What will President Trump’s first recession look like?
The question is not that far-fetched. The current economic expansion is already the third longest since the middle of the 19th century, according to the National Bureau of Economic Research. If it makes it past June of next year it will be the longest on record.
While the economy is hardly booming, trundling along at an annual growth rate of about 2.5 percent, investors are getting jittery.
The stock market tumble after the government reported an uptick in wages last month suggests just how worried investors on Wall Street are that the Federal Reserve might start increasing interest rates more aggressively to forestall inflation. And the tax cuts and spending increases pumped into an expanding economy since December shorten the odds that the Fed will step in forcefully in the not-too-distant future to bring an overheated expansion to an end.
It is hardly premature to ask, in this light, how the Trump administration might manage the fallout from the economic downturn that everybody knows will happen. Unfortunately, the United States could hardly be less prepared.
Not only does the government have precious few tools at its disposal to combat a downturn. By slashing taxes while increasing spending, President Trump and his allies in Congress have further boxed the economy into a corner, reducing the space for emergency government action were it to be needed.
The federal debt burden is now the heaviest it has been in 70 years. And it is expected to get progressively heavier, as the budget deficit swells.
To top it off, a Republican president and a Republican Congress seem set on completing the longstanding Republican project to gut the safety net built by Presidents Franklin D. Roosevelt and Lyndon B. Johnson, which they blame for encouraging sloth, and replace it with a leaner welfare regime that closely ties government benefits to hard work.
