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Republican Rejection Of State Aid Risks ‘Extended Depression’

Reprinted with permission from Alternet

Senate Majority Leader Mitch McConnell has been slammed by everyone from New York Times liberal Paul Krugman to Washington Post conservative Jennifer Rubin over his recent assertion that he has no desire to "bail out blue states" and that individual states that are struggling should apply for bankruptcy. Journalist Robert McCartney, in an article for the Post, reports that according to "officials and analysts," McConnell's proposal is "a recipe for turning a potentially short recession into a prolonged depression."

"Governors, mayors and county leaders of both parties are clamoring for help in the next federal rescue package after McConnell and President Trump blocked such assistance in the $484 billion bill approved last week," McCartney reports. "House Speaker Nancy Pelosi (D) says the next bill must include state and local aid, but Trump has sent mixed signals about whether he will support it. McConnell and many other Senate Republicans are resisting."

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Economy Won’t Reopen With A Bang

From the first moment Donald Trump recognized the serious nature of the new coronavirus pandemic, his impatience has been palpable. Over and over, he stressed how quickly we would get past it. And even after extending the guidelines that restrict activity until the end of April, he continues to predict that life will soon be back to normal.

"It would be nice to be able to open with a big bang and open up our country or certainly most of our country," he said Wednesday. "And I think we're going to do that soon." Treasury Secretary Steven Mnuchin was similarly optimistic, predicting that "we could be open for business in the month of May." Attorney General William Barr insisted that by then, it will be time "to allow people to adapt more than we have and not just tell people to go home and hide under their bed."

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US Economy’s Second-Quarter Growth Slower Than Estimated

Reprinted with permission from Alternet

President Donald Trump and his sycophants continue to insist that reports of a weakening U.S. economy are “fake news” and that the state of the economy has never been stronger in the United States. But an inverted yield curve (meaning that short-term interest rates for financial products are higher than long-term interest rates for such products) is, according to many economists, a sign of an economic slowdown — and data released by the Commerce Department on Thursday shows that growth for the U.S. during 2019’s second quarter was 0.1 percent less than originally thought.

For the April-June period, the Commerce Department’s Bureau of Economic Analysis (BEA) revised U.S. gross domestic product (GDP) growth to 2 percent —which is 0.1 percent less than the previous estimate of 2.1 percent released in July.

Obviously, 0.1 percent isn’t a huge change, but growth in the quarter was already disappointing to begin with. A significant revision upward would have been a sign that the economy was doing somewhat better than we thought; instead, it’s doing slightly worse.

The Federal Reserve signaled it’s taking these signs of weakness seriously with its recent decision to lower interest rates for the first time since 2015. Gradually, interest rates had been increasing since 2015, but that trend ended this summer with the Fed’s rate cut.

Although Trump insists that the U.S. is not going into a recession, his desire for more interest rate cuts indicates that he is worried about the economy slowing down. On Thursday, Trump tweeted, “The Economy is doing GREAT, with tremendous upside potential! If the Fed would do what they should, we are a Rocket upward!”

But some economists, including Robert Reich, have been warning that there is a strong possibility the U.S. will head into a recession when the “sugar high” of the GOP’s 2017 corporate tax cut wears off.

Major Banks Warn Against Trump Recession

Big banks are raising red flags about a looming recession in the United States, citing Trump’s trade war with China as the major factor.

In the last week, Bank of America, Morgan Stanley, Goldman Sachs, and UBS have all warned that Trump’s actions with China are hurting the U.S. economy and pushing the country, and even the entire globe, into a recession.

Morgan Stanley on Aug. 5 predicted that a recession will start in just nine months if Trump follows through on his pledge to add a 25 percent tariff (tax) on all goods from China.

“Trade tensions have pushed corporate confidence and global growth to multi-year lows,” Chetan Ahya, Morgan Stanley’s chief economist, said.

In an analysis published Friday, Aug. 9, Bank of America raised their odds of a recession in the next year from a 1-in-5 chance to a 1-in-3, and stated their model “likely does not fully capture the threat of US-China trade tensions spiraling into a more severe trade war, which we view as the biggest downside risk for the US economy.”

“Fears that the trade war will trigger a recession are growing,” Jan Hatzius, Goldman Sachs’ chief economist, announced on Sunday. He also predicted that Trump’s economic battle with China will cause America’s economic growth to falter at the end of 2019.

On Tuesday morning, UBS said it anticipates both a slowdown in job growth as well as an increase in unemployment. In June, UBS warned that if trade tensions between the U.S. and China did not cool, “the contours would resemble a mild ‘global recession.'”

The warnings come days after Trump announced a 10 percent tariff on Chinese goods starting September 1. The White House has since changed course, announcing that the U.S. will delay the start of tariffs on Chinese goods until mid-December.

Before the White House announced a delay in the new tariffs, economists questioned if and when the trade war could end.

“I’m very skeptical that the two sides will come to a deal before the 2020 election,” said Meredith Crowley, a Cambridge University economist, told NBC News on Monday.

Trump’s trade war with China has already had devastating effects for American farmers. In retaliation for Trump’s tariffs, China first reduced and then completely eliminated purchases of U.S. agricultural products.

Mark Zandi, chief economist at Moody’s Analytics, estimated Trump’s trade war has already cost the U.S. economy 300,000 jobs.

There’s no telling how much more damage he will do before it all ends.

Published with permission of The American Independent.