The Hill’s Morning Report – Is the US headed for a recession?
It is increasingly likely that the U.S. economy will tumble into recession within the next two years, according to economists and analysts, a risk that raises big questions for U.S. and global politics as well as policy.
Rising inflation and low unemployment, the pandemic, supply chain problems, a war between Russia and Ukraine with energy implications, plus the churn of elections in the United States and elsewhere, such as France, cast a collective shadow over forecasts.
The New York Times: In the French presidential runoff April 24, the economy will be key.
Economists surveyed by The Wall Street Journal this month on average put the probability of the economy being in recession sometime in the next 12 months at 28 percent, up from 18 percent in January and just 13 percent a year ago.
Federal Reserve Chairman Jerome Powell said last month that the central bank did not anticipate a recession this year, but since his last public comments on the subject, the Fed appears more aggressively poised to fight inflation with interest rate hikes and take a machete to its balance sheet. Analysts on Tuesday anticipate an annual 8.4 percent to 8.5 percent rise in the latest report of the consumer price index, yet another sign that costs for many Americans are not easing.
The Hill’s Alexander Bolton reports that in the House and Senate, Democrats eyeing the November elections are casting about for voter-friendly messages that can hold up into the fall at a time when everything from gasoline to food to prescription drugs are pricier and taking the wind out of higher wages and consumer confidence.
The Hill’s Niall Stanage in his latest Memo describes a split-screen backdrop between higher prices and a healthy job market. Most Americans tell pollsters the state of the economy and inflation are the most important issues facing the country, and they are ready to blame President Biden and the Democratic Party for appearing to do little to ease their wallet woes. Analysts argue the economy is strong, but consumers do not believe it (Vox chart).
James Mackintosh, The Wall Street Journal: Inflation hurts. Better get used to it.
Here’s what some analysts are saying about inflationary risks and the odds of a downturn:
➤ Larry Summers, former Treasury secretary and Harvard professor, told Bloomberg TV on Friday (video here), “Recession in the next couple of years is clearly more likely than not. … We have never had a moment in the United States when inflation was above 4 (percent) and unemployment was below 4 (percent) and we didn’t have a recession within the next two years.” He repeated that same message Sunday during an interview with NBC’s “Meet the Press” and said the Fed will have to be both skillful and “lucky” to avoid it.
➤ Gary Pzegeo, the head of fixed income at CIBC’s U.S. private wealth division, said inflation can often lead to wealth destruction, especially when rising consumer prices outpace wage growth. “It acts as a tax. So, give it a little bit of time in the economy, and it’ll eat away at your wealth and set the stage for a recession” (Yahoo Finance).
➤ “We no longer see the Fed achieving a soft landing,” Deutsche Bank economists led by Matthew Luzzetti said in an analyst note last week. “Instead, we anticipate that a more aggressive tightening of monetary policy will push the economy into a recession” (Fox Business). The bank was the first major Wall Street firm to predict a U.S. downturn.
The Hill: Inflation is driving the debate in Congress over the fiscal 2023 budget for the Pentagon.
Flashback: Since World War II, the U.S. has weathered a dozen recessions, but not without serious blows over the years to presidential candidates from both parties as well as off-year candidates who are members of the party in power in the White House.
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LEADING THE DAY
UKRAINE CRISIS: Ukraine and Russia are gearing up for another major fight as Russian forces line up along eastern Ukraine and U.S. military officials expect Moscow to launch a new offensive from the cities of Izium to Dnipro.
As The New York Times reports, satellite images at the end of last week showed hundreds of military vehicles moving through Velykyi Burluk toward Izium, a city nearly 150 miles northeast of the heaviest fighting since the war started. The expected offensive has also led Ukrainians in the region to flee en masse, but along the roads out of the area, there are dead bodies visible.
“We think this will be a new wave of this war. … Ukraine depends on the support of the United States,” Ukrainian President Volodymyr Zelensky told CBS’s “60 Minutes” in an interview that aired Sunday, noting his country’s specific requests to Washington, since approved, for additional weapons. “We need it as soon as possible. If we receive this support in time, we will win.”
The main goal of Russia appears to be to take over areas in the Donbas region that are not yet controlled by Moscow, with fighting to be done in deserted lands that is beneficial for Russia due to its military might. If that is completed, Russia still eyes taking over Kyiv despite being stymied in that pursuit in the past six weeks (The Wall Street Journal).
The Telegraph: Rocket attack destroys major airport in Dnipro.
The Hill: Kyiv Mayor Vitali Klitschko: Hundreds of civilians killed “with no reason.”
The Washington Post: Champion boxer turned Kyiv mayor becomes a rousing wartime leader.
The New York Times: Ukraine’s draft dodgers face guilt, shame and reproach.
Elsewhere in the region, Austrian Chancellor Karl Nehammer will visit Russian President Vladimir Putin in Moscow today, marking the first time a European Union leader has met face-to-face with him since he started the war in late February.
“I will meet Vladimir #Putin in Moscow tomorrow. We are militarily neutral, but has a clear position on the Russian war of aggression against the #Ukraine. He has to stop! It needs humanitarian corridors, a ceasefire & full investigation of war crimes,” Nehammer tweeted, adding that he informed a number of European leaders ahead of time, including Zelensky(Reuters).
The meeting comes only two days after Nehammer met with Zelensky in Kyiv, the same day the Ukrainian leader hosted British Prime Minister Boris Johnson for a surprise visit. However, one person not expected in Kyiv anytime soon is Biden as national security adviser Jake Sullivan told “Meet the Press” on Sunday that the president has no plans of traveling to the Ukrainian capital city (The Hill).
The Hill Sunday talk shows roundup: Sullivan told ABC’s “This Week” that the repeated targeting of civilians in Ukraine by Russian forces is intentional “to try to terrorize the population and subjugate it.” Frustrations among individual Russian soldiers and military units at being forced back by Ukrainian forces and civilians may also contribute to the killings, he said.
The Hill: U.S. lawmakers arrive in Poland over the weekend.
The Associated Press: U.S. official: Russia appoints new Ukraine war commander
Reuters: Russia confirms prisoner exchange with Ukraine.
NPR: Pope Francis calls for an Easter truce in Ukraine on Palm Sunday.
👉 INVITATION TOMORROW: Join The Hill’s virtual “The Future of Jobs Summit” on Tuesday at 1 p.m. ET for a discussion moderated by Steve Scully about the future of America’s workforce with guests Reps. Jim Langevin (D-R.I.) and David Schweikert (R-Ariz.), Upwork CEO Hayden Brown, Philadelphia Federal Reserve President Patrick Harker, American Nurses Association President Ernest Grant and more. RSVP HERE. Two years after COVID-19 sparked a work revolution, employers and workers ponder which sectors of the economy will experience the most growth, how companies will stay ahead of the curve and what’s ahead for transitioning workers into in-demand jobs.
IN FOCUS/SHARP TAKES
CORONAVIRUS: The new U.S. phase of living with COVID-19 is resulting in a slew of headlines featuring VIPs who test positive for the coronavirus despite vaccinations, booster doses and U.S. government guidance to continue precautions. From all walks of life, they often present no symptoms or describe mild signs of illness while testing positive. They are busy at work, congregating among peers, dining out, performing in shows, traveling and living their lives amid the pandemic, often without masks and often surprised they test positive amid frequent routine or required testing.
© Associated Press / John Minchillo | New York City Mayor Eric Adams at Yankee Stadium on Friday.
“Get used to it,” was a quote in a weekend report by The Associated Press noting the many entertainers, politicians, Cabinet members, leaders in Congress, jurists and White House staff members who have been sidelined by recent positive test results. New York Mayor Eric Adams (D) was one such official this weekend, following on the heels of Washington, D.C.’s mayor, who reported a positive test result last week (The Associated Press). Agriculture Secretary Tom Vilsack (D) is another, and he followed at least two other Cabinet colleagues who tested positive for the coronavirus last week (CNN and NPR).
But here are some words to the wise: Common assumptions about the delta, omicron and BA.1 variants of COVID-19 keep getting revised. What is predominantly spreading in the United States now is the highly transmissible BA.2, which has mutated beyond its ancestor, the original SARS-CoV-2 detected in Wuhan, China. There are even reports that BA.1 and BA.2 found a way to marry up in a human host, creating variant XE, which is even more virulent but so far not deadly. There is still a lot that researchers are trying to understand about how infection with COVID-19 and its cousins alter human cells, whether existing vaccines can retain effectiveness and what the next phase of “living with” a changing pathogen will mean (Scientific American).
The Hill: COVID-19 infections loom nationwide as cases spike in Washington, D.C., several states.
Adjusting lifestyles amid COVID-19 has presented new problems in the United Kingdom (confirmed cases are spiking again in the U.K., France and Germany) and in Shanghai, where lockdown policies amid a surge in infections are draconian, unpopular and pose a threat to the Chinese economy. Residents of China’s largest city are also questioning the human cost of the quarantine amid the largest outbreak across the country since late 2019 (Reuters). China’s outbreaks are growing (The Associated Press).
Researchers continue to probe for answers about the effect of COVID-19 and its variants on individuals. Example: Do some people possess special genetic immunity to COVID-19, despite multiple exposures to the coronavirus that have rendered other people sick but left them unscathed? Scientists are studying people who fit that bill to try to answer that question (National Geographic).
Total U.S. coronavirus deaths reported this morning, according to Johns Hopkins University: 985,482. Current average U.S. COVID-19 daily deaths are 516, according to the Centers for Disease Control and Prevention.
As of today, 76.4 percent of the U.S. population has received at least one dose of a COVID-19 vaccine and 65.1 percent is “fully vaccinated,” according to the Bloomberg News global vaccine tracker and the government’s definition. The percentage of Americans who have received third or booster doses is 29.3.
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ADMINISTRATION: The White House this morning announced its new rule on ghost guns in an attempt to combat the continued creation of privately made firearms that do not feature serial numbers as they continue to show up at crime scenes.
The new rule includes a ban on “buy build shoot” kits that people can buy online or at a store without a background check, which can assemble a working firearm in as little as 30 minutes, according to senior administration officials.
The policy clarifies that such kits qualify as “firearms” under the Gun Control Act and, as a result, commercial manufacturers of them must be licensed, include serial numbers, and include a background check prior to a sale.
Biden’s official announcement on the issue will come later today alongside Vice President Harris and Deputy Attorney General Lisa Monaco (The Hill). It also comes in the face of months of clamoring from Democrats, progressives and anti-firearm advocacy groups. The policy is expected to receive heavy blowback from gun advocacy organizations.
As The Associated Press notes, nearly 24,000 guns were found at crime scenes by law enforcement and reported between 2016 and 2020. Any other statistics on ghost guns are hard to come by, including how many are still at large, because they cannot be traced.
CNN: Biden to announce new gun regulation, name Steve Dettelbach, a former U.S. attorney from Ohio, as nominee to lead the Bureau of Alcohol, Tobacco, Firearms and Explosives.
From one move this week to one that might not happen at all, the Justice Department (DOJ) is continuing to weigh the three criminal referrals made by Congress aimed at three Trump-era White House officials over their defiance of Jan. 6 committee subpoena.
At issue for the department, as The Hill’s Rebecca Beitsch and Harper Neidig write, the referrals pose thorny legal issues as the DOJ has historically defended senior administration officials’ testimonial immunity in the face of congressional subpoenas. For example, it’s why federal prosecutors did not hesitate to issue criminal contempt of Congress charges against Stephen Bannon.
However, Meadows, Navarro and Scavino referrals may prove tougher for the department given that they cover their work as White House officials.
“For people who were senior White House officials at the time, there’s another layer of complexity that doesn’t apply to a Bannon,” said Neil Eggleston, a former White House counsel and congressional investigator for the House’s Iran-Contra probe.
The Hill: Vulnerable Senate Democrats undercut Biden on Title 42.
OPINION
Student loan forgiveness is an idea whose time has gone, by Matthew Yglesias, columnist, Bloomberg Opinion. https://bloom.bg/37xaFPa
On culture-war issues, tolerance should be a two-way street, by Gary Abernathy, contributing columnist, The Washington Post. https://wapo.st/3DZ7yf4
WHERE AND WHEN
The House meets for a pro forma session at 10:30 a.m. Votes are not scheduled until after the House recess April 26.
The Senate convenes for a pro forma session at 11:30 a.m. Senators are in recess for two weeks and return to the Capitol on April 25.
The president will return from Delaware at 9:50 a.m.He willreceive the President’s Daily Brief at 10 a.m. Biden will speak by phone at 11 a.m. with Prime Minister Narendra Modi of India, who represents a significant trading partner with Russia, as the U.S. continues to press world leaders to take a hard line against Moscow (The Associated Press). The president and the vice president will lay out the new federal restriction on homemade unregistered weapons at 2:15 p.m.
The vice president will join the president this afternoon for his announcement of a federal restriction on unregistered gun parts and homemade ghost guns. At 4:15 p.m. Harris will will announce new efforts to reduce medical debt and will be accompanied at the White House by .Health and Human Services Secretary Xavier Becerra, Deputy Secretary of Department of Agriculture Jewel Bronaugh, Veteran Affairs Deputy Secretary Donald Remy and Consumer Financial Protection Bureau Director Rohit Chopra.
First lady Jill Biden at noon will join former Secretary of State Hillary Clinton for a virtual conversation at a meeting of the Clinton Global Initiative University to discuss community colleges and the future of workforce development. It will be livestreamed HERE.
The White House daily press briefing is scheduled at 1 p.m.
📺 Hill.TV’s “Rising” program features news and interviews at http://digital-release.thehill.com/hilltv, on YouTube and on Facebook at 10:30 a.m. ET. Also, check out the “Rising” podcast here.
ELSEWHERE
➤ INTERNATIONAL: French President Emmanuel Macron and Marine Le Pen, the far-right National Rally candidate, will square off on April 24 in a high-stakes runoff. Macron is seeking a second five-year term. Macron pulled in 27.6 percent of the vote in the first round, with Le Pen winning 23.4 percent. If the incumbent president wins in a fortnight, he would become the first French president to secure a second term since Jacques Chirac in 2002 (The Associated Press)… Today a successor to Pakistan Prime Minister Imran Khan is to be elected and sworn in by parliament. The ouster of Khan in a parliamentary no-confidence vote early Sunday set Pakistan on an uncertain political path. Khan was brought down by 174 lawmakers in the 342-seat Parliament who voted to depose him, two more than the required simple majority (The Associated Press).
© Associated Press / Thibault Camus | French President Emmanuel Macron in Paris on Sunday.
➤ WAR AND THE CLEAN ENERGY TRANSITION?: Some experts believe the long-range energy policies now pursued in Europe because of sanctions on Russia’s oil, gas and coal could accelerate the global spread of clean energy technologies (The Hill). … Here are five things to know about the liquified natural gas industry and its significance in the Ukraine crisis because of Russia’s energy leverage in Europe (The Hill).
➤ STATE WATCH: States, including New York, Virginia, Maryland, Kansas and Missouri are prepared to spend enormous taxpayer dollars to keep or poach NFL teams. The Hill’s Reid Wilson reports on a trend frowned on by economists of all stripes when public dollars could be better invested and the NFL’s billionaire owners reap huge sums.
THE CLOSER
And finally … ⛳ The world No. 1 golfer is now a Masters champion. Scottie Scheffler on Sunday became an owner of the green jacket, scoring 10-under par and defeating Rory McIlroy by three strokes to win The Masters at Augusta National Golf Club on Sunday.
All four of Scheffler’s rounds this week were played under par, having led the field by three strokes heading into Sunday’s final round — a lead he never relinquished.
The win caps off a whirlwind two-month stretch for Scheffler, 25, who had not won a PGA Tour event before February. Since then, he won the WM Phoenix Open, the Arnold Palmer Invitational and the WGC-Dell Technologies Match Play before his triumph at Augusta (ESPN).
© Associated Press / Matt Slocum | Scottie Scheffler wins The Masters on Sunday.
Morning Report journalists Alexis Simendinger and Al Weaver can be reached at asimendinger@digital-release.thehill.com and aweaver@digital-release.thehill.com. Send us a message and/or SUBSCRIBE!
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