I’LL TAKE HEADLINES FROM 2020 FOR $500, ALEX: Trump’s second term seems inevitable.

Face it: Biden isn’t that popular as world leaders go. In their respective countries, Narendra Modi (India), Andrés Manuel López Obrador (Mexico), Anthony Albanese (Australia), Lula (Brazil) and Giorgia Meloni (Italy) are all better liked. If you look at Biden’s job approval, using the RealClearPolitics average, he is now slightly more unpopular (a net approval of minus 11.6 percent) than Trump was at this stage in his presidency (minus 10.7 percent).

Trump is also not that unpopular. Indeed, he is less so than at this point eight years ago. In July 2015, Trump’s net unfavorable number was minus 39.3 percent. Today, it’s minus 16 percent. Then, just 23 percent of voters had a positive view of him. Now it’s 39 percent. The RealClear figure for Joe Biden is 41 percent, and his net unfavorable is minus 12 percent.

And that’s the state of play at the moment. But what if there’s a recession between now and next year? It’s not a certainty. There is more than one smart economist who still believes there could be a “soft landing,” despite all the recent worries sparked by US (and Swiss) bank failures. In an interview with CNBC, Apollo Global Management’s chief executive, Mark Rowan, even used the phrase “non-recession recession,” which we must hope doesn’t catch on.

On the other hand, former treasury secretary Larry Summers has had a pretty good run ever since he called the Biden administration’s inflationary fiscal mistake back in February 2021, and he said last week that there’s a 70 percent probability of a recession within the next year. He is not alone.

I’m with the bears. What we have witnessed over the past two years is an epic monetary policy failure. In June 2021, the members of the Federal Open Market Committee thought that the target federal funds rate this year would lie between zero and 1.75 percent. By March of this year, they had to revise those figures up to between 4.75 and 6 percent. Having been asleep at the wheel in 2021, they have cranked up short-term rates to try to bring inflation back down to 2 percent. But they are still a long way from achieving that.

As central bankers love to intone, monetary policy acts with long and variable lags. The current lag is taking longer than people appreciate. Recessions resemble slow chain reactions. The signal from the policy interest rate to the wider economy goes through multiple channels, but the most important is the volume of bank credit.

In the twelve months through March, total bank credit in the US economy declined in real terms. That rarely occurs. Since 1960, it has happened only during, or in the immediate aftermath of, a recession. This is the indicator to watch, along with the surveys of borrowers and lenders.

The deceptive indicators are those that track consumer behavior and the labour market, which still look strong. In the latest GDP print, consumption was still growing. But non-residential investment contracted. The present game of chicken over the debt ceiling makes a recession more likely. As in 2011, the showdown will probably be resolved at the last moment, within twenty-four hours of the “X-date” after which the Treasury must either slash public spending or default on some part of the federal debt. But the 2011 debt-ceiling crisis took place during the sluggish recovery from the 2008 financial crisis, when inflation and interest rates were close to the zero lower bound. The risk of a bond market accident is much higher today.

What this suggests to me is that Joe Biden is in serious danger of following Gerald Ford, Jimmy Carter and George H.W. Bush into the trashcan marked “one-term presidents.” Why? For the simple reason that no president since Calvin Coolidge a century ago has secured re-election if a recession has occurred in the two years before the nation votes. It does not need to be as severe as the Great Depression that destroyed Herbert Hoover’s presidency. A plain vanilla recession will suffice.

In the wake of the 1976 Republican convention, Ford was trailing his rival, Carter, by thirty-three points in the Gallup poll. His campaign did an extraordinary job of closing the gap, so that the result was tantalizingly close. But over the GOP, as the New York Times put it in its immediate post-election report, “hung the shadow of Richard M. Nixon and a dangerously shaky economy.”

In 1980, it was Carter’s turn to lose, in part because of “last-minute rejections of [his] handling of the economy,” in part because of the Iran hostage crisis. “Inflation and unemployment had been a constant drag on Mr. Carter throughout the race,” reported the New York Times. “The issue got new prominence when Mr. Reagan stressed it as he closed his argument in the debate in Cleveland by saying, ‘Ask yourself, are you better off than you were four years ago?’”

And in 1992, Bill Clinton ran on “the economy, stupid,” one of three points on a sign that his chief strategist James Carville hung in the campaign headquarters in Little Rock, Arkansas. (The others were “Change vs more of the same” and “Don’t forget healthcare.”)

If you think the economy isn’t going to be the issue in the 2024 election, I’ve got a Whip Inflation Now badge to sell you. Look at the Gallup poll on “satisfaction with the way things are going in the US.” That’s currently at the 1980 level, half what it was four years ago, before the pandemic. Gallup’s economic confidence index is deeply in negative territory, the opposite of where it was under Trump. And this is before any recession.

Whoever is running against Biden gets to play some variation on the “Worst economy in 50 years” tagline of Bill Clinton. But DeSantis can add a variation of Reagan’s trademark: “Are you better off than you were four years ago? Well, Florida residents aren’t. As to the rest of America…”