There are two things I would urge the president to avoid in discussing the economy. The common thread is to keep it positive.
First, do not focus on the fact that the recovery in employment is too slow. It is, and unemployment is still much too high. During President Obama’s first term, the argument for fiscal stimulus rested on the very distressed business environment and weak job market. But today it might be more helpful for the president to stop repeating this old litany of bad news and instead contribute some optimism about how we are doing.
Let me elaborate. There is no assurance that a relatively upbeat presidential assessment would do any good. But it might. We believe leadership matters in other spheres. And economists generally believe in the importance of expectations in shaping current behavior. Since the Great Recession, business has been cautious about expanding and consumers have been restrained in their spending. Though not yet reflected in most forecasts, there are now signs of revival on both fronts. What is more, the recent revisions to the employment data indicate the job market has already been strengthening more than we had thought. So the president has good grounds for offering a brighter vision of economic prospects.
The second thing I would urge on the president is to keep class distinctions out of economic policy. For decades, the wealthy have gotten much richer while middle class incomes have stagnated. This is an important feature of our recent economic history, and it strongly suggests that any search for new revenues should, in fairness, look first to higher income groups. But the president’s agenda, which needs compromise across the political aisles, is not served if the facts of income distribution morph into class warfare in political rhetoric.
Sentiment inside the Beltway has turned sharply against China. There are many issues where the two parties sound more or less the same. Trump and others in the administration seem heavily invested in a ‘get very tough with China’ stance. It’s possible that some Democrats might argue that a decoupling strategy borders on lunacy. But if Trump believes this will play well with his core constituencies as his reelection campaign moves into high gear, he will probably decide to stick with it, if the costs and the collateral damage seem manageable. But that’s a very big if, especially if the downsides of a protracted trade war for both American consumers and for American firms become increasingly apparent.