Trump White House ‘Woefully Unprepared To Handle A Recession’ – Forbes

White House Woefully Unprepared To Handle A Recession
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The Trump Slump has been with us for two years, with the economy slowing to stall speed in late 2018 and throughout 2019. Now, in its injured condition, with preexisting conditions from poorly devised Trump economic policies, including his never-ending Trade Wars, comes the exogenous shock: Coronavirus SARS-CoV-2.

The body blow of this on top of Trump’s already weakening economy is likely to fall hardest on those in the bottom 50% or so economically speaking. And be absolutely brutal on the bottom fourth.

While the United States is burning, the Trump Administration still isn’t learning. Electing instead to continue issuing out lie after lie and spin after spin.

Forbes:

The White House switches from Alfred E. Neuman to Chicken Little in its responses to the economic fallout from the corona virus. One moment, the administration is down playing the virus to boost the stock market. In the next moment, it considers several ill-designed measures to boost the economy. These head spinning turns are not reassuring. There is no consistent message as the risk of a recession is growing. Worse, the administration already has a poor track record on economic policy. Families could quickly feel the pinch of a slowing economy and yet they cannot count on the White House to offer effective help.

The spread of the corona virus will likely hurt the economy. The virus has led to factory slowdowns and closures in China, disrupting global supply chains. Travel and conferences are cancelled in the US and abroad. The economic fallout could spread along side the virus. Businesses could pull back more investments amid the ensuing economic uncertainty. The global economy will take a hit, but the exact size of the effect is anybody’s guess.

This both increases the risk of a recession and the need to be prepared. Growth has already slowed for more than a year. Trump’s massive trickle-down tax cuts of 2017 failed to deliver on promised faster growth. Instead, the economy continued to expand at a modest rate while deficits skyrocketed. Trump’s continued ad hoc trade conflicts for the past two years hurt businesses, especially in manufacturing and agriculture and contributed to a prolonged investment decline from March to December 2019. As a result, economic growth has remained modest for much of 2019 and private domestic activities have continued to fall (see figure below). Economic growth was already modest and slowing when the coronavirus started…

Worse, the Trump administration has no real plan to help working-class families right now. The White House is considering another round of tax cuts. But, if the last tax cut and subsequent proposals are any indication, such cuts would likely favor the wealthiest families, who are least likely to feel the pinch from a slowing economy. In addition, President Trump is pressuring the Federal Reserve to lower interest rates, even though the effects of such rate cuts would likely be very limited. Interest rates have fallen to record lows. Businesses are not investing because they don’t see where the customers for new products are coming from, not because debt is too costly. And interest rates on consumer credit – student debt, car loans and credit cards – remain stubbornly high even when the Federal Reserve cuts interest rates. Only in the case of mortgage rates could lower interest rate get a few more people off the sidelines and into home ownership, although worries over smaller paychecks and potential layoffs will likely dwarf any positive effects from lower rates. Finally, President Trump has regularly sought to undermine health insurance for working-class families by weakening Medicaid, most recently with is budget proposal just a few weeks ago. President Trump’s favorite go-to policy prescriptions — supply-side tax cuts, attacking the Fed and weakening health insurance – miss the mark by a wide margin.

Real help to strengthen the economy instead needs to focus on struggling families. They are most likely to spend the money, thus boosting domestic demand. This could help turn around business investment as firms see more customers now and in the foreseeable future.

Several programs have proven in the past effective in boosting families’ fortunes. These include expansions of food stamps, Unemployment Insurance, and health care, especially Medicaid and Children’s Health Insurance Programs (CHIPs). More spending on infrastructure as well as research and development could also stabilize the economy and provide much better returns on long-term growth than yet another round of ill-advised trickle-down tax cuts. […] Read the entire article on Forbes.com

Emphasis ours

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