Bond markets are flashing warning signs. Stock prices are whipsawing. Some troubling economic data are rolling in, both here and abroad. All this suggests that the risk of a U.S. recession is rising.
Trump seems to be worried about getting blamed for what is coming. For months, he has been setting up the Federal Reserve as a scapegoat — including for market swings caused by his own foolish trade wars. When stocks go up, Trump claims full credit; when they go down, it’s the Fed’s fault. Personal responsibility and all that.
My view on what he (and the rest of us) should be fixed on is slightly different. If indeed we have a downturn, Trump might or might not be the cause; the exact triggers of recession are often hard to pinpoint. But you know what would unequivocally be his fault, rather than fickle fortune?
A badly mismanaged recession. Which seems inevitable if, indeed, recession strikes.
If things go south, this administration doesn’t have a plan. It never had a plan. And it doesn’t have competent personnel in place to come up with a plan.
Trump’s economic brain trust consists of a guy who plays an economist on TV, a crank who has been disowned by the (real) economics profession and the producer of “The Lego Batman Movie.”
For those unfamiliar with this particular dream team, the first person on that list is National Economic Council Director Larry Kudlow, an affable former CNBC personality. Kudlow has one skill that actually could be useful in a crisis: being able to communicate clearly to financial markets. That skill has been rendered moot, however, by Trump’s inability to settle on any consistent message worthy of communicating.
Next is senior White House aide and trade adviser Peter Navarro. When profiled in the New Yorker in 2016, Navarro could not name a single other economist who agreed with his views on trade. More recently, he suggested the Wall Street Journal editorial page sounded communist.
That’s a first, for sure.
And finally, there’s Treasury Secretary Steven Mnuchin. Bankrolling “Suicide Squad” and other movies — whatever their artistic merits — and earning the coveted title of greatest sycophant in Cabinet history bear little relevance to rescuing the world from economic crisis.
Moreover, Mnuchin’s Treasury Department is rife with vacancies. Many senior jobs lack even a nominee. There is likewise no nominee for the Senate-confirmed job of chair of the Council of Economic Advisers. The acting chair is a health expert.
Not that we should expect Trump, who reportedly disregards briefings that don’t feature his name in every paragraph, to take the wise counsel of aides even if it were on offer. Indeed, the scary question is not whether there are any smart people in meetings with Trump, but if there’s one he would even listen to.
The only competent economic policymakers we have right now are over at the Fed, an institution that Trump is spending all his energy trying to discredit. He has done this by questioning Fed officials’ abilities (a theme of his blow-by-blow tweetstorm of Wednesday’s market rout, which referred to Trump’s own hand-picked Fed chair as “clueless”); and he’s done it by compromising the central bank’s perceived political independence.
Whenever the Fed has refused to bend to Trump’s will, he (alongside other members of his team) has taken to the airwaves to complain, in violation of a multi-decade-long norm for the White House to never comment on monetary policy. This means that even if Fed officials cut interest rates further next month solely because they believe that would be best for the economy — which in my view, would be the only reason this group of professionals would ever cut rates — at least some Fed-watchers will instead interpret the action as a response to the president’s bullying.
In other words, regardless of what the Fed does, Trump is eroding its credibility just when we need it most.
Additionally, with interest rates already low and some powers taken away by the Dodd-Frank Act, the Fed also has fewer tools at its disposal than in recessions past. Fiscal policy, too, is somewhat limited. Trump already spent nearly $2 trillion on tax cuts for corporations and the wealthy, leaving relatively little powder left in the keg when we’ll actually need it.
Trump — like the rest of us — had better hope and pray that we don’t have a recession anytime soon. Because if we do, it’s gonna be bad.