Impending economic recession looms as presidential election approaches
Could an economic “Black Swan” of a recession upend the November election?
Even before Friday’s shockingly worrisome jobs report (unemployment ticking up to 4.3%, a slowdown in hiring followed by a 610-point drop in the Dow) that’s what some savvy market analysts and economists told me could be happening.
They see some weird stuff in the economic data that hasn’t been factored into the recent Dow and the Nasdaq run-ups to record territory. Given the supreme importance of the economy to voters, it could turn a neck-and-neck race between Donald Trump and Kamala Harris strongly in favor of Trump. It’s Harris and her boss, Sleepy Joe Biden, whose policies created this possible mess.
![The Dow plummeted more than 900 points on Friday.](https://nypost.com/wp-content/uploads/sites/2/2024/08/gasparino-recession-hp.jpg?1722696093&w=1024&1722696093)
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The reason economists and analysts believe a recession would be a Black Swan is because it’s not expected based on many readings of the economic data, and because if it happened, it would take an already volatile race for the White House to new levels of confusion. Trump, who has been losing momentum, would change the nature of the debate over who deserves to lead the country.
Full disclosure: I have my doubts that we’re headed into a type of economic shock that could be a factor for voters this fall, and timing is crucial here. The Fed might be worried about a recession that hits closer to the end of this year or early next, but it’s about to stimulate things with lower short-term interest rates after years of tighter monetary policy, maybe any day now after Friday’s report. BlackRock Chief Larry Fink has said he believes all the Biden fiscal spending and money printing by the Fed that sparked inflation before Jerome Powell began to raise rates is still sloshing around the economy and should provide a buffer to prevent a full-blown recession any time soon.
But the people I’m speaking to more recently are serious economic types, and it pays to hear them out. They see something “fugazi” in the stock market’s rally, the bond market’s relative calm, and all those great headline economic numbers like historically low unemployment. They point out the Biden-Harris administration propped the economy up in ways that can’t last: lots of spending (and vote buying) like student-loan forgiveness, and tax credits for businesses to retain employees. They say inflation is falling but hides the fact that prices for necessities are still higher than they were during Trump’s first term. Inflation is a tax that hits working-class people — aka most voters — the hardest.
Plus, they say the Biden-Harris White House has set the stage for some bad stuff with massive new regulations that squeezed the private economy. Lots of unnecessary spending that stoked inflation, and papering over it all in duplicitous and dangerous ways. The debt is dangerously high at $35 trillion and growing. Recently, the Biden Treasury Department sought to hide this inconvenient truth by financing spending with short-term borrowing, rolling over notes and short-dated Treasuries instead of issuing bonds with 10- and 30-year maturities.
Yes, it’s risky business. If they issued debt the old-fashioned way, the 10- and 30-year yields pegged to stuff like mortgages would have spiked and crushed the economy in an election year. But you can only borrow short-term to finance long-term obligations for so long. Just ask the geniuses who ran New York City’s finances in the 1970s and gave us near-bankruptcy. Borrowers will balk because such gimmicks are a recipe for even more money printing, currency devaluation and possibly default.
Now that Harris and the Democratic elite have kicked Biden to the curb, they’re hoping the liquidity in the system can last through the election before any of the you-know-what hits the fan.
There are signs it might not. Jason DeSena Trennert, economist, market strategist and founder of advisory firm Strategas, tells me “cracks are showing” in the Biden-Harris economy even before this past week’s data.
Signs of lower consumer spending are cropping up. Then there’s the so-called “inverted yield curve” where longer-dated bonds have a lower yield than the short-term fed-funds rate. That usually signals recession since it’s a bet that there will be lower economic growth.
As the recently anointed Dem nominee, Harris is doing a lot of scripted stuff — rallies and speeches, and she’s avoiding real interviews. So far it’s working, with polls showing she’s gaining on Trump. Yet if the economy starts heading into recession, it would be a Black Swan she can’t avoid because, as a wise man once said, “It’s the economy, stupid.”
Unstacking the decks
We can all remember that strange year of 2020. COVID caused lockdowns, social-justice riots burned cities. There was a nail-biter of an election between Donald Trump and Joe Biden.
The decks were stacked against The Donald for many reasons including powerful social-media platforms being totally in the bag for old Joe. It’s a spectacle I explore in my upcoming book, “Go Woke Go Broke.” Social media canceled pro-Trump voices, throttling stories such as The Post’s Hunter Biden laptop exposé.
Joe Biden is no longer in the picture for the Dems. VP Kamala Harris is, but she won’t have the full force of social media behind her. In 2022, the free-speech absolutist, Tesla chief and world’s richest man Elon Musk shelled out $44 billion to buy Twitter, renamed it X, fired its old lefty staff and leveled the playing field, giving Trump and his people a fighting chance to sway public opinion.
It’s unclear how much money, if any, Elon will give to the Trump campaign after his recent endorsement. In some ways it doesn’t matter — he’s already made a $44 billion in-kind donation.