Washington's Recent Fiscal Recklessness Will Look Even Worse if America Is Heading Into a Recession
Plus: Fashion versus the police state, a truce in the Kansas-Missouri border war, and more....
Markets tumbled on Wednesday as the Dow Jones Industrial Average fell by more than 800 points and U.S. Treasury bond yields flashed a warning that usually signals a coming recession. Forecasters predict a slight recovery on Thursday despite the fact that overnight trading in Asian markets was similarly bad.
Are we heading for a recession? Treasury bonds seem to think so. The yield (how much investors get paid after the term of the bond) for 10-year U.S. Treasuries fluctuates with market conditions, but it almost always pays more than the yields for shorter term, two-year bonds. That makes sense, of course, because investors expect bigger payouts in exchange for locking up their money over a longer period of time. But on rare occasions, like yesterday, the yield curves will cross—"don't cross the streams!"—and the two-year bonds will offer higher yields. This is something investors refer to as an "inverted yield curve."
What is an inverted yield curve? It marks a point on a chart where short-term investments in U.S. Treasury bonds pay more than long-term ones. Here's why it's widely regarded as a bad sign for the economy. https://t.co/VCBISqhGR3 pic.twitter.com/sH1whoYLNb
— CNBC (@CNBC) August 14, 2019
That might seem like a weird little thing that shouldn't unnerve international markets so dramatically, but the last five times it's happened, a recession has followed.
If a recession is on the way, then recent fiscal recklessness on the part of Congress and the White House will look like an even bigger mistake. The current national debt exceeds $22 trillion, and the Congressional Budget Office estimates that the federal government is on pace to add another $11 trillion by the end of 2029.
Or, rather, that was the pace we were on before a massive new spending bill was approved by Congress last month. The CBO has yet to weigh in, but the $2.7 trillion budget deal is expected to add another $1.7 trillion to the debt over the next decade.
Those projections also don't anticipate recessions, which typically cause a decline in tax revenue and an increase in demand for government services. A recession, in other words, will make America's current debt crisis significantly worse.
When it comes to America's economic health, presidents generally get more credit and blame than they deserve. But it's impossible to ignore the impact on Wall Street of Trump's meddling in international trade and his haphazard handling of the trade war with China. The trade war is creating crippling uncertainty for businesses, many of which are delaying investment decisions. Exports have declined and business investment fell into negative territory during the last quarter—both of which could be effects of Trump's tariffs and could help cause a recession by slowing economic growth.
It is too soon to tell whether the next recession will be caused by Trump's trade policies. However, it is almost certain that the next recession will be worsened by his and Congress's total disregard for fiscal responsibility.
FREE MINDS
Resist the panopticon in style. Hacker and fashion designer Kate Rose unveiled her "Adversarial Fashion" line at a cybersecurity conference in Las Vegas last weekend. She tells The Guardian that if surveillance cameras are "able to be fooled by fabric, then maybe we shouldn't have a system that hangs things of great importance on it."
To human eyes, Rose's fourth amendment T-shirt contains the words of the fourth amendment to the US constitution in bold yellow letters. The amendment, which protects Americans from "unreasonable searches and seizures", has been an important defense against many forms of government surveillance: in 2012, for instance, the US supreme court ruled that it prevented police departments from hiding GPS trackers on cars without a warrant.
But to an automatic license plate reader (ALPR) system, the shirt is a collection of license plates, and they will get added to the license plate reader's database just like any others it sees. The intention is to make deploying that sort of surveillance less effective, more expensive, and harder to use without human oversight, in order to slow down the transition to what Rose calls "visual personally identifying data collection".
FREE MARKETS
War is over if you want it. Gov. Laura Kelly of Kansas, a Democrat, and Gov. Mike Parson of Missouri, a Republican, signed a deal on Wednesday that they say will put an end to the practice of trying to lure businesses from one state to the other with tax breaks and other economic incentives. The so-called "economic border war" mostly resulted in taxpayers getting the bill for politically motivated job-poaching that didn't help either state's economy.
QUICK HITS
- An autopsy revealed that Jeffrey Epstein suffered broken bones in his neck.
- Trump hasn't condemned China's crackdown in Hong Kong because he made a private deal with Chinese President Xi Jinping to stay out of it.
- The War on Terror will now officially be fought on American soil, too.
- Happy trails to former Colorado Gov. John Hickenlooper, who is expected to end his Democratic presidential campaign.
- Americans are depressed about the state of politics, but we only have ourselves to blame.
- National Football League Commissioner Roger Goodell wants everyone to know he has a black friend.
- What do The Rock, Pikachu, Jar Jar Binks, and Donald Trump have in common?
- This guy gets it:
The right is worried that immigration will destabilize society. The left is worried that automation will. Am I the only one who thinks a society of people of diverse national origin, living and working beside intelligent machines, sounds absolutely fucking amazing? pic.twitter.com/Ncs9uqaxSG
— Casey B. Head (@CaseyBHead) August 13, 2019
