Off to the Races

As Dark Clouds Gather, Leaders Should Learn From the Past

George H.W. Bush's funeral marks the passing of a generation that was shaped by crisis.

The casket of President George H.W. Bush is carried by a joint-services military honor guard at St. Martin's Episcopal Church in Houston on Thursday.
AP Photo/Mark Humphrey
Dec. 6, 2018, 8 p.m.

Those of us who think and care about politics will long remember where we were when we watched or, in my case, listened to Wednesday morning's deeply moving National Cathedral memorial service for President George H.W. Bush.

As my family well knows, I come from the John Boehner school of masculinity: quick to shed a tear, even on the 100th viewing of Goose dying in the movie Top Gun. So driving from New Orleans to Baton Rouge, listening to the service, grateful for Bush's life and service to our country, for his presidency, it was with tears running down my cheeks, hearing the eloquence and poignance of historian and Bush biographer Jon Meacham, former Canadian Prime Minister Brian Mulroney, former Sen. Alan Simpson, former President George W. Bush, and the Rev. Dr. Russell Jones Levenson Jr., the Bush family's pastor in Houston.

Meacham’s statement that, “An imperfect man, he left us a more perfect union,” summed up Bush well, and Meacham’s biography Destiny and Power: The American Odyssey of George Herbert Walker Bush is a fascinating look at our 41st president.

Listening to the eulogies almost inevitably leads to thinking about the challenges our world faces and the state of leadership today. Pointing out that Bush “remains the last US president with combat experience,” the Financial Times’s Janan Ganesh put it so well: “Wednesday’s memorial service is for one man, but also, by proxy, for a generation that lost its best years to the second world war.” Ganesh goes on to write:

“Of all the theories behind the spurt in populism—the 2008 crash, immigration— the passing of the ‘greatest’ generation from both high office and the electorate is under-discussed. Experience of trauma does not instil risk aversion as a matter of course. But having lived through the near ruin of civilisation, that cohort of westerners did not trifle with dangerous ideas after 1945. Obituaries that attribute Bush’s caution to high-born Waspery or the Episcopalian Church miss the formative effect of war. To see what happens when societies become incautious, look around.”

Ganesh further argues, “What unites Donald Trump’s former adviser Steve Bannon with France’s rioting gilets jaunes and the UK’s fiercest Brexiters is not just their will to upturn the existing order. It is their belief that transient economic strife is the worst that could possibly happen. None of these people actively desires civilisational meltdown. They just under-rate the prospect of it happening as an inadvertent result of their actions. How could they not? Unintended consequences, the precariousness of order, the independent momentum of ideas: to keep these dangers in mind takes a bitterer experience of history than is available to most people under 90. How telling that the populist fever in US politics flared in the 1990s, when power passed from the war generation to its children.” This is something to ponder as we see leadership shifting from one generation to another.

As we head into 2019 and the 2020 presidential election, we are in a country and world with dark clouds on the horizon, ones not totally unlike those faced by Bush’s "Greatest Generation." The European continent is on shaky ground, China and Russia are acting in increasingly provocative ways, and foreign policy experts and folks in our intelligence community warn of an impending war between Israel and Hamas, Hezbollah, or both. Meanwhile, the world and U.S. economies are slowing down as we prepare for a divided Congress and a president facing a scandal that looks like it will be getting a lot worse before it gets any better.

While some attribute recent stock-market declines mostly to apprehensions over President Trump’s trade policies and tariffs, many economists are warning of something much larger, possibly an impending recession. Harvard economist and former Treasury Secretary Larry Summers said last month that a slowdown in the economy is a “near certainty” and that “the recession risk is nearly 50 percent over the next two years, maybe slightly less.”

Political economist and longtime Fed-watcher Tom Gallagher points out that, “You can try to forecast the economy, or you can look at what markets seem to be pricing in about the future, because markets know all you do about the economy, and then more.” Gallagher, a principal at The Scowcroft Group, adds that “when long-term interest rates fall below short-term rates, what’s called an inverted yield curve, recessions have reliably followed around a year and a half later. Right now the 10-year Treasury rate is just 0.15% above the 2-year Treasury rate, so it’s tantalizingly close to but not yet at the level that predicts a recession.”

Michael Bauer and Thomas Mertens write in the Federal Reserve Bank of San Francisco’s March 5 Economic Letter: “The term spread—the difference between long-term and short-term interest rates—is a strikingly accurate predictor of future economic activity. Every U.S. recession in the past 60 years was preceded by a negative term spread, that is, an inverted yield curve.” They add that, “Furthermore, a negative term spread was always followed by an economic slowdown and, except for one time, by a recession. While the current environment is somewhat special—with low interest rates and risk premiums—the power of the term spread to predict economic slowdowns appears intact.”

So when might a recession occur? Torsten Slok, chief international economist for Deutsche Bank Securities, points out that over the last five recessions, from the time the inverted yield curve happened until a recession began was as short as just under a year to as long as almost three years, averaging 21 months.

With such tumultuous challenges at home and abroad, we can only hope our leadership in the White House and on Capitol Hill in both parties will rise to the occasion and look to leaders of the past—like George H.W. Bush—for guidance on how to handle them.

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