Will the economy save Trump?
Simplified a bit, their theory goes as follows.
There's income and there's wealth. Income is what people earn from their jobs and their investments; wealth is what they own -- mainly homes and stocks. For many years, changes in incomes and wealth moved together. Now, wealth movements have acquired a life of their own, so that shifts in wealth shape the business cycle. When people feel richer, they spend more. When they feel poorer, they spend less.
What's happening, they argue, is that stock prices have outraced income gains. When the resulting "bubble" bursts, paper wealth will be destroyed, spending will slow, and there will be a recession. They think one will occur in 2018, probably in the second half of the year.
Some economists are more pessimistic. They believe that the overvaluation of stocks is global, reflecting widespread easy-money policies of government central banks.
"While in 2008 bubbles were largely confined to the American housing and credit markets, they are now to be found in almost every corner of the world economy," writes economist Desmond Lachman of the American Enterprise Institute in The New York Times. Lachman says he feels fairly confident that stocks will retreat -- but not when.
What's striking about the current situation is the huge disconnect between what's happening in the economy and what's happening in politics. Politics is unstable and chaotic. Polarization has intensified, and Trump has corrupted political debate with his constant, often-untrue tweets. Meanwhile, economic confidence is strong, and the stock market acts as if it has not a worry in the world.
To some extent, the contradictions can be reconciled by Trump's pro-business tax and regulatory policies. But the gap is too wide for this to be a fully adequate explanation.
Someday, the gap may be erased. But how? Will political chaos spoil the economy, or will economic confidence stabilize politics?
(c) 2018, The Washington Post Writers Group