The IMF this week cut its growth forecast for the US economy to 2.1% from 2.3% for 2017, and to 2.1% for 2018 as well, down from 2.5%.
Originally, the IMF had been more bullish in direct response to President Trump’s pro-growth agenda. IMF analysts liked his infrastructure spending plans, they liked his proposals on tax, and the arguments now raging around healthcare and the Russia enquiry were not central to their analysis at all.
Mr Trump’s notional growth target is 3% and with the 2.8% growth target for 2018, the IMF was prepared to go most of the way there with him. Until now.
Because while no-one doubts President Trump’s genuine desire to take the US economy to higher levels the policy quagmires that his regime has run into are now mitigating against.
Healthcare is stalling, economic stimulus is stalling and he’s hit a political scandal in the form of ties to Russia that may or may not lead to something more significant, but which nevertheless is taking up a lot of airtime.
Late night talk show hosts have been making merry with President Trump’s simultaneous denial that there is a Russia scandal and his willingness to blame it on President Obama.
The rub-off is that Trump’s poll ratings are poor, even allowing that polling as a science is not what it once was.
They are worse than President Obama’s were at this stage in his incumbency, and worse than George W Bush’s. In fact they are worse than every elected post-war President barring only President Clinton who, notably, was mired in healthcare problems of his own.
The problem for Trump is not so much that he’s unpopular - Presidents have faced that particular challenge since time immemorial. It’s more that Trump’s entire agenda has been set by a supposition that he somehow heads a populist revolt against the elites and ruling classes. He uses this supposition to give his bluster and his attempts to short-circuit due process and scrutiny legitimacy.
But it may be that the Emperor is about to be revealed as less well-clad than he thought he was
In this febrile climate President Trump is unlikely to be able to steamroll any sort of legislation through that doesn’t have at least a solid central support base in his own party, the party he so spectacularly divided on the way to securing the Presidential nomination last year.
But Congress is divided. There’s the repeal of Obamacare for a start. That’s taking up legislators’ time far more than was anticipated in pre-election rhetoric. The new bill has now been delayed till after 4th July for the simple reason that if it had gone in front of the House now it would have failed.
Then there’s the more medium term outlook. Should Congress focus on raising the debt ceiling that is allowed for US spending? Should it focus on increasing spending on the US military. Or should it allow for a stimulus package that will undoubtedly be slow to get going and the full impact of which may not now start to be felt until after the next election?
After all, for every construction project that gets proposed, it takes countless white-collar workers to go through architecture, design, planning, safety and general feasibility before the blue-collar boys get the green light.
And easing legislation on mining permitting won’t cut it at a national level.
The beleaguered US coal industry only comprises around 70,000 workers in total, which is less than Wal-Mart, or Amazon, or many other major US household names.
So while providing individual special interest groups with relief may help soothe specific wounds, it’s unlikely to get the US economy moving in a way that can undo the structural changes of the last three decades.
So what’s Trump’s real plan?
That’s where the IMF’s downgrade comes into play this week. Because the answer isn’t entirely clear. His popular mandate is largely illusory, although in some circumstances he ought to be able to command a majority in Congress. In some regions though, Trump remains intensely popular and, due to the growing media disconnect, that constituency may not yet be aware of his larger travails.
He will have to pull something out of the hat to retain support in these regions before too long. But what it is remains to be seen. If he remains hamstrung economically, then it may be something wildly rhetorical or political. And that will only increase the broader uncertainty still further.