Donald H.W. Bush: The One-Term Curse?

  • Trump’s worried about the economy now? What took so long?
  • The spooky parallels between Trump and the last one-term president
  • “Best case” national debt scenario of $35 trillion by 2029
  • Relief rally as the weekend approaches, gold still resilient
  • Unexpected turn of events in the Tom’s Diner saga
  • Is good help really hard to find? Two very different reader takes.

So now the president is concerned about the economy slowing down in advance of the election? What have we been saying here for nearly two years?

This morning’s Washington Post has a loooong front-page story that begins: “Mounting signs of global economic distress this week have alarmed President Donald Trump, who is worried that a downturn could imperil his reelection…

“From his golf club in New Jersey where he is vacationing this week, Trump has called a number of business leaders and financial executives to sound them out — and they have provided him a decidedly mixed analysis, according to two people familiar with the discussions who spoke on the condition of anonymity because the conversations were confidential.”

Having spent 20 years in Establishment media, I offer you a pro tip: The discerning news consumer should always take anonymous insider-gossip stories like these with a grain of salt.

That’s a good rule of thumb no matter who’s the president — and probably more so with this president.

But for argument’s sake, let’s take the story at face value: Trump has every reason to be worried. He should have worried from the moment he took office.

In October 2017, as he pondered who to appoint chairman of the Federal Reserve, we said the wrong choice would doom him to becoming the first one-term president in a generation.

Today seems like a good time to revisit our case.

Let’s take a short trip through the history of every president who’s been elected since 1980.

We’ll go backward in time and examine when they entered office relative to the “business cycle.” Was the economy in a recession? Was it in an expansion? Was it somewhere in between, and if so, where? Think about your own economic circumstances as each president came into office…

Trump: Entered office seven years and seven months into an economic expansion

Obama: Entered office smack in the middle of the “Great Recession”

Bush the Younger: Entered office weeks before the start of the 2001 recession

Clinton: Entered office about two years into an economic expansion

Bush the Elder: Entered office six years and two months into an economic expansion

Reagan: Entered office six months after the end of one recession and six months before the start of the next.

Maybe you already see where we’re going with this.

Trump and Poppy Bush are the only presidents during this stretch of history who came into office inheriting a yearslong economic expansion.

Everyone else was lucky enough to enter office during a recession, going into a recession or coming out of a recession. By the time they ran for a second term, the economy was “good enough” relative to when they came in that they could win reelection.

Bush the Elder had the misfortune of a recession starting about 18 months after he took office.

It was over in nine months — by March 1991, according to the wonks who come up with recession dates at the National Bureau of Economic Research. But by November 1992, the public perception was that the economy was still punk — enough that voters sent Poppy packing. He’s the only one-term president Americans younger than 40 can remember.

In July 1991, shortly after the end of that 1990–91 recession, Poppy made the fateful decision to appoint Alan Greenspan to a second term as Fed chairman.

“He has done an outstanding job,” said the president. “He's been a fierce fighter against inflation, but I think he also is as strongly committed to growth.”

George H.W. Bush

For Bush, “Stay the course” turned out to be the wrong call…

But an Associated Press account at the time hinted at tension: “Over the past year, as the economy sunk into its first recession in eight years, Bush and his senior advisers have constantly pressured Greenspan and his fellow board members to stimulate an economic recovery by quickly and steeply lowering interest rates.

“Central bank officials, however, have resisted loosening credit as forcefully as the administration had wanted, fearing that would lead to resurgent inflation.”

In October 1990 — shortly after Saddam Hussein invaded Kuwait and gasoline prices jumped — the Greenspan Fed began lowering the fed funds rate. From 8%, the rate came down steadily to 3% by Election Day 1992. But for many of Bush 41’s advisers — especially Treasury Secretary Nicholas Brady — it wasn’t fast enough.

In 1998, Bush himself laid blame for his election loss at the feet of Alan Greenspan.

As he explained it in an interview with the late David Frost, “I think that if the interest rates had been lowered more dramatically that I would have been reelected president because the [economic] recovery that we were in would have been more visible.”

Not to put too fine a point on it, Bush added, “I reappointed him, and he disappointed me.”

Little wonder Trump’s administration is the first since Bush 41’s to openly feud with the Fed.

To be clear, it’s not that Trump blew it by appointing Powell as Fed chairman. It’s the nature of the Fed beast.

The Fed creates the boom-bust cycle by manipulating interest rates and other levers of monetary policy. They have the conceit that they can “fine-tune” the economy to avoid the inevitable busts that result from their policy… but that’s worked out only once since World War II, when the Greenspan Fed engineered a “soft landing” in 1994.

During the debates with Hillary Clinton in 2016, Trump observed, “We're in a bubble right now. And the only thing that looks good is the stock market, but if you raise interest rates even a little bit, that's going to come crashing down. We are in a big, fat, ugly bubble. And we better be awfully careful.”

But once he was in office, he had to pivot to the hope that the “big, fat, ugly bubble” could remain inflated long enough to buy him a second term. The odds were never good…

If a recession arrives, there’s no telling how high the national debt might climb.

The debt stands this morning at $22.34 trillion. The Congressional Budget Office currently projects the debt will rise to $33.3 trillion over the next 10 years.

Oh, wait, that was before Congress and the White House came to terms on a spend-a-palooza last month. Tucked in that legislation is an estimate that the additional spending will tack another $1.7 trillion onto the national debt over the next 10 years. So now we’re looking at $35 trillion.

But wait: Congressional Budget Office projections are notorious for assuming there will never be another recession — which would have budget-busting effects like lower tax revenue and higher welfare spending.

Even if a recession can be averted in time for Election Day 2020… what are the odds of no recession until at least 2029? Uh-huh…

To the markets today, where the “risk on” trade is in full swing.

For no obvious reason, the major U.S. stock indexes are all up well over 1%. Can you say “relief rally”? The Dow, the S&P 500 and the Nasdaq are still set for big losses on the week. The Dow rests 5.4% below its record close a month ago.

Treasury rates are moving back up, the 10-year at 1.58%. And while gold is down, it’s still holding the line above $1,500. Resilient.

The big economic numbers of the day are a mixed bag: July housing starts came in less than expected, but permits — a better indicator of future activity — came in much better than expected. Still, permits are down 3.8% from this time a year ago.

Meanwhile, the University of Michigan’s consumer sentiment survey came in way below expectations and is now back at levels last seen earlier this year.

There’s a sudden and unexpected resolution to the saga of Tom’s Diner.

Tim's Diner Denver

A quick refresher: Tom Messina hoped to fund his retirement by selling the restaurant he owned in downtown Denver to a developer who wanted to build apartments on the site. But according to The Denver Post, historic preservation do-gooders stepped in and “asked the city to designate the kitschy building as a historic landmark.” Approval by the city council looked like a near-certainty.

Now the do-gooders have withdrawn their request: “We have agreed to withdraw our application,” says a statement, “in an effort to find alternative solutions for this site and hope that the property owner and the current developer will engage with us in good faith moving forward.”

We’re not sure exactly what that means, but today the city will issue a “certificate of nonhistoric status.”

“There are no more major legal obstacles to demolition,” reports The Denver Post, “but the applicants still hope to find a way to preserve the building.”

No comment yet from Messina. A few days ago, he was feeling mighty low: “You plan for something and you think it's yours to do as you wish,” he told Reason, “and then this pops up.”

“Mr. Helger is not the only one with a hiring problem,” a reader writes on the topic of good help being hard to find.

Helger, you might recall, is the Wendy’s district manager who complained that staffing a location in Wareham, Massachusetts, was nigh impossible because most of the “talent pool” consisted of “recovering addicts.” (Update: Helger has been suspended “pending an internal investigation.”)

“I live in Rockingham County, north of the Piedmont on the Virginia border,” our reader says. “I have heard the same argument from managers at the small businesses and the large retail managers. The labor pool cannot pass either the drug tests or the simple math tests. Some of the stores are being forced to loosen their standards.

“Either way, no employees or low quality results in bad customer service.”

“I’m not buying it,” a reader says of the surveys that find “quality of labor” to be the biggest problem facing small business these days.

“I’m mostly retired (volunteer work occupies some time), but have sought out full-time employment for an income supplement to add to investing or extra travel. At age 58 there aren’t many employers willing to consider me, except to run a cash register at a checkout counter. That’s not happening, as I see more than my fair share of a$$hole customers giving those people **** on a near-daily basis just about anywhere.

“Mostly I never even get a call back after filling out an online application, or if I do get an initial phone interview, it tends to end shortly after they realize my age! Age discrimination absolutely exists, but it’s near-impossible to prove.

“I’m not sure what those respondents mean by quality of labor. Sorry, but if drug addicts and ex-felons are all that apply, then I suggest the jobs they are trying to fill are either financially inadequate or just plain undesirable for those of a higher caliber/quality. I have seen some pretty absurd requirements/responsibilities for jobs that are barely over minimum wage. Many of them are not even full-time, as the employers do not want to offer benefits.

“I spotted one just yesterday for a famous brand car rental agency looking for rental return agents. Their listed benefits were as follows:

  • Generous unpaid leave
  • 401(k) without a match
  • Company discounts
  • Special employee-only pricing on vehicle purchases
  • No paid holidays
  • No paid sick days
  • No health insurance of any kind.

“It’s part time, but you must be flexible and willing to work any day and any shift as needed.

“Good luck filling that job with any so-called ‘quality labor.’ I don’t know anyone that stupid or desperate.”

The 5: Which will make things very interesting whenever the next recession rolls around…

Have a good weekend,

David Gonigam

Dave Gonigam
The 5 Min. Forecast

P.S. With the stock market’s rather swift drop in August, Jim Rickards has just prepared an urgent — and unexpected — message. Check out this video right away.

Dave Gonigam

Dave Gonigam

Dave Gonigam has been managing editor of The 5 Min. Forecast since September 2010. Before joining the research and writing team at Agora Financial in 2007, he worked for 20 years as an Emmy award-winning television news producer.

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