The Morning Jolt

Politics & Policy

Ringing in the New Year with a Recession

A trader at the New York Stock Exchange at closing bell, February 5, 2018. (Reuters photo: Brendan McDermid)

Making the click-through worthwhile: some ominous signs about the health of the economy and the outlook for 2019, Russia takes aim at Robert Mueller, the New York Times explores the upside of human extinction, and an out-of-the-box idea for paying for a new border wall.

Should We Be Worried about the U.S. Economy in 2019?

After a while, we start to tune out the dramatic swings in the stock market — a huge plunge one day, a rebound the next, an hour-by-hour roller coaster the day after that. A lot of us figure it will sort itself out eventually, and things will probably turn out okay. Maybe we shouldn’t.

Both the Dow Jones Industrial Average and the S&P 500 are on pace for their worst December performance since 1931, when stocks were battered during the Great Depression. The Dow and S&P 500 are down 7.8 percent and 7.6 percent this month, respectively.

December is typically a very positive month for markets. The Dow has only fallen during 25 Decembers going back to 1931.

The New York Times summarizes a whole lot of suddenly grim data:

The market has been buffeted by a range of concerns, from signs that the trade war between China and the United States is beginning to weigh on global growth to worries that higher interest rates will eat into corporate profits . . .

When the dust had cleared, the S&P 500 was down 2.1 for the day and 4.8 percent for the year. Should the market fail to recover, 2018 would be Wall Street’s worst year since the financial crisis a decade ago.

This year’s sell-off is nothing like the collapse of stocks a decade ago, when the S&P 500 fell more than 38 percent. But in its own way, 2018 is emerging as a remarkable year for financial markets, with almost every type of investment and asset class — stocks, bonds, commodities, even safe Treasuries — posting negative or minuscule returns.

Economists who are skeptical of President Trump’s outlook on trade and tariffs — and perhaps his policies as a whole — expected things to go south pretty quickly after he was inaugurated, and that didn’t happen. Instead, the markets soared, and the economy roared. But every economic boom ends eventually, and this one has been going for 97 months. Last week, a survey of U.S. chief financial officers found that half believe a recession will strike the U.S. economy by the end of 2019; 80 percent think it will arrive by the end of 2020.

Keep in mind a recession does not necessarily mean another “Great Recession.” Economists define a recession as two consecutive quarters of declining gross domestic product. In the third quarter of 2018, the United States GDP was 3.5 percent; the one before that it was 4.2 percent.

Is it being driven by trade? Our trade deficit is up slightly, but U.S. exports are also slightly up, compared to the last two years. (Our exports just aren’t keeping up with our imports, even with the tariffs in place.)

There were some signs that 2019 was going to be a big year for the markets. Uber, Lyft, Palantir, Slack, and perhaps Airbnb were all discussing launching “initial public offerings,” which is when a company moves from being privately owned to publicly traded. Those moves are generally seen as a sign of economic confidence.

If the economy goes into recession in 2019, President Trump may well relish having the Democratic-controlled House to blame. It’s unlikely that House Democrats will have much ability to influence U.S. economic policy, other than blocking any new initiatives from the Trump administration. But the timing for them would be pretty bad — they step into the new majority and the economy suddenly slows on their watch.

Are Russian Bots Eating Away at Robert Mueller’s Reputation?

A natural follow-up to yesterday’s Jolt — are the not-so-great public-opinion numbers for Robert Mueller a reflection of a Russian effort on social media?

Months after President Trump took office, Russia’s disinformation teams trained their sights on a new target: special counsel Robert S. Mueller III. Having worked to help get Trump into the White House, they now worked to neutralize the biggest threat to his staying there.

The Russian operatives unloaded on Mueller through fake accounts on Facebook, Twitter and beyond, falsely claiming that the former FBI director was corrupt and that the allegations of Russian interference in the 2016 election were crackpot conspiracies. One post on Instagram — which emerged as an especially potent weapon in the Russian social media arsenal — claimed that Mueller had worked in the past with “radical Islamic groups.”

Do you think there are a lot of real-life, flesh-and-blood, non-bot American people walking around who believe a former FBI director “worked with radical Islamist groups”? U.S. Marine rifle platoon leader in Vietnam; chest full of medals including a Bronze Star and Purple Heart; U.S. attorney for twelve years; oversaw the prosecutions of Manuel Noriega, John Gotti, and Lockerbie bombers; taking a pay and prestige cut to prosecute murders in Washington D.C. in the Clinton years; FBI director during 9/11; every decision reviewed by the 9/11 Commission; defender of NSA surveillance; God knows how many background checks throughout his career . . .  and the guy is supposedly a secret Islamist? People have been watching too many Homeland episodes.

Yesterday, a couple people scoffed that the public-opinion numbers of Robert Mueller don’t matter, because he’s investigating crimes and matters of law, not public opinion. Well, yes and no. When he and his team are in a courtroom, then yes, all that matters is what the judge and jury think.

But if this is all building up to criminal charges against the president, then public opinion matters a great deal. Impeachment is an inherently political process, and the outcome of that effort will depend a great deal on whether the American public trusts Mueller’s assessment and conclusions, or whether enough people believe that Mueller has a political agenda or that he was simply determined to keep looking until he could plausibly charge the president with a crime, even if it was far afield of his original mandate of Russian interference into the 2016 elections.

Professor: Hey, Maybe We’ve Been Too Quick to Judge this Human Extinction Thing

Robert Frost once described a liberal as “a man too broadminded to take his own side in an argument.”

We can update that to being too broadminded to fully take our own side on the issue of human extinction.

Todd May, a professor of philosophy at Clemson University, writes in today’s New York Times:

 . . . what I am asking here is simply whether it would be a tragedy if the planet no longer contained human beings. And the answer I am going to give might seem puzzling at first. I want to suggest, at least tentatively, both that it would be a tragedy and that it might just be a good thing… Humanity is the source of devastation of the lives of conscious animals on a scale that is difficult to comprehend.”

Let me guess, when he went to watch the Avengers movie, he rooted for Thanos?

ADDENDUM: On Fox News, Michael Goodwin calls for a GoFundMe for a border wall. Well, that’s one way to work around obstinate congressional negotiators.

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