Are we due for another recession? As President Donald Trump continues to tout (and take credit for) America's current stretch of economic good fortune, other onlookers are getting nervous. "Whether it's this year or next year, the odds of another economic downturn are high—and growing," wrote Sen. Elizabeth Warren (D–Mass.) last week.
It's been "10 years since the Great Recession ended, making this officially the longest expansion in American history," points out Ben Casselman at The New York Times. Does that mean we must be due for another downturn?
It's complicated.
"Economists are notoriously terrible at forecasting recessions, especially more than a few months in advance," notes Casselman, adding that "it's possible (though unlikely) that a recession has already begun, and we just don't know it yet." But there are a few "indicators that have historically done the best job of sounding the alarm."
These indicators include the unemployment rate, the state of Treasury bonds, the Institute for Supply Management's Manufacturing Index, and consumer confidence levels. And on three out of four fronts, things are looking a tad bit rough.
The good news is that the unemployment rate remains low and hasn't seen any recent spikes. ("Not only is it low, it's trending down," the Times points out.) But interest rates on 10-year Treasury bonds have fallen below rates on three-month bonds, and that's not a good sign—no reason to "panic yet," but a "storm warning," writes Casselman. So are tepid consumer confidence levels. And on the manufacturing front, things are also murky.
It is almost always a sign of recession if the Manufacturing Index falls below 45 for a sustained period, writes Casselman. Right now it's above 50. "Many economists think it will fall below 50 in the coming months but don't expect a steeper drop."
Put it all together and…lol, nobody really knows anything! Or at least that seems to be the consensus among cautious econ types. But some Democrats reading the tea leaves are seeing much more assured signs of trouble.
Warren in particular has been issuing warnings. "I went through this back in the years before the 2008 crash, and no one wanted to listen. So, here we are again," the presidential candidate told reporters last week.
Of course, Warren and her ilk have good reason to portray things as particularly fraught. The more Trump's team relies on campaign messaging that suggests he has helped the economy flourish, the more Democratic presidential candidates—and opponents of Trump more generally—will reach for a message that combats that. But if their predictions are too dire, it could cost them credibility.
Warren's predictions "could help her win over primary voters by tapping into anxieties about middle-class economic stability despite broad gains over the past decade," says the AP.
But Warren's opponents could seize on her warning to undermine her credibility should a crash fail to materialize before next year's election, and some economists sympathetic to her agenda say that—for the moment—her conclusion of a looming recession is overblown.
Meanwhile, the Federal Reserve is poised to cut interest rates for the first time in more than a decade. The Washington Post calls it "a highly unusual action" and a big gamble. "Typically, when the Fed slashes interest rates, borrowing costs drop for mortgages, business loans, auto loans, and credit cards, leading to more homes being sold, more businesses investing, and more economic activity overall," writes the Post's Heather Long.
But loans are already cheap and few industries are asking for lower rates, suggesting that other factors outside the Fed's control—a labor shortage, trade wars, a lack of housing supply—are capping the economy's potential. "A Fed rate cut will have zero impact on the housing market," said Tendayi Kapfidze, chief economist at Lending Tree. "Mortgage rates are already at three-year lows."
As the American Enterprise Institute's James Pethokoukis pointed out in May, it's certainly "better to be running during an expansion rather than a contraction"—but that's far from an insurmountable obstacle for Trump opponents:
That doesn't seem to be how things really work anymore. Recent research finds the relationship between the economy and presidential approval has weakened in recent decades. Perhaps, as the study "Motivated Reasoning, Public Opinion, and Presidential Approval" suggests, rising polarization means partisan[s] are more likely than ever to view presidents from their party through rose-colored lenses. They're less likely to blame their guy for the bad times, just as the opposition is less likely to give credit for the good times.
FREE MINDS
Lucy Steigerwald tackles "Justin Amash and the Libertarian Future" for The New Republic:
The great danger is that, in America's two-party system, standing outside a party means relegating yourself and your movement to insignificance. There is a reason that Bernie Sanders, an independent, is running for the Democratic presidential nomination, instead of pursuing a third-party bid. But the Sanders example, in fact, is instructive in more ways than one, showing the ways an outsider can make inroads once his party is prepared to face a great reckoning—which, if there is to be any hope for the republic, is exactly what awaits a post-Trump GOP. When the president isn't a party loyalist but the party is loyal to him, it makes someone like Amash, who is above all loyal to his beliefs, both an oddity and a potential hero. Like Sanders, he is remarkably consistent in his views, so much so that he has grown increasingly out of step with his party as it has been drawn into the orbit of the Trump supernova. According to FiveThirtyEight, Amash has voted with Trump about 60 percent of the time; the rest of the Republicans are closer to 90 percent. His supposed fellow libertarian travelers in Congress have also grown closer to Trump, despite being bullied by him in the 2016 Republican primary. Ted Cruz, whose libertarian credentials were always shaky anyway, is fully lost to the right wing. Rand Paul, at best, is whispering in Trump's ear for the greater good on issues like criminal justice, at worst flattering him because he knows it's the only game in town. What we know for sure is that Paul has never tweeted, as Amash has, "Dude, just stop," at the president.
More here.
FREE MARKETS
Foreign investors in U.S. housing aren't the problem, argues Scott Beyer at Governing. "Absentee property owners from abroad take much of the blame for rising housing prices in America," the magazine notes. "But they're really a net win for cities." How so?
Foreign investors thus get lumped in with other scapegoats who are thought to "take" housing from more deserving recipients. These include Airbnb guests, college students, techies and immigrants, among others. Some cities impose regulations against these groups, cracking down on Airbnb, outlawing student housing in certain areas, or taxing foreign speculation. But this mindset is impractical, because it ignores the complexity of modern urban housing markets. At a time when global travel is easy and labor more fluid than ever, cities are full of temporary workers and visitors. With rising global wealth—and instability—there are also many foreigners looking for second homes, or wishing to diversify their assets by purchasing U.S. real estate. Cities can respond in either of two ways. They can view these unorthodox housing uses as a legitimate form of demand, and allow enough construction to accommodate it, alongside the more traditional demands. Or they can nitpick about the "right" and "wrong" uses of housing, and write laws accordingly. But one thing's likely: Neither strategy will stop the activity or cool the market, because no city can just wall off people or capital. And why would cities want to? Foreign speculation is a net win for municipalities. This kind of development generates impact fees, tax revenue and construction jobs. If units are left empty, it may create bad optics, but it also means the absentee owners are giving money to the city without using services.
Read the whole thing here.
QUICK HITS
As far as I can tell, the sum total of this man's intelligence background is seven months on HPSCI. His primary "qualification" appears to be attacking the Mueller investigation. https://t.co/pMXi0rUMYq — Julian Sanchez (@normative) July 29, 2019
Dan Coats is resigning as director of national intelligence and Trump has nominated Rep. John Ratcliffe (R–Texas) to replace him.
The president is tweeting that Al Sharpton is a con man who "hates Whites & Cops!" Sharpton responds:
Trump at NAN Convention 2006 telling James Brown and Jesse Jackson why he respects my work. Different tune now. pic.twitter.com/mvNQmPdLUh — Reverend Al Sharpton (@TheRevAl) July 29, 2019
Three people, including a six year old boy, were killed by a shooter at the Gilroy Garlic Festival in California.
"'Nutrition' is now a degenerating research paradigm in which scientifically illiterate methods, meaningless data, and consensus-driven censorship dominate the empirical landscape," say researchers Edward Archer and Carl Lavie. A new study on eggs helps highlight this; see Salon for more.
A federal judge has dismissed the lawsuit filed by Covington Catholic student Nick Sandmann against The Washington Post.
The CEO of Overstock.com defends "Russian spy" Maria Butina:
Well, here's another turn in the Maria Butina story: She had a romantic relationship with https://t.co/zxRZmADXZP's CEO, who was an FBI informant. And he's now saying she's innocent. They met at the Las Vegas conference where she questioned Trump.https://t.co/jTNrMqGLoj — Tim Mak (@timkmak) July 28, 2019
Why, Rand, why?
This is pretty repugnant. https://t.co/AOYxZLE9SR — Daniel W. Drezner (@dandrezner) July 29, 2019
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