Washington Post columnist warns Trump’s shutdown is going to cause a recession


A catastrophic economic recession is closer to a reality if President Donald Trump continues to refuse to end the government shutdown over his demand for border wall funding.

The shutdown is about to enter a fifth straight week, the longest such shutdown on record, and now Washington Post columnist Catherine Rampbell is warning that if it drags on much longer it will trigger an economic recession that Trump will also be blamed for.

“[T]he risks of a recession in the near term appear to be rising,” Rampbell wrote. “In a recent Wall Street Journal survey of economists, more than half said they expected a recession to start in 2020. The risk of recession in the next year predicted by the Treasury spread — the difference in yields of government bonds of different maturities — has climbed to 21 percent.”

And a big part of that is because of Trump’s shutdown he started four weeks ago by refusing to sign a government funding bill into law because it was passed by a Republican Congress without border wall funding.

“And what could be to blame?” Rampbell asked.

Here’s how Deutsche Bank chief international economist Torsten Slok puts it: “If the shutdown and trade war continue with no end in sight, it could cause a recession in the U.S. economy later this year.”

The shutdown — which, lest readers have forgotten, began because Trump abruptly changed his mind about a wall-free funding bill after it had passed nearly unanimously in the Republican-controlled Senate — is shaving a tenth of a percentage point off economic growth every week. That’s according to an estimate from the White House’s own Council of Economic Advisers.

If we realistically say that quarterly growth is around 2 percent, a full half of that would be wiped out if the shutdown goes on for ten weeks. Since it’s already going to last for at least five weeks, that means a half point is already gone.

Rampbell went on to point out that Trump’s trade wars with China, Canada, Mexico, and the European Union are also contributing to recession fears, as are his tax cuts for the wealthy that have caused the debt and deficit to skyrocket out of control.

And that’s not all. Trump is also picking a fight with the Federal Reserve and his economic advisers are running around like chickens with their heads cut off as their right-wing economic policies nose-dive off a fiscal cliff. It could be enough that all it would take to send our economy over as well is an “external shock.”

Trump’s attacks on Federal Reserve independence, continued turmoil in the White House and demonstrable incompetenceamong the most senior economic policy advisers are not exactly reassuring markets. Even if any one of these factors doesn’t tip us into recession, their cumulative effect — coupled with some sort of external shock, such as an oil price spike or a disorderly Brexit — could be disastrous.

And what’s more, the American people and outside economic experts won’t be able to see the warning signs coming because the shutdown is keeping vital economy statistics from being released.

Meanwhile, thanks to the shutdown, the government isn’t releasing many of the critical data points economists normally examine for signs of trouble. Thankfully, the Labor Department wasn’t affected by the partial shutdown (and its next jobs report, due Feb. 1, will reveal just how many people were laid off nationwide because of Trump’s temper tantrum). Funding lapses in other departments, however, have indefinitely delayed releases for trade, retail sales, building permits, the budget, crops and other crucial metrics.

But it’s the shutdown that will have the most impact because almost one million workers are not getting a paycheck, which means they aren’t putting that money back into the economy, which will hurt millions of other people in a domino effect.

The bottom line is that Trump is causing mass chaos that’s about to get even worse if the economy crashes, and he’s the one to blame just like most Americans already blame him for the shutdown.

Trump clearly stands to lose the most if he does not end this shutdown immediately, but Republicans will be dragged down with him if the economy crashes since they have had chance after chance to end this by passing a bill without wall funding by a veto-proof margin. Of course, Senate Majority Leader Mitch McConnell (R-Ky.) won’t do it, so it looks like we should prepare ourselves for economic disaster.


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