S3E21:2020 elec: voters purged & IT’S the recession stupid

Today’s podcast is all about the changes happening on the state level (not related to gerrymandering) and the effects of white supremacy. And in our blog we discuss the economy and the coming recession.

The behavior by the president shows his leaning toward white nationalism.  In just a tweet today, he called on a long prison sentence for a black man in Philadelphia who wounded a number of cops with an AR 15 riffle.

It was a surprising statement given the president has not been as harsh on the white 20 year old who actually killed people in El Paso, TX.  Nor has he called made any more statements on gun control.

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And the president is having a down ballot effect as a self identified white nationalist and Trump supporter stated on Facebook he was going to challenge freshmen African American congresswoman Lucy McBath in Georgia.

Republicans in the district were successful in getting him to exit the race.

On today’s podcast, I highlight MSNBC’s Rachel Maddow at the top and Jason Johnson at the middle of the episode for some spot on remarks:

It’s the economy stupid

The famous credo from the Clinton administration is as prescient now as ever before.   Donald Trump knows this more than anyone. 

I think he rightly believes he cannot win in 2020 if the economy goes into recession or, god forbid, crashes.

So what do the economists say?

It’s all about recession fears and predictions

The market are spooked by a number of things.

On this blog and in the podcast, I’ve written about the president’s ongoing trade war with China.   The president has backed off threats to impose 10% tariff on billions of Chinese imports.

That decision, a few weeks ago, caused the markets to relax a little and the DJ and Nasdaq rose.

But the issue now are market predictions.  There is a formula for predicting the next recession, as the AP put it:

The most commonly cited indicator of a weakening economy is weekly first-time applications for unemployment benefits. People are eligible for the benefits if they’ve been laid off or have lost a job through no fault of their own. So a rising pace of applications suggests that companies are cutting jobs.

Last week, first-time applications amounted to 209,000, a very low level historically.

The Institute for Supply Management’s survey of manufacturers is another important gauge. Lately, it is showing that factory activity has been slowing and is near the level that indicates it is shrinking. Manufacturing makes up a relatively small part of the economy but is more sensitive to downturns than services. That’s because people cut back on car-buying and other large purchases when they feel economically squeezed.

Then there is the “inverted yield curve”. 

Those three words were played over and over again yesterday. Ali Velshi, an economics reporter, told viewers on All In, producers banned him from using the three words.  

But here is what it means in a nutshell:

CNN added this point here:

We’re overdue for a recession

What’s also interesting is this notion that we are “overdue” for a recession.  It reminds me of earthquake fears in California for the past 15-20 years.

How can we be overdue for something bad to happen?  Surprisingly it’s cause good things have been happening for so long (thank you president Obama).

As far as 2017 the Atlantic had a headline “Is the economy overdue for a recession?”  Writer Annie Lowry wrote:

The unemployment rate at 4.7 percent. Employers adding 235,000 workers a month. Consumer confidence at its highest level since 2001…. The expansion nearing its 100th month. Things are bound to fall apart soon.

This sentiment has become surprisingly common as the expansion has kept chugging along: President Trump has to face a recession in his first term, right? These things don’t last forever, right? “Trump’s turn,” USA Today warned. “Talk about a poisoned chalice,” quipped Bloomberg. “History shows there’s a 100 percent chance of a recession for Trump,” Yahoo declared.

Meanwhile, last year at Forbes, Cameron Keng, a former contributor, wrote:

A booming economy will lead to a recession because the economy will overheat or create a bubble that will burst. The longer we artificially extend our expansion or economic boom, the bigger the recession we create. The natural business cycle’s economic boom will create more wealth than the recession will erode. When we artificially affect the economy, we throw the natural business cycle out of order. Thus, we may lose more than the wealth we’ve created during the economic boom.

How did we get here? Let’s not forget the Great Recession of 2007 required a stimulus to prevent a “great depression” level crash.

The government used quantitative easing and the Fed lowered interested rates to zero to juice the economy.   

But Cameron Keng reminds us all measures were meant to be temporary. 

By the time the new president was installed and the new fed chair was sworn in, the government didn’t get off the sugar.

In 2018, Donald Trump increased government spending by about $300 billion and decreased tax revenues by $230 billion. Thus, we’ve artificially inflated the economy to extend our current expansion or economic boom. We currently pay $310 billion dollars in interest on our national debt based on the federal budget. The only line items that cost more are social security ($987 billion), military ($874.4 billion), Medicare ($582 billion) and Medicaid ($400 billion). Our interest on debt is 7.4% of our entire American budget. When you ask why your tax dollars aren’t working, it’s because they’re paying interest.

And let’s not forget, as I wrote previously, Elizabeth Warren warned of an economic crash in June.   She says, in part, in an essay:

When I look at the economy today, I see a lot to worry about again. I see a manufacturing sector in recession. I see a precarious economy that is built on debt — both household debt and corporate debt — and that is vulnerable to shocks. And I see a number of serious shocks on the horizon that could cause our economy’s shaky foundation to crumble.

How bad will it get?

If the prognosticators are to be believed, the next recession is going to be very very bad. Again, going back as far as earlier this year, the naysayers seem to believe when the next recession hits, its going to be brutal.

Warren says it will be an economic “crash”.   In a piece in yesterday’s Rolling Stone the reporter says:

Some 40 percent of American families struggled to cover the cost of food, health care, housing or utilities last year, according to a report from the Urban Institute. A Fed found four in 10 adults couldn’t cover a $400 emergency expense. 

A recession could take many of those families struggling on the margins and push them squarely into poverty. A family that can’t cover a $400 expense definitely isn’t ready to weather an unexpected layoff. And workers already struggling to find jobs will fare worse if and when the number of openings plummet and the number of unemployed job seekers climbs. 

How will they blame Obama?

It looks like if a recession happens it won’t happen for another 18 months.  According to Warren, we should be doing things now to prepare for the recession.

But already on Fox Business, they are preparing a narrative which will give President Trump cover and throw the blame on Obama.

You see, it’s the actions of the Fed 10 years ago that is causing this nightmare, not uncertainty, not the trade war, not the reckless tax spending. 

Oh no!  It’s Obama’s Fed chairs Ben Bernanke and Janet Yellin who actually caused this.  Like a ticking time bomb set to go off during the Trump Presidency, the fed’s actions to save the economy also doomed it!

Take a look:

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