Trump’s Economic Nightmare
While criminal law has failed so far to close in on the president, economic law has begun to do exactly that.
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Trump’s Economic Nightmare
by Rich Herschlag
Let me say from the outset that I am rooting against a recession, whether this fall, next spring, next fall, or ever. In my mid-50s as I slug my way to a seemingly imminent semi-retirement where I can spend less time chasing down building permits and more time coming up with cool riffs on my bass guitar, I have a lot to lose. I have a kid still in college, another just getting started in the job market, a wife looking at Act III in life, and a whole nation I still care deeply about. That said, a recession is coming. Don’t be fooled by a decent jobs report following a mediocre one. The missile has left the silo. And Donald Trump fears it more than a fully unredacted Mueller report.
We’ve read about the indicators currently lined up like a battalion of doom. College loan debt at an all-time high. Credit card debt at an all-time high. Auto loan delinquency at an all-time high. Total consumer debt at an all-time high and climbing rapidly. Corporate debt at an all-time high, with revered U.S. brands like GE and AT&T being downgraded. The annual federal deficit at an all-time high. Total national debt at an all-time high, exceeding $22 trillion and amounting to a sobering $172,000 per household. We are getting tired of winning. Winning has exhausted us and our coffers.
We know historically that few if any of these debts ever actually get paid off. Like a struggling homeowner managing an 18-percent interest credit card by opening up a 16-percent interest credit card, astronomical private and public debt get transferred, shuffled around, and renamed. That’s in relatively good times. In times of upheaval, credit defaults spread like the flu and a social realignment takes place. Those who have little end up back at zero or worse. Those with a firm stake in the middle class are cut adrift and effectively lose a decade or so of their hard work. The rich go bargain hunting. And the government—always a culprit in at least some measure—underwrites the realignment in the manner and to the degree necessary to stay relevant and in power.
By virtue of running a small business tied to residential and commercial real estate, I sometimes get a front or second row seat for the coming maelstrom. Back in 2007, while performing standard structural evaluations for my clients, I watched marginally middle class couples bolstered by seemingly easy mortgage terms bidding upwards of $500 thousand on homes I knew in my conservative engineer’s heart were intrinsically worth no more than half that. This happened on a weekly basis. It wasn’t my place to pull aside my clients and read them the riot act. I just told them how to fix their concrete block foundation.
These days, without a singular financial industry juggernaut compressor pumping air into the economic bubble, I nonetheless notice a lot of little things. Clients plead cash flow problems and defer payments by a month or two. (I always say okay.) Clients pay even small invoices in halves or thirds. Clients send me a check then email me to ask if I can hold off cashing it. (Like I have a real choice.) Clients go totally MIA. Potential clients ask dozens of exacting questions trying to suck as much professional service as humanly possible before finally conceding they are not about to actually hire a professional.
There has been a palpable uptick in this sort of behavior dating back to about late 2018. One can call it merely anecdotal, but in my world an onslaught of a hundred anecdotes with a common theme is a cumulative realty. When the anecdotes are underscored by a deep sea of data immune to the cry of “fake news,” it’s a tidal wave.
Donald Trump knows this like he knows he’s a serial rapist. It’s there. He denies it. He dances around it. The difference between the rapes and the impending financial crisis is he has to mitigate the latter to have a prayer of being reelected.
For 95 percent of his adult life—and we use the term ironically—Trump has been a bit player in the excesses of our times. For 130 chaotic weeks, he has been a player. Otherwise serious financial reporters speak respectfully of Trump’s “economic policies” as one would speak respectfully of Harvey Weinstein’s “casting policies.” These policies are little more than the easiest, most mindless spur-of-the-moment acts that may seem at first to have a benefit. Of course any “financial adviser” on opioids could walk into the living room of a typical family and try to convince them that emptying out their modest 401(k) to purchase Club Med vacations, a Range Rover, a Luxema entertainment spa and a case of Dom Perignon would put their lives on eight glorious cylinders. But what about next month?
For Trump, the 401(k) cleanout was a tax cut for Mar-a-Lago members along with permission to dump coal slag into open waterways. He had, of course, no solution of any kind to our longstanding embedded economic problems—outdated infrastructure, a shortage of domestically educated STEM talent, highly limited access to capital for small businesses, millions of Americans still without health insurance, rural economic segregation, millennials unable or unwilling to buy a home—the list goes on and on. And next month is approaching fast in the form of 2020.
It won’t take much to shave a few points off of the cult following in a few swing states. A string of layoffs in the auto industry and a jump in home foreclosures. Two or three straight disappointing jobs reports. Declining exports. An sharp rise in personal bankruptcies. Some of these things have already begun. As a loyal American the best I can do is hope 1) the decline is modest and short-lived, and 2) it is well timed enough to end the most ill-conceived presidency in U.S. history.
While criminal law has failed so far to close in on the president, economic law has begun to do exactly that. So far, the defense has involved inhumane detention camps at the southern border, calls for holocaust-level deportations, an LSD-driven trade war, and a game of nuclear chicken with Iran. To remain in the White House and out of the sights of Region 2 federal prosecution, Trump must hope for some combination of a grand distraction and a lucky deferral of the looming recession.
As decent Americans approaching a cliff we can do little more than be discerning and vocal about the distractions and hopeful about the economy. Whether the impending recession ultimately enhances or detracts from your sleep, rest assured the writing is already on the wall. And Mexico won’t pay for this one either.
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