(Bloomberg) --
Some battleground states crucial to President Donald Trump’s political future are being particularly hard hit by the coronavirus crisis, a development that could decimate his central argument for re-election at a critical moment.
The booming economy Trump hoped to ride to a second term may be collapsing – with some forecasting a national unemployment rate as high as 30% – and the trifecta of states that delivered him the presidency will likely bear the brunt.
Michigan, which Trump won in 2016 by 10,704 votes, now ranks just behind New York and New Jersey in the number of coronavirus deaths, with 1,479 fatalities as of Monday. Pennsylvania, which has the fourth-largest number of coronavirus cases, ranked first in the nation in percentage of new unemployment claims in the last two weeks of March. He carried the Keystone State by 44,292 votes in 2016.
Franklin & Marshall College professor Terry Madonna, a veteran political analyst, said Pennsylvania will be one of the most fiercely contested states in November and much will depend on Trump’s ability to restart the economy.
“Presidents, whether they cause the economic downturn or recession or not, they’re in office. When times are good they benefit, when times are bad, they don’t,” Madonna said. “Much will depend on the degree to which Trump is using the federal government to make improvements to minimize the cumulative economic damage from the coronavirus.”
And Wisconsin Democrats won’t soon forget that Republicans in the State Legislature overruled the governor to force the state’s primary to go forward with in-person voting last week, prompting troubling scenes of mask-clad voters gathering to cast their ballots.
The economic damage is falling hardest on a key part of the Trump coalition -- blue-collar workers. Employment of those without a college degree declined 2.5% from February to the first half of March, according to seasonally adjusted Labor Department figures. Employment of those with college degrees actually increased by 0.4%, though the number of unemployed jumped by 28%.
The mounting bad news — both from disease and joblessness — has already ended the two-week “crisis bump” Trump enjoyed in late March for his handling of the coronavirus.
More Americans now disapprove of his crisis management than approve, 48.7% to 46.8%, according to the RealClearPolitics average -- suggesting that even a “rally round the flag” effect of voters sticking with the incumbent at a time of crisis is fleeting.
Trump, who previously argued that he oversaw one of the most prosperous periods in American history, remains optimistic. “We built the greatest economy in the world,” Trump said at a White House press briefing last week. “I’ll do it a second time.”
And while he continues to promise an early end to the war against what he calls “the invisible enemy,” the disruption threatens to do untold economic injury that could take years to recover.
The economy is set for a historic contraction in the second quarter, with many economists predicting an unemployment rate well above the peak of 10% reached in the wake of the last recession.
A Bloomberg survey of 69 economists last week showed a median estimate of a 25% annualized contraction in gross domestic product in the second quarter, with chances of a recession at 100%.
Voters Deciding Now
The second quarter of an election year is critical for a president running for a second term. While the exact time frame is open to debate, research shows that’s when many voters form their impressions of the economy that they take with them into the voting booth in November.
If the election is a referendum on the economy, Trump’s position is more fragile than it’s ever been.
Yet Trump has often defied political gravity, and experts say there’s still plenty of uncertainty seven months before voters go to the polls. In addition, his presumptive Democratic rival, former Vice President Joe Biden, has struggled to remain in the spotlight with the primary contests over and the virus dominating headlines.
Yet Biden still tops several polls measuring a general-election contest, and can argue that, as vice president, he steered America out of the last recession that occurred under a Republican president.
“Two months ago” Trump’s approval “rating was lower than it should have been based on the economy,” said Christopher Wlezien, a University of Texas at Austin professor who studies the impact of the economy on presidential elections. “He wasn’t getting the credit for that, so maybe he doesn’t get the blame.”
That might be because increased partisanship has colored people’s perception of the economy. Democrats and Republicans both see it in more favorable terms when their party holds the White House.
Republicans still see the economy as being in better shape than it was at any point under the Obama administration, while Democratic sentiment has hit the lows of the Great Recession.
Overall, consumer sentiment saw a record-breaking decline in April, with sharp drops among Republicans and Democrats alike, according to the consumer confidence survey by the University of Michigan.
But consumers are less pessimistic about the future, said survey director Richard Curtin. That may work in Trump’s favor.
“They expect the pandemic to be temporary, they expect that the peaks would be reached and then we would see some relief and the economy would open up,” he said.
Curtin said that’s “a rather dangerous expectation” for consumers. “I don’t think they’re correctly interpreting the situation, in that the recovery will be much slower and start much later than is expected by consumers.”
Third-quarter comeback?
Some economists are predicting a third-quarter rebound, though not nearly enough to make up for the lost output resulting from the shutdowns.
An analysis by Nomura Securities in New York forecasts GDP will drop by 42% on an annualized basis in the second quarter before posting a 15% expansion in the third quarter. It sees unemployment above 18% by the end of the second quarter, and expects it will still be above 13% by the end of the year.
“Yes, there’s a bit of a recovery in the second half of the year, but that only gets you back a small way,” said Lewis Alexander, Nomura’s chief U.S. economist.
The rebound would also depend on psychological factors beyond the control of policy makers and even the president, as well as on factors like when social distancing eases and people return to job sites.
“Social distancing is not something you can turn off with a switch. That’s a judgment about what policy makers are going to do but also about what behavior is going to be,” Alexander said. “I’m reasonably confident they are going to reopen the theaters in New York in a couple of months, but I don’t think those audiences are coming back until the threat of Covid-19 is behind us.”
Barclays (LON:BARC) has a somewhat rosier forecast, predicting GDP declining by 35% on an annualized basis in the second quarter before posting a 25% expansion in the third quarter. Barclays sees unemployment rising to around 17% in the second quarter, and expects it will be about 9.5% at the end of the year.
Even if the economy improves once the coronavirus restrictions are lifted — as Trump has repeatedly promised — the feeling of insecurity could remain. People who go back to work could still be anxious about their savings and health insurance.
“Most people think it’s another hit to middle- and lower-income Americans, and see it as revealing inadequacies not only in the public health system, but also in social safety nets,” said Michael Gapen, chief U.S. economist at Barclays in New York.
Those sentiments could help Democratic congressional candidates. “That probably helps Democrats down-ballot because they’re traditionally the party that has been seen as best judged to handle health care issues,” Gapen said. “I think it’s less clear how it will influence the presidential race. There certainly tends to be a rally-around-the-flag effect.”
Partisan disasters
Presidents have at least some control over the economy. But voters also tend to punish an incumbent for natural disasters — even weather events that are difficult to predict or prepare for.
“When bad things happen, whether it’s the president’s fault or not, voters kind of look to the president. Part of it is irrational,” said Andrew Reeves of Washington University in St. Louis. “‘I’m going to punish the president for it.’”
Research by Reeves and Douglas Kriner of Boston University shows that presidents respond by targeting aid to politically important states. But this is a national emergency, and as of Wednesday, Trump had declared disasters in every state.
He has also feuded with Democratic governors like Michigan Governor Gretchen Whitmer, saying they didn’t appreciate federal aid enough. Biden is considering her as a running mate.
After Hurricane Sandy, President Barack Obama was photographed embracing Republican New Jersey Governor Chris Christie two weeks before the 2012 election.
Political scientists studying that disaster found that it only increased partisan views of the president. Democratic counties supported Obama even more after the hurricane, while Republican counties punished him.
“Voters who think the incumbent president is terrible are going to think that even more and voters who think the incumbent president is great also will think that more,” said Boris Heersink of Fordham University.
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