Date: August 20, 2019
Donald Trump Can Win Re-Election. But New Polls Show He’s Right to Worry
“Despite a barrage of polls that show him losing to Democratic rivals, Donald Trump’s re-election hopes are far from doomed. But he’s vulnerable on the two most important predictors: presidential approval ratings and the state of the economy. Trump’s approval rating is 43% in two new surveys by NBC/Wall Street Journal and Fox News. Despite low unemployment and record stock market highs, his approval has averaged in the low 40s steadily through his presidency. Set against recent history, that’s a dangerous place to be. On the eve of their successful re-elections, Presidents Barack Obama, George W. Bush and Bill Clinton all had approval ratings in positive territory, according to Gallup tracking polls. Worse yet, Trump’s inflammatory and divisive style of politics has cemented a high negative rating and left him little room to grow. Despite all that, Trump could very well win in November 2020. He’s raising more money than any Democrat and has the backing of a Republican Party apparatus that is working to define his foes as radical and out of touch. His geographic advantage is so strong he could lose the popular vote by 5 million and still win, according to one analysis. The most important uncertainty for Trump is the economy. Since World War II, presidents have won a second term unless they oversaw a recession on the road to Election Day — George H.W. Bush in 1992 and Jimmy Carter in 1980 were felled by a downturn. The U.S. economy has sputtered in recent days, with some warning signs that could presage a recession, although economists surveyed by Bloomberg News say there’s only a 35% chance of it hitting within the next year. This month, confidence dipped among independents and Republicans, according to the University of Michigan Consumer Sentiment Index, which showed the second-lowest overall level since before 2016 election. Some Trump allies say the president’s position is unique. “His approval rating is the most static statistic in politics. Nothing he does changes it. It’s a straight flat line,” said Republican strategist Brad Todd. “His approval rating is driven by the fact that people view him as a brake pedal on normal politics, and they accept the things they don’t like about him.” Surveys suggest the growing economy has been an asset to Trump. The NBC/Journal poll found 49% approve of U.S. adults approve of his handling of the economy — 5 points higher than his overall approval rating. An Economist/YouGov poll found that 47% approve of the way he’s handling the economy — 6 points higher than his overall approval rating. Trump performs poorly on his stewardship of other policy issues, from health care and immigration to gun control and abortion, as well as questions of honesty and steadiness. The Fox News poll found Trump losing to all four of his top Democratic rivals — Joe Biden, Elizabeth Warren, Bernie Sanders and Kamala Harris — in head-to-head matchups by margins between 6 and 12 points. Trump has shown signs of nervousness lately, angrily tweeting about the “CRAZY INVERTED YIELD CURVE!” — a reference to the 10-year Treasury bond rate dipping below the two-year Treasury bond rate for the first time in over a decade — and seeking to reassure Americans. He accused Democrats of “trying to ‘will’ the Economy to be bad for purposes of the 2020 Election. Very Selfish!” ”
EU Rebuffs Johnson Bid to Reopen Brexit Deal as Deadlock Remains
“The European Union poured cold water on Boris Johnson’s attempt to renegotiate the Brexit deal, saying the so-called backstop to prevent a hard Irish border — which the British prime minister wants scrapped — was a vital part of the divorce agreement. It means that with just over two months to go until Johnson has said the U.K. will leave the bloc “do or die,” the two sides are completely deadlocked — with Britain on course to leave on Oct. 31 without the safety net of an agreement and a transition phase to smooth the process. Still, the EU didn’t reject outright Johnson’s letter to senior European officials setting out his objections to the plan for the Irish border, which will become the U.K.’s new land frontier with the bloc. That indicates there may be room for the two sides to start talking, but only if Johnson can provide more details. The EU has consistently said the backstop isn’t up for renegotiation. “We welcome the U.K. government’s engagement,” European Commission spokeswoman Natasha Bertaud told reporters in Brussels. “The letter does not provide a legally operable solution to prevent the return of a hard border on the island of Ireland, it does not set out what alternative arrangements could be, and in fact it recognizes that there’s no guarantee that such arrangements will be in place by the end of the transitional period.” Responding to Johnson’s letter, European Council President Donald Tusk didn’t shut the door on further talks, though he pressed the prime minister to set out what the alternatives to the Irish backstop should be. The backstop, agreed by the British government with the rest of the EU in November, would guarantee no checks or infrastructure on the frontier between Northern Ireland and the Republic of Ireland by keeping the U.K. closely aligned to the bloc’s customs and trading rules. It’s a central part of the Brexit withdrawal agreement agreed by Johnson’s predecessor, Theresa May, with Brussels — which was never ratified in the British Parliament. In his letter, Johnson said he wants to replace the backstop with a “legally binding commitment” not to build infrastructure or carry out checks on the border. He has said that this is the only way the Brexit deal will get the approval of U.K. lawmakers. Both sides must seek other ways to keep the border free of checks, he said, calling for a commitment “to put in place such arrangements as far as possible before the end of the transition period,” which could be as early as the end of 2020. Politicians rejecting the backstop and not proposing an alternative plan “in fact support reestablishing a border, even if they don’t admit it,” Tusk said on Twitter.”
China Rate Reform Throws Focus on What’s Next to Aid Economy
“The People’s Bank of China unveiled a major reform to its system of benchmark interest rates on Tuesday, a move that’s immediately focused attention on if and when the real monetary easing will begin. The central bank will now release a so-called Loan Prime Rate each month, a yardstick meant to peg the cost of borrowing by firms and households more closely to the rates that banks pay for cash in money markets. While that step itself should already nudge borrowing costs a few basis points lower, analysts say that outright cuts to monetary policy tools are still needed. Even though China’s economy is slowing to its weakest pace in almost thirty years, the government remains focused on stability rather than speed amid the broadening confrontation with the U.S. That means PBOC officials are sounding reluctant to roll out the big stimulus guns: monetary-policy department head Sun Guofeng said Tuesday that there’s “not too much” room to further cut banks’ reserve ratios. “The reform tells markets that the PBOC isn’t keen to cut reserve ratios or interest rates immediately,” said Peiqian Liu, China economist at Natwest Markets in Singapore. “The central bank is paying more attention to rates transmission, which will be the focus in the second half of the year.” Industrial output slid in July, after second quarter gross domestic product growth came in at the weakest pace since quarterly data began in 1992. For some, the current approach isn’t enough to arrest the economy’s slide and adjustments to some of the PBOC’s tools are in view. The interest rate reform itself means the PBOC is less likely to use its old benchmark lending rate to cut costs broadly across the economy, as policy makers have said that instrument will ultimately be scrapped. The new lending rate was announced at 4.25% on Tuesday, 10 basis points lower than the old benchmark. Instead, analysts are focusing on the medium-term lending rate and bank reserve ratios as possible tools to be adjusted. Sun steered against outsize expectations in that department. “There is some room for adjustment to the reserve-requirement ratios, but generally speaking the room isn’t as big as people imagine,” Sun said Tuesday. Liu said the central bank will likely keep monetary policy stable in the third quarter, and it’s likely to lower the rate for mid-term lending toward the end of the year by 5-10 basis points.”
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