Off to the Races

The Calm Before the 2020 Storm

The Mueller saga, the economic slowdown, and the presidential race are all on the verge of intensifying.

AP Photo/Richard Drew
March 21, 2019, 8 p.m.

As weird and wild as the last four and a half months have been, it still feels like the lull before the storm.

Special Counsel Robert Mueller’s multilayered probe seems to be near a crescendo, though so much about it is still unknown. Given the few leaks from the Mueller team, smart folks who watch these things closely suggest that we don’t know 75 percent of what Mueller has found. So even if you adopt the conservative-base case that there will be no indictment or impeachment of President Trump, things are more likely to get uglier for him and his reelection prospects in the coming weeks.

The Federal Reserve Board’s Federal Open Market Committee announcement on Wednesday that there will likely be no more interest-rate increases for the foreseeable future confirms the widely held view that the economy is softening from the 2.2 percent real gross-domestic-product growth rate reported for 2017 and 2.9 percent for 2018 to the FOMC’s consensus of 2.1 percent for 2019 and 1.9 percent for 2020. The range of estimates among members was growth between 1.6 percent and 2.4 percent for this year and 1.7 to 2.2 percent for next year. The central-tendency range—throwing out the three most optimistic and three most pessimistic forecasts—was 1.9 to 2.2 percent for this year and 1.8 to 2 percent for next year. The Trump administration’s very rosy forecast is for real GDP growth of better than 3 percent for this year and next. So the conservative-base case is: no recession between now and the election but an economy slowing down from its tax-cut sugar high last year, with interest rates already low and federal budget deficits soaring.

The Washington Post’s Heather Long recently pointed out that, “In March 2016, then-candidate Donald Trump told The Washington Post he could eliminate the entire U.S. debt in eight years. Now that he’s president, Trump is doing the exact opposite. Trump’s budget—his own budget—projects debt held by the public will hit $22.8 trillion by 2025, more than 50 percent higher than the year he took office. (Debt held by the public was $14.7 trillion in 2017.)” Here is the kicker: “That’s the rosy forecast. Trump’s budget relies on ‘gimmicks’ to keep the debt rising by ‘only’ that much, experts across the political spectrum say. Trump predicts the economy will grow at a home-run pace with no recessions for the next decade, and he proposes massive cuts to education, health care and other nondefense parts of the budget that will not be enacted.”

As Nelson Schwartz wrote in The New York Times in September, “Within a decade, more than $900 billion in interest payments will be due annually, easily outpacing spending on myriad other programs,” including the military, Medicaid, and children’s programs. Schwartz continued, “Already the fastest-growing major government expense, the cost of interest is on track to hit $390 billion next year, nearly 50 percent more than in 2017, according to the Congressional Budget Office.” He went on to note that, “In the past, government borrowing expanded during recessions and waned in recoveries. That countercyclical policy has been a part of the standard Keynesian toolbox to combat downturns since the Great Depression. The deficit is soaring now as the economy booms, meaning the stimulus is pro-cyclical. The risk is that the government would have less room to maneuver if the economy slows.” (One might well change the tense of the previous line to "the deficits and debt soared while the economy boomed"—if the economy does in fact slow down, the growth in the deficit and debt will be even worse.)

The always wise Greg Ip put it another way in The Wall Street Journal: “The Federal Reserve now believes its monetary policy is back to normal. That should worry you: if this is normal, then the Fed has precious little ammunition for when economic conditions again turn abnormal.” To all but the most passionate advocates of the new-age MMT (Modern Monetary Theory), most economists find this is a very scary prospect.

Meanwhile, the president’s already pretty eccentric behavior seems to be getting even more erratic, prompting one (non-medically trained) spouse of a top presidential adviser to be hauling out the Diagnostic and Statistical Manual of Mental Disorders. Wow, we can’t make this stuff up.

All of this is occurring against a backdrop of the beginning of the 2020 presidential campaign. The Democratic field has pretty much taken shape. Former Vice President Joe Biden is all but declared—staffing begun, the first ads scouted in his hometown of Scranton, Pa., and an announcement tour developed all this week. My guess is that the field is almost complete, that any relatively unknown candidates jumping in from here on would find the political lanes already crowded and the fundraising incredibly challenging. Once Biden is in, it will be reminiscent of the scene in Top Gun when the control tower refuses permission for Maverick’s flyover, telling the Navy F-14 Tomcat pilot: “Negative, Ghostrider. The pattern is full.” (Of course, he buzzes the tower anyway.) Once Biden is in, this candidate pattern will be nearly full. It’s clear that the White House and Trump campaign strategy will be to paint freshman Rep. Alexandria Ocasio-Cortez as the running mate and democratic socialism the platform no matter Democrats are actually chosen to head the ticket.

Get your parachutes ready—things are likely to get even wilder.

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