What Happens in a Recession?
Posted August 17, 2019 12:08 p.m. EDT
This column is not in the business of forecasting recessions, based on inverted yield curves or any other form of augury. But when enough credentialed auguries suddenly think one might be possible, it seems prudent to speculate about the consequences if they turn out to be correct. So let’s imagine what might follow if, sometime this winter, our post-2008 economic expansion finally ends.
First, the easy part: Donald Trump loses reelection. It will be ugly and flailing and desperate and — depending on recession-era geopolitics — potentially quite dangerous, but there is no way a president so widely disliked survives the evaporation of his boom. The rules of politics have changed, but they haven’t been suspended. Polarization will keep Trump from being defeated in a landslide, but not from being beaten handily, and in a recession, the Democrats can nominate any of their candidates and expect to evict the president with ease.
What comes next? In Washington, the centrists get a surprising opportunity. Blamed and written off by left and right alike, a Trump defeat would give the capital’s dwindling band of dealmakers and moderates another chance to govern — because even if it’s Elizabeth Warren or Bernie Sanders in the White House, it’s still going to be red-state Democrats and blue-state Republicans holding the balance of power in the Senate. The left-wing revolution won’t be canceled, exactly, in those circumstances, but it will be postponed till after 2022 or 2024; in the between-time, the people who once pined after comprehensive immigration reform and deficit commissions may get a (last?) chance to prove their critics wrong.
Meanwhile, the right will have to decide whether it wants to be an opposition or an alternative. With a bad economy and a liberal Democrat in the White House, conservatives could well return to the scripts of the Obama era, rediscovering (with whatever absurd hypocrisy) the perils of deficits and big spending, and defining themselves entirely against whatever bargains the center-left attempts to make. But if the GOP is reduced to a white working-class base at a time of increasing economic pain, there will also be incentives for Trump’s would-be successors to flesh out his populism rather than abandoning it. This will be the ground on which the next Republican civil war gets fought no matter what, but how long a recession lasts and how it gets interpreted will determine whether a serious post-Trump conservative populism is inevitable or stillborn.
Then outside of D.C., the immigration crisis will diminish, while the social crisis gets worse. Notwithstanding the real horrors of gang violence in their native countries, many of the people trying to cross into the United States are clearly making an economic decision when they migrate — which means, in turn, that fewer jobs here will gradually take some pressure off the southern border. But at the same time, the domestic trends that have already worsened despite a strong economy — drug overdoses, suicide rates, middle-aged mortality, the slumping birthrate — are likely to get even grimmer in a contraction. America’s social fabric hasn’t recovered from the rendings that followed 2008; a recession now would tear out the weakest stitching quickly.
Then in the commercial sphere, the venture-capital subsidy to American consumers will dry up. The Atlantic’s Derek Thompson summed up the peculiarities of this subsidy with a recent tweet: “If you work at WeWork, drive home with Uber, and then order food by DoorDash, you’re engaging with three companies that are projected to lose about $13 billion this year.” Those losses are supposed to end with an eventual leap into profitability; in a bad economy, they may end a lot more suddenly than that. Presumably a few of the many money-losing, long-game-playing Silicon Valley companies will survive a recession — but how many? Gather your Uber rides while ye may …
Finally, to end close to home, my profession will be shellacked. As with the social trends noted above, the economic foundation for professional journalism has continued to erode amid relative economic plenty; midsize daily newspapers keep shrinking and closing, web startups struggle to find ad revenue, and the business of online subscriptions rewards giants like The New York Times but so far almost nobody else. For many newspapers and webzines struggling to make the economics of the business work, a slump now could be simply fatal. And academia, journalism’s comrade in “careers that made more sense in 1960,” could face its own reckoning, with midsize and small colleges closing and consolidating, like midsize and small newspapers.
So a recessionary America would find the center-left enjoying some kind of power but probably struggling to govern, a right tearing itself apart in civil war, our downscale social crisis worsening, Silicon Valley delivering substantially less than promised, and the institutions that are supposed to inform and educate struggling or in decline.
Having guaranteed Trump’s removal from office, in other words, the recession would also set the stage for Trumpism’s eventual return.
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