An Economic Red Flag

This is not the economic forecast any new administration wants to see:

The Atlanta Fed’s GDP Now forecast model’s dramatic downward turn for the first quarter of 2025 shouldn’t be overread. As CNBC reported, the tracker is volatile and becomes more reliable toward the end of the quarter as the data come in. But the metrics fueling the contraction – declining consumer spending and confidence combined with exports coming in weaker than expected – should not be dismissed so quickly.

Voters are unlikely to blame the new administration for a single quarter defined by negative GDP growth, particularly one in which he was only president for two-thirds of it. But the administration should be more heedful of the risks they’re courting by promoting a fiscal policy that consists primarily of imposing artificial price hikes on import-heavy sectors of the economy. At 82 and 80 percent, respectively, respondents to a CBS News survey last week said Trump’s top priorities should be the economy and inflation. But only 36 percent said that Trump is prioritizing the economy, and just 29 percent said the same of inflation. Those findings dovetail with a CNN survey from the same period, which found that just 40 percent of voters believe Trump has the right priorities.

Democrats are attempting to make hay of this emerging disconnect between the Trump administration and the broader public, but they’ve struggled to overcome both their own credibility deficit and the honeymoon effect benefiting Trump. For all voters’ anxieties, Trump still retains the public’s trust when it comes to the economy. But that can change quickly in the event of a painful downturn. Even if Democrats have not repaired the reputational damage the party did to itself in the Biden years, “throw the bums out” is not an especially discerning philosophy. The anti-incumbent sentiment that swept Trump back into office is still abroad in the West, and it can turn against Republicans, too.