be a lot easier if I didn’t take China on. But I like doing it because I have to do it. And we’re getting great help. China’s had the worst year they’ve had in 27 years, and a lot of people saying the worst year they’ve had in 54 years,” he added.
If the economy weakens any further, the president has already lined up scapegoats including the media, Democrats and the man he appointed to lead the Federal Reserve, Jerome Powell, who Trump has been railing against for months.
The president appears to be setting up this collective group to take the blame if the economy falters on his watch.
“I think the word ‘recession’ is a word that’s inappropriate because it’s just a word that the — certain people; I’m going to be kind — certain people and the media, are trying to build up because they’d love to see a recession. We’re very far from a recession,” the president said.