“The last quarter, it was just announced, our gross domestic product, a sign of strength, right? But not for us. It was below zero”, Donald Trump said, in the course of announcing his bid for the White House in 2015. “Who ever heard of this?”, he wondered.
Nobody. Nobody had “ever heard” of that, because it’s not possible. A country’s GDP cannot be “below zero”. Trump of course meant that the economy was contracting – that the growth rate was below zero, something he said “never” happens.
In reality, it does happen, and increasingly, the president and his advisers are concerned it’s going to happen to him. And not just for one quarter, but for two. That is, the administration is starting to worry that the US economy is headed for a recession, as telegraphed most recently by the inversion of the 2s10s curve, a high-profile indicator with a track record that’s pretty good, to say the least.
Although analysts and economists have long questioned Trump’s lofty economic ambitions and grandiose claims about ushering in a manufacturing renaissance, the warnings are getting louder now that the sugar high from the tax cuts and fiscal stimulus is wearing off.
The trade war has derailed growth abroad, contributing to a deep manufacturing slump in Germany, undermining China’s already decelerating economy and waylaying export-dependent bellwethers like South Korea and Singapore.
In short, some worry it’s just a matter of time before the global malaise makes landfall in the US, which is why the White House is currently drawing up contingency plans, including possible tax cuts.
Well, according to Politico, chief of staff and notorious budget hawk-turned sycophant, Mick Mulvaney, suggested this week to Republican donors that a recession is possible.
Citing an attendee at the fundraising luncheon in Jackson, Wyoming, Politico says Mulvaney “acknowledged the risks to the GOP elite behind closed doors” and told more than four-dozen donors that if the US were to face a recession, it would be ‘moderate and short'”.
Jared Kushner and Ivanka Trump were present at the event.
To be clear, if the US were to fall into a recession, it should – and we emphasize should because Trump voters aren’t easily deterred- be a devastating blow to Trump’s narrative. Despite voluminous evidence to the contrary (including a damning New York Times exposé and readily available accounts of his various business dealings), Trump’s base continues to buy the manifestly false narrative that the president’s business career was the picture of success. He repeatedly insisted on the campaign trail that America would benefit from having a businessman in charge, even one with a history of bankrupting things.
To be clear, the US economy is still on sound footing according to most of the recent data. The economy grew at a 2.1% annualized clip in the second quarter, consumer spending is strong, the labor market is robust and manufacturing surveys appear to have stabilized after a swoon.
But, things can turn on a dime, and with the trade war weighing heavily on sentiment and the president’s incessant Fed attacks having seemingly backfired, at least in terms of consumer confidence, there’s cause for concern.
Knowing that, the president is working overtime to set the Fed and Democrats up to take the blame. On Monday, during his daily Twitter assault on the central bank, he posited a Democrat conspiracy to “will” the economy weaker. He cited no evidence.
Then, on Tuesday, he told reporters the following:
I think the word ‘recession’ is a word that’s inappropriate because it’s just a word that the — certain people; I’m going to be kind — certain people and the media, are trying to build up because they’d love to see a recession.
Let’s be honest. Nobody would “love to see a recession”. The president is just trying to deflect blame by suggesting that Democrats are secretly hoping their own economic fortunes will take a turn for the worse just to spite Trump.
Mulvaney’s admission that a downturn is possible is consistent with professional forecasters who put the odds of a recession at post-crisis highs.
Publicly, the administration continues to insist on the notion that the economy can grow 3% in perpetuity. At this point, that’s absurd. The revisions that accompanied the second quarter data wiped 2018’s 3% growth rate off the board (the Q4-to-Q4 print was revised lower) and not a single professional forecast out of more than 50 sees the US economy expanding 3% this year or next.
Take a second to let those visuals sink in. Trump, his advisers and sycophants are the only people on the planet worth mentioning that believe in the 3% growth story.
Now, apparently, even those people are starting to suspect that not only is 3% a pipe dream, but assuming any growth at all may be optimistic going forward.
Some big names have recently suggested that if the economy falters, Trump will have virtually nothing to campaign on next year.
“I am not even sure he’s going to really run”, Jeff Gundlach told Fox in June. “If the economy goes into recession and he can’t pull out by removing the tariffs, there’s very little for him to run on”.
Read more: Can Trump Save Trumponomics?