Recession
Until now, I’ve mostly seen the prospect of yet another recession more as speculation seemingly founded on a notion that the alleged expansion (it’s an expansion only if you discount externalities, such as climate) couldn’t go on forever. And certainly, psychology is a factor: The very fact that the Wall Street Journal publishes an article speculating on the possibility of a recession[1] will mean people will think about the possibility of a recession. The question is when or if that thinking becomes a self-fulfilling prophesy.
Another question is whether, in passages to warm capitalist libertarians’ hearts, the article is correct to allocate considerable blame for past recessions to the Federal Reserve[2] (capitalist libertarians even blame the Great Depression that began with a stock market crash in 1929 on, yes, the Federal Reserve).
But there are a few storm clouds now: One is Donald Trump’s idiocy on tariffs, which a lot of folks, importantly including Republican Congress members, translate as taxes on U.S. consumers and businesses.[3] They’re dubious with China, fully delusional in trying to get Mexico to stem the flow of migrants into the U.S.[4] Another is Brexit, which now seems certain to be hard, with its predicted devastating consequences for the British economy—one question will be how these spill out into the world economy. Then there’s a bipartisan antitrust crackdown on big high tech[5] that I have to say I didn’t see coming.
It might well be that none of those, by themselves or even in combination with each other, would push the economy past a tipping point. But it is a positivist (and brain-dead) linear model of causation that expects a single cause and a single effect (yes, really, and no, I couldn’t believe it either—this was an “are you fucking kidding me” moment for me when I learned of this). I am, among other things, a systems theorist and I know that there are always other factors at work.
But if a threat hits the economy, policy makers may have a difficult time finding further tax or spending capacity to limit the impact. As Canada experienced in the early 1990s, fiscal belt tightening in a downturn can make a recession even worse.
The Fed is also constrained. With interest rates already very low, it has little room to cut them to spur borrowing, spending and investment in a downturn.[6]
What I’m not is an economist and, frankly, if I were, you’d have even less reason to listen to me if I were forecasting a recession (if, indeed, human science is a mother to the social sciences,[7] economics would be the mean and vicious, ugly-to-the-bone stepchild). I’m not. I simply don’t have the training or the data, nor do I have any particularly educated insight into the economy. But I’m starting to see reason for people to worry.
The silver lining is that if a well-timed recession occurs, later this year, or better still, early to mid-next year, it will boost the prospects for a Green New Deal. So-called “creative destruction” has destroyed too much: I drive past shuttered manufacturing facilities and through devastated communities—McKeesport, I’m thinking of you, but you’re not the only one by a very long stretch—every day. I see the poverty that has resulted.
The neoliberal rationalization that yes, workers might be getting paid less and might be treated like shit, but at least they’re paying lower prices for products now made overseas, doesn’t really fly here because these folks aren’t buying much at all. They don’t have the money. The alleged expansion hasn’t reached these folks any more than it has me. And if I’m going to talk about tipping points, another recession, especially a severe recession, might be one.
Jon Hilsenrath, “After Record-Long Expansion, Here’s What Could Knock the Economy Off Course,” Wall Street Journal, June 3, 2019, https://www.wsj.com/articles/after-record-long-expansion-heres-what-could-knock-the-economy-off-course-11559591043
Trade
Republican lawmakers aren’t eager to be drawn into a conflict with the president. But some feel they might have to take action following a growing consensus within the GOP that these new tariffs would amount to tax increases on American businesses and consumers — something that would represent a profound breach of party orthodoxy.[8]
There’s another reason Republican congress members might not really want to have this particular fight with Donald Trump: Authoritarian populists are very often the ones who’ve lost jobs in so-called “free” (for whom? to do what? to whom?) trade. They’re also a large (if not the larger) part of Trump’s base. It may indeed be sheer idiocy, but so-called “free” trade is not an argument that will win them over. And they’re already incensed over migration, Trump’s excuse for tariffs on Mexico. He’s pushing all the right buttons for them and they’re loving it. That said, at least some Republican senators seem to think they have the votes to override Trump’s veto and stop the tariffs.[9]
Erica Werner, Seung Min Kim, and Damian Paletta, “GOP lawmakers discuss vote to block Trump’s new tariffs on Mexico, in what would be a dramatic act of defiance,” Washington Post, June 3, 2019, https://www.washingtonpost.com/business/economy/citing-mexico-tariffs-threat-lawmakers-say-n-american-trade-deal-is-in-peril/2019/06/03/73c4eaac-863c-11e9-a491-25df61c78dc4_story.html
Erica Werner et al., “GOP lawmakers warn White House they’ll try to block Trump’s Mexico tariffs,” Washington Post, June 4, 2019, https://www.washingtonpost.com/world/the_americas/mexico-sees-80-percent-chance-of-a-deal-to-head-off-trump-tariffs/2019/06/04/53bdce08-86c4-11e9-98c1-e945ae5db8fb_story.html
Antitrust
There’s an acronym, FAANG, used to refer to the really big high tech firms, standing for Facebook, Apple, Amazon, Netflix, and Google. Four of those companies, but apparently not Netflix, will now be the subject of antitrust scrutiny.[10] I’m having a hard time imagining what the results of punitive measures might look like, which probably says as much about the need for antitrust action as it does my own limited imagination.
Dan Gallagher, “Big Tech’s Weird Day of Reckoning,” Wall Street Journal, June 4, 2019, https://www.wsj.com/articles/big-techs-weird-day-of-reckoning-11559641888
Elon Musk
Tom Hoggins, “Tesla is ‘structurally unprofitable’, analysts say,” Telegraph, June 3, 2019, https://www.telegraph.co.uk/technology/2019/06/03/tesla-structurally-unprofitable-analysts-say/
Brexit
So yesterday, we had Donald Trump’s pal, the ambassador to Britain, saying Britain’s National Health Service would be on the table for post-Brexit trade negotiations.[11] I called it an “own goal” because it gives Brits a reason to vote against Nigel Farage, whom Trump would undoubtedly love to win a general election and become prime minister.[12] So guess what Trump did today? He doubled down on the “own goal.” He might have backtracked later,[13] but I’m guessing the damage is done. Typical. And this is how you know the man’s a fucking idiot, because stupid just doesn’t come much stupider than this.
Adam Taylor, “Brits are fiercely protective of their health-care system. Trump suggested he wants it included in trade talks,” Washington Post, June 4, 2019, https://www.washingtonpost.com/world/2019/06/04/brits-are-fiercely-protective-their-health-care-system-trump-suggested-he-wants-it-included-trade-talks/
- [1]Jon Hilsenrath, “After Record-Long Expansion, Here’s What Could Knock the Economy Off Course,” Wall Street Journal, June 3, 2019, https://www.wsj.com/articles/after-record-long-expansion-heres-what-could-knock-the-economy-off-course-11559591043↩
- [2]Jon Hilsenrath, “After Record-Long Expansion, Here’s What Could Knock the Economy Off Course,” Wall Street Journal, June 3, 2019, https://www.wsj.com/articles/after-record-long-expansion-heres-what-could-knock-the-economy-off-course-11559591043↩
- [3]Jon Hilsenrath, “After Record-Long Expansion, Here’s What Could Knock the Economy Off Course,” Wall Street Journal, June 3, 2019, https://www.wsj.com/articles/after-record-long-expansion-heres-what-could-knock-the-economy-off-course-11559591043; Erica Werner, Seung Min Kim, and Damian Paletta, “GOP lawmakers discuss vote to block Trump’s new tariffs on Mexico, in what would be a dramatic act of defiance,” Washington Post, June 3, 2019, https://www.washingtonpost.com/business/economy/citing-mexico-tariffs-threat-lawmakers-say-n-american-trade-deal-is-in-peril/2019/06/03/73c4eaac-863c-11e9-a491-25df61c78dc4_story.html↩
- [4]Damian Paletta, Nick Miroff, and Josh Dawsey, “Trump says U.S. to impose 5 percent tariff on all Mexican imports beginning June 10 in dramatic escalation of border clash,” Washington Post, May 30, 2019, https://www.washingtonpost.com/immigration/trump-prepares-to-threaten-mexico-with-new-tariffs-in-attempt-to-force-migrant-crackdown/2019/05/30/0f05f01e-8314-11e9-bce7-40b4105f7ca0_story.html; Damian Paletta, Taylor Telford, and Mary Beth Sheridan, “U.S. and Mexico plan summit in Washington on Wednesday in bid to head off trade dispute,” Washington Post, May 31, 2019, https://www.washingtonpost.com/business/2019/05/31/lawmakers-express-alarm-trump-forges-ahead-with-mexico-tariffs/; David Randall, “World stocks drop, bonds rally as trade tensions fan growth fears,” Reuters, May 28, 2019, https://www.reuters.com/article/us-global-markets/global-recession-fears-hit-stocks-bonds-rally-idUSKCN1SZ02F; Erica Werner, Seung Min Kim, and Damian Paletta, “GOP lawmakers discuss vote to block Trump’s new tariffs on Mexico, in what would be a dramatic act of defiance,” Washington Post, June 3, 2019, https://www.washingtonpost.com/business/economy/citing-mexico-tariffs-threat-lawmakers-say-n-american-trade-deal-is-in-peril/2019/06/03/73c4eaac-863c-11e9-a491-25df61c78dc4_story.html; Erica Werner et al., “GOP lawmakers warn White House they’ll try to block Trump’s Mexico tariffs,” Washington Post, June 4, 2019, https://www.washingtonpost.com/world/the_americas/mexico-sees-80-percent-chance-of-a-deal-to-head-off-trump-tariffs/2019/06/04/53bdce08-86c4-11e9-98c1-e945ae5db8fb_story.html↩
- [5]Dan Gallagher, “Big Tech’s Weird Day of Reckoning,” Wall Street Journal, June 4, 2019, https://www.wsj.com/articles/big-techs-weird-day-of-reckoning-11559641888↩
- [6]Jon Hilsenrath, “After Record-Long Expansion, Here’s What Could Knock the Economy Off Course,” Wall Street Journal, June 3, 2019, https://www.wsj.com/articles/after-record-long-expansion-heres-what-could-knock-the-economy-off-course-11559591043↩
- [7]David Benfell, “The mother of the social sciences,” Not Housebroken, n.d., https://disunitedstates.org/the-mother-of-the-social-sciences/↩
- [8]Erica Werner, Seung Min Kim, and Damian Paletta, “GOP lawmakers discuss vote to block Trump’s new tariffs on Mexico, in what would be a dramatic act of defiance,” Washington Post, June 3, 2019, https://www.washingtonpost.com/business/economy/citing-mexico-tariffs-threat-lawmakers-say-n-american-trade-deal-is-in-peril/2019/06/03/73c4eaac-863c-11e9-a491-25df61c78dc4_story.html↩
- [9]Erica Werner et al., “GOP lawmakers warn White House they’ll try to block Trump’s Mexico tariffs,” Washington Post, June 4, 2019, https://www.washingtonpost.com/world/the_americas/mexico-sees-80-percent-chance-of-a-deal-to-head-off-trump-tariffs/2019/06/04/53bdce08-86c4-11e9-98c1-e945ae5db8fb_story.html↩
- [10]Dan Gallagher, “Big Tech’s Weird Day of Reckoning,” Wall Street Journal, June 4, 2019, https://www.wsj.com/articles/big-techs-weird-day-of-reckoning-11559641888↩
- [11]Jessica Elgot and Patrick Wintour, “Donald Trump to land in UK amid rising anger over trade demands,” Guardian, June 2, 2019, https://www.theguardian.com/us-news/2019/jun/02/donald-trump-to-land-in-uk-amid-rising-anger-over-trade-demands↩
- [12]David Benfell, “Fantasies,” Irregular Bullshit, June 3, 2019, https://disunitedstates.com/2019/06/03/fantasies/↩
- [13]Adam Taylor, “Brits are fiercely protective of their health-care system. Trump suggested he wants it included in trade talks,” Washington Post, June 4, 2019, https://www.washingtonpost.com/world/2019/06/04/brits-are-fiercely-protective-their-health-care-system-trump-suggested-he-wants-it-included-trade-talks/↩