Since 2016, the Democratic blitzkrieg against President Donald Trump has invoked the three Rs: racism, recession, and Russia. When one failed to reach significance, another was hauled out. When racism didn’t work, the left turned to Russia. Once the neo-McCarthyist tactic crumbled like the campaign of Sen. Kamala Harris (D-CA), opponents spouted recession talk to scare the public. After impressive job reports, swelling wages, and commendable GDP numbers, Democrats on Capitol Hill and in the press shrugged their shoulders and returned to shrieking about racism. Now, recession is again mentioned in passing: The reference is an excuse should a Democrat win in 2020 and an economic slump occur.
A Side of Malarkey, Extra Pickles
During a recent campaign stop in Iowa, the Democratic frontrunner spoke with CNBC to discuss a variety of political and economic issues. Former Vice President Biden made two things clear in the interview. The first is that he believes Trump is a “bad president” because he is “ripping the soul” out of the United States. The second is that the country will soon slip into a recession.
Biden was asked if he still supports a balanced budget amendment, and he confirmed that he had changed his position on the issue because things are different today. “No, because we’re in a different place now. I hope it’s not true, but we’re likely to inherit a recession, at least a significant economic slowdown. That doesn’t make sense,” he said.
Although a brief response, it contained a bit to unpack. Biden believes the United States will be hit with a recession within the next 12 months or if a Democrat retakes the White House in 2020. His economic philosophy is of the Keynesian variety, one that requires government intervention when a slowdown occurs. Key, however, is that Biden is engaging in a pre-emptive strike.
Biden Off More Than You Can Chew
This might disappoint Democrats, but a recession is unlikely to happen in the next 12 months. Even if the United States and China do not reach a trade agreement, the world’s largest economy will still avoid a contraction in the near-term. The labor market is roaring, quarterly gross domestic product is around 2%, and stocks are hitting all-time highs. With an accommodative Federal Reserve using an assortment of tools to postpone the coming financial crisis – historically low interest rates, money printing, and the relaunch of quantitative easing – it is hard to envision a recession in the immediate future.
Democrats are banking on a recession before the next Inauguration Day. If they regain the keys to 1600 Pennsylvania Avenue and retain control of the House, then a downturn needs to happen prior to the official transition. That’s because the Democratic president must blame it on Trump. However, if a recession takes place after the swearing-in ceremony on Jan. 21, 2021, the perception will be that he or she reversed the tremendous gains made under Trump’s watch.
The same reasoning applies to President Trump, too. He clamors to extend this expansion until at least the next election. He hopes that if a recession initiates, it is after his residency in the Oval Office. That way, Trump cannot be faulted for a downturn.
Of course, this simplistic view of the boom-bust business cycle appeals to partisans on CNN and Fox News or in The Hill’s comments section. But economic laws do not suddenly change on Election Day because a certain breed of politician possesses executive power. The economy will not decide overnight to expand or contract if an R stays the same or transitions to a D. That requires a series of economic events, an adjustment in monetary policy, and time to negate the historic advancements we have witnessed in recent years.
If President Trump serves two terms, odds are high that he could witness a recession before 2025. The left would be gleeful and use him as evidence that a pro-business agenda is bad for the country. If a Democrat wins in 2020, he or she will employ multitrillion-dollar policies that could speed up a downturn by taking money out of the economy and introducing anti-business mechanisms that limit saving and investment growth. Of course, no matter what happens, the media will still blame Trump and continue to ignore the central bank’s culpability. Americans know better. Well, anyway, it is hoped they do.
Whatever the case, Biden seems to be readying the nation for a recession in his term. And he is already preparing for Trump to receive 100% of the responsibility.
The One-Armed Man
The next recession will be nothing like what we saw in 2008. There are just too many risks – new and old – to the U.S. economy, from burdensome debt levels to bubbles in everything. Yet, the boom phase of the business cycle persists. Could policies of free tuition, free health care, and free money push the United States off the cliff? Perhaps it is not so much these policies as the costs behind such lofty proposals that will trigger the R-word in the next few years. Indeed, you cannot be cavalier about taking trillions of dollars out of the economy to fund a progressive cause du jour without seeing the consequences.
Biden is putting together an economic defense of: “It wasn’t me. It was the one-armed man.” But everyone could be bipartisan and call out a single institution for the coming crash: the Federal Reserve.
Read more from Andrew Moran.