Fears of recession are everywhere—except the White House

Fears of recession are everywhere—except the White House

With prices soaring, labor shortages, the Ukraine war raging, supply-chains snarled and interest rates now set to rise, fears of a looming recession are everywhere. Except, of course, at the White House—which is in utter denial.

Just as it was over inflation.

“’Inflation shock’ worsening, ‘rates shock’ just beginning, ‘recession shock’ coming,” blared Bank of America chief investment strategist Michael Hartnett in a note to clients.

“We anticipate that a more aggressive tightening of monetary policy will push the economy into a recession,” warns Deutsche Bank’s economists.

“The overheating of the labor market has raised the risk of recession meaningfully,” declares Goldman Sachs chief economist Jan Hatzius.

“Recession in the next couple of years is clearly more likely than not,” warns Clinton Treasury Secretary Larry Summers — whose prescient alarms on inflation a year ago went unheeded by Team Biden.

One development prompting jitters: Yields on short-term debt have been inching past longer-term debt, signaling investors’ lack of confidence in the economy down the road.

The Federal Reserve building.
Inflation has risen to 8.5 percent as of March.
Joshua Roberts/REUTERS

The key problem: The Federal Reserve Board’s drive to tame inflation — now running at 8.5% a year, the highest since 1981 — by jacking up interest rates and shrinking its balance sheet runs the risk of squeezing credit, thwarting investment and growth. After months of claiming (like the White House) inflation was “transitory,” the Fed is now finally tightening, with expected rate hikes totaling as much as perhaps 2 ½ points before year’s end.

Add to that lingering pandemic-era supply-chain issues, Russia’s invasion of Ukraine, President Joe Biden’s war on energy and Dems’ tax-and-borrow agenda — and recession in a year or two starts looking ever more likely.

Economist Tara Sinclair compares slowing price hikes without slowing growth to “trying to land during an earthquake.”

A television screen on the floor of the New York Stock Exchange
The Federal Reserve is expected to hike rates as much as 2 and a half points before the end of the year.
Richard Drew/AP
A hiring sign is displayed at a restaurant in Schaumburg, Illinois.
A hiring sign is displayed at a restaurant in Schaumburg, Illinois.
Nam Y. Huh/AP

Indeed, Summers notes that there’s never been “a moment in the United States when inflation was above 4[%] and unemployment was below 4[%]” — as now — “and we didn’t have a recession within the next two years.”

But the White House is all happy talk. Asked if Biden believes Summers is right about recession, as he was about inflation, White House flack Jen Psaki huffed, “That is not a projection we have made.” And National Economic Council Director Brian Deese claims the administration has “driven a uniquely strong economic recovery” that “positions us uniquely well to deal with the challenges ahead.”

Sorry: It was Bidenomics — the war on energy, Dems’ nearly $2 trillion debt-fueled American Rescue Plan spending spree — that sparked Bidenflation in the first place. Now the same cure pretends it’s going to fix its disastrous mistake, even while it sticks to the same course?

Brace for a rocky road ahead.


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