No Wonder the Economy Has Trump Spooked

Despite gyrations on Wall Street this week and an associated rise in recession fears, Donald Trump is still ballyhooing the state of the U.S. economy. In private, however, the President sounded “nervous and apprehensive” when he called a number of business leaders and financiers from his New Jersey golf club to get their opinions, the Washington Post reported.

Small wonder. With his personal-approval ratings stuck in the low forties, Trump’s 2020 reëlection campaign hinges on a healthy economy. He can be pretty confident that his core supporters will turn out for him, but he also needs to win over some less committed voters. His pitch to them is one that the British Conservative Party used successfully in 2015, during a general election, when it talked up the U.K. economy and issued dire warnings about the consequences of a victory for the opposition Labour Party.

One of the Conservatives’ campaign slogans was “DON’T LET LABOUR WRECK IT.” Substitute “THE DEMOCRATS” for “LABOUR” and you have Trump’s campaign strategy in a nutshell. Addressing a campaign rally in New Hampshire on Thursday night, he portrayed the Democratic candidates for President as “a bunch of socialists or communists” and asked the crowd, “Does anybody want to pay a ninety-five-per-cent tax?” He also suggested that a Democratic victory would lead to a crash in the stock market, adding, “You have no choice but to vote for me, because your 401(k), everything is going to be down the tubes. Whether you love me or hate me, you have got to vote for me.

The mere fact that Trump’s strategy is based on scaremongering (under Barack Obama, the Dow more than doubled) and outright lies (Joe Biden is a socialist?) doesn’t mean that it can’t work. In 2015, the British economy wasn’t doing great at all. Held back by five years of Conservative austerity policies, it hadn’t even fully recovered from the Great Recession. But the Conservatives, aided by their allies in the British media, managed to raise enough doubts about Labour’s economic competence to gain an over-all majority in the House of Commons. As long as the U.S. economy looks strong, the possibility of something similar happening in November, 2020, can’t be ruled out entirely, despite Trump’s unpopularity.

But, if the economy turns south between now and the election, Trump will almost certainly be defeated, and he knows it. Hence his delay, earlier this week, on expanding tariffs on Chinese imports, and his increasingly frantic efforts to scapegoat the Federal Reserve and its chairman, Jerome Powell. As the Dow plunged on Wednesday, Trump took to Twitter, calling Powell “clueless” and retweeting guests on Fox Business who were criticizing the Fed’s recent policy moves.

In the two days since the big fall in the stock market, we’ve received some new economic data, and it has been mixed. On Thursday, the Commerce Department reported that retail sales expanded by 0.7 per cent in July, the strongest figure since March. Economists responded by raising their estimates of third-quarter G.D.P. growth to about two per cent. That’s a long way short of the four-per-cent growth that Trump promised, but it’s also well above recession levels.

At the same time, the Fed confirmed that the manufacturing sector is in a slump. Manufacturing output fell 0.4 per cent in July, the central bank said, and it is now about 1.5 per cent below its December, 2018, level. For a President who promised to restore manufacturing to its former position of prominence, that can hardly be reassuring. Neither can the news, on Friday, that the University of Michigan’s survey-based index of consumer confidence fell sharply in August, reaching its lowest level since 2016.

The fall raised concerns about whether strong consumer spending will continue to underpin the economy, and it also illustrated that Trump’s aggressive tactics in the trade war are backfiring. “Consumers strongly reacted to the proposed September increase in tariffs on Chinese imports, spontaneously cited by 33% of all consumers in early August,” Richard Curtin, the chief economist at the Michigan survey, noted. The White House has now postponed the higher tariffs until December. That may reassure some consumers, but this week’s fluctuations in the stock market are likely to add to their jitters.

To be sure, none of this means that a recession is imminent. Most economists are predicting that the G.D.P. will continue to rise, albeit at a modest pace. Citing continued growth in jobs and household incomes, Curtain said “it is likely that consumers will reduce their pace of spending while keeping the economy out of recession at least through mid 2020.” The most recent statements from the Fed indicate that it agrees with this assessment.

Despite all his bluster, Trump seems spooked. According to the Washington Post report, he has been “telling some confidants that he distrusts statistics he sees reported in the news media and that he suspects many economists and other forecasters are presenting biased data to thwart his reelection.” These sound like the ravings of an egomaniac who sees the world closing in on him.

From Trump Boom to Trump Gloom

The smart money thinks Trumponomics is a flop.

Last year, after an earlier stock market swoon brought on by headlines about the U.S.-China trade conflict, I laid out three rules for thinking about such events.

  1. First, the stock market is not the economy.
  2. Second, the stock market is not the economy.
  3. Third, the stock market is not the economy.

But maybe I should add a fourth rule: The bond market sorta kinda is the economy.

An old economists’ joke says that the stock market predicted nine of the last five recessions. Well, an “inverted yield curve” — when interest rates on short-term bonds are higher than on long-term bonds — predicted six of the last six recessions. And a plunge in long-term yields, which are now less than half what they were last fall, has inverted the yield curve once again, with the short-versus-long spread down to roughly where it was in early 2007, on the eve of a disastrous financial crisis and the worst recession since the 1930s.

Neither I nor anyone else is predicting a replay of the 2008 crisis. It’s not even clear whether we’re heading for recession. But the bond market is telling us that the smart money has become very gloomy about the economy’s prospects. Why? The Federal Reserve basically controls short-term rates, but not long-term rates; low long-term yields mean that investors expect a weak economy, which will force the Fed into repeated rate cuts.

So what accounts for this wave of gloom? Much though not all of it is a vote of no confidence in Donald Trump’s economic policies.

You may recall that last year, after a couple of quarters of good economic news, Trump officials were boasting that the 2017 tax cut had laid the foundation for many years of high economic growth.

Since then, however, the data have pretty much confirmed what critics had been saying all along. Yes, the tax cut gave the economy a boost — a “sugar high.Running trillion-dollar deficits will do that. But the boost was temporary. In particular, the promised boom in business investment never materialized. And now the economy has reverted, at best, to its pre-stimulus growth rate.

At the same time, it has become increasingly clear that Trump’s belligerence about foreign trade isn’t a pose; it reflects real conviction. Protectionism seems to be up there with racism as part of the essential Trump. And the realization that he really is a Tariff Man is having a serious dampening effect on business spending, partly because nobody knows just how far he’ll go.

To see how this works, think of the dilemma facing many U.S. manufacturers. Some of them rely heavily on imported parts; they’re not going to invest in the face of actual or threatened tariffs on those imports. Others could potentially compete with imported goods if assured that those imports would face heavy tariffs; but they don’t know whether those tariffs are actually coming, or will endure. So everyone is sitting on piles of cash, waiting to see what an erratic president will do.

Of course, Trump isn’t the only problem here. Other countries have their own troubles — a European recession and a Chinese slowdown look quite likely — and some of these troubles are spilling back to the United States.

But even if Trump and company aren’t the source of all of our economic difficulties, you still want some assurance that they’ll deal effectively with problems as they arise. So what kind of contingency planning is the administration engaged in? What are officials considering doing if the economy does weaken substantially?

The answer, reportedly, is that there is no policy discussion at all, which isn’t surprising when you bear in mind the fact that basically everyone who knows anything about economics left the Trump administration months or years ago. The advisers who remain are busy with high-priority tasks like accusing The Wall Street Journal editorial page of being pro-Chinese.

No, the administration’s only plan if things go wrong seems to be to blame the Fed, whose chairman was selected by … Donald Trump. To be fair, it’s now clear that the Fed was wrong to raise short-term rates last year.

But it’s important to realize that the Fed’s mistake was, essentially, that it placed too much faith in Trumpist economic policies.

  • If the tax cut had actually produced the promised boom,
  • if the trade war hadn’t put a drag on growth,

we wouldn’t have an inverted yield curve; remember, the Fed didn’t cause the plunge in long-term rates, which is what inverted the curve. And the Trump boom wasn’t supposed to be so fragile that a small rise in rates would ruin it.

I might add that blaming the Fed looks to me like a dubious political strategy. How many voters even know what the Fed is or what it does?

Now, a word of caution: Bond markets are telling us that the smart money is gloomy about economic prospects, but the smart money can be wrong. In fact, it has been wrong in the recent past. Investors were clearly far too optimistic last fall, but they may be too pessimistic now.

But pessimistic they are. The bond market, which is the best indicator we have, is declaring that Trumponomics was a flop.

Jeffrey Epstein and When to Take Conspiracies Seriously

Sometimes conspiracy theories point toward something worth investigating. A few point toward the truth.

The challenge in thinking about a case like the suspicious suicide of Jeffrey Epstein, the supposed “billionaire” who spent his life acquiring sex slaves and serving as a procurer to the ruling class, can be summed up in two sentences. Most conspiracy theories are false. But often some of the things they’re trying to explain are real.

Conspiracy theories are usually false because the people who come up with them are outsiders to power, trying to impose narrative order on a world they don’t fully understand — which leads them to imagine implausible scenarios and impossible plots, to settle on ideologically convenient villains and assume the absolute worst about their motives, and to imagine an omnicompetence among the corrupt and conniving that doesn’t actually exist.

Or they are false because the people who come up with them are insiders trying to deflect blame for their own failings, by blaming a malign enemy within or an evil-genius rival for problems that their own blunders helped create.

Or they are false because the people pushing them are cynical manipulators and attention-seekers trying to build a following who don’t care a whit about the truth.

For all these reasons serious truth-seekers are predisposed to disbelieve conspiracy theories on principle, and journalists especially are predisposed to quote Richard Hofstadter on the “paranoid style” whenever they encounter one — an instinct only sharpened by the rise of Donald Trump, the cynical conspiracist par excellence.

But this dismissiveness can itself become an intellectual mistake, a way to sneer at speculation while ignoring an underlying reality that deserves attention or investigation. Sometimes that reality is a conspiracy in full, a secret effort to pursue a shared objective or conceal something important from the public. Sometimes it’s a kind of unconscious connivance, in which institutions and actors behave in seemingly concerted ways because of shared assumptions and self-interest. But in either case, an admirable desire to reject bad or wicked theories can lead to a blindness about something important that these theories are trying to explain.

Here are some diverse examples. Start with U.F.O. theories, a reliable hotbed of the first kind of conspiracizing — implausible popular stories about hidden elite machinations.

It is simple wisdom to assume that any conspiratorial Fox Mulder-level master narrative about little gray men or lizard people is rubbish. Yet at the same time it is a simple fact that the U.F.O. era began, in Roswell, N.M., with a government lie intended to conceal secret military experiments; it is also a simple fact, lately reported in this very newspaper, that the military has been conducting secret studies of unidentified-flying-object incidents that continue to defy obvious explanations.

U.F.O. conspiracy theorists may be way off about Area 51. But the government did keep secrets.

CreditJohn Locher/Associated Press

So the correct attitude toward U.F.O.s cannot be a simple Hofstadterian dismissiveness about the paranoia of the cranks. Instead, you have to be able to reject outlandish theories and acknowledge a pattern of government lies and secrecy around a weird, persistent, unexplained feature of human experience — which we know about in part because the U.F.O. conspiracy theorists keep banging on about their subject. The wild theories are false; even so, the secrets and mysteries are real.

Another example: The current elite anxiety about Russia’s hand in the West’s populist disturbances, which reached a particularly hysterical pitch with the pre-Mueller report collusion coverage, is a classic example of how conspiracy theories find a purchase in the supposedly sensible center — in this case, because their narrative conveniently explains a cascade of elite failures by blaming populism on Russian hackers, moneymen and bots.

And yet: Every conservative who rolls her or his eyes at the “Russia hoax” is in danger of dismissing the reality that there is a Russian plot against the West — an organized effort to use hacks, bots and rubles to sow discord in the United States and Western Europe. This effort is far weaker and less consequential than the paranoid center believes, it doesn’t involve fanciful “Trump has been a Russian asset since the ’80s” machinations … but it also isn’t something that Rachel Maddow just made up. The hysteria is overdrawn and paranoid; even so, the Russian conspiracy is real.

A third example: Marianne Williamson’s long-shot candidacy for the Democratic nomination has elevated the holistic-crunchy critique of modern medicine, which often shades into a conspiratorial view that a dark corporate alliance is actively conspiring against American health, that the medical establishment is consciously lying to patients about what might make them well or sick. Because this narrative has given anti-vaccine fervor a huge boost, there’s understandable desire among anti-conspiracists to hold the line against anything that seems like a crankish or quackish criticism of the medical consensus.

But if you aren’t somewhat paranoid about how often corporations cover up the dangers of their products, and somewhat paranoid about how drug companies in particular influence the medical consensus and encourage overprescription — well, then I have an opioid crisis you might be interested in reading about. You don’t need the centralized conspiracy to get a big medical wrong turn; all it takes is the right convergence of financial incentives with institutional groupthink. Which makes it important to keep an open mind about medical issues that are genuinely unsettled, even if the people raising questions seem prone to conspiracy-think. The medical consensus is generally a better guide than crankishness; even so, the tendency of cranks to predict medical scandals before they’re recognized is real.

Marianne Williamson spoke about health care during the June Democratic debates.
CreditHolly Pickett for The New York Times

Finally, a fourth example, circling back to Epstein: the conspiracy theories about networks of powerful pedophiles, which have proliferated with the internet and peaked, for now, with the QAnon fantasy among Trump supporters.

I say fantasy because the details of the QAnon narrative are plainly false: Donald Trump is not personally supervising an operation against “deep state” child sex traffickers any more than my 3-year-old is captaining a pirate ship.

But the premise of the QAnon fantasia, that certain elite networks of influence, complicity and blackmail have enabled sexual predators to exploit victims on an extraordinary scale — well, that isn’t a conspiracy theory, is it? That seems to just be true.

A QAnon conspiracy supporter at the “Demand Free Speech” rally in Washington in July.
CreditStephanie Keith/Getty Images

And not only true of Epstein and his pals. As I’ve written before, when I was starting my career as a journalist I sometimes brushed up against people peddling a story about a network of predators in the Catholic hierarchy — not just pedophile priests, but a self-protecting cabal above them — that seemed like a classic case of the paranoid style, a wild overstatement of the scandal’s scope. I dismissed them then as conspiracy theorists, and indeed they had many of conspiracism’s vices — above all, a desire to believe that the scandal they were describing could be laid entirely at the door of their theological enemies, liberal or traditional.

But on many important points and important names, they were simply right.

Likewise with the secular world’s predators. Imagine being told the scope of Harvey Weinstein’s alleged operation before it all came crashing down — not just the ex-Mossad black ops element but the possibility that his entire production company also acted as a procurement-and-protection operation for one of its founders. A conspiracy theory, surely! Imagine being told all we know about the late, unlamented Epstein — that he wasn’t just a louche billionaire (wasn’t, indeed, a proper billionaire at all) but a man mysteriously made and mysteriously protected who ran a pedophile island with a temple to an unknown god and plotted his own “Boys From Brazil” endgame in plain sight of his Harvard-D.C.-House of Windsor pals. Too wild to be believed!

And yet.

Where networks of predation and blackmail are concerned, then, the distinction I’m drawing between conspiracy theories and underlying realities weakens just a bit. No, you still don’t want to listen to QAnon, or to our disgraceful president when he retweets rants about the #ClintonBodyCount. But just as Cardinal Theodore McCarrick’s network of clerical allies and enablers hasn’t been rolled up, and the fall of Bryan Singer probably didn’t get us near the rancid depths of Hollywood’s youth-exploitation racket, we clearly haven’t gotten to the bottom of what was going on with Epstein.

So to worry too much about online paranoia outracing reality is to miss the most important journalistic task, which is the further unraveling of scandals that would have seemed, until now, too implausible to be believed.

Yes, by all means, resist the tendency toward unfounded speculation and cynical partisan manipulation. But also recognize that in the case of Jeffrey Epstein and his circle, the conspiracy was real.

‘We need answers. Lots of them.’ What’s known and what’s next after Jeffrey Epstein’s death

Jeffrey Epstein, the multimillionaire financier indicted on federal sex-trafficking charges, died after he was discovered unresponsive from an “apparent suicide” on Saturday morning in a federal detention center in Manhattan. His death has raised questions about the investigation and its political implications.

What happens to the case now?

Epstein’s death comes a day after new documents pertaining to his global sex-trafficking ring were unsealed in court filings on Friday.

On Saturday, Attorney General William P. Barr said that he was “appalled” after hearing about the suspect’s death and that many questions would need to be answered, according to a Justice Department statement. Barr said he “consulted with the Inspector General who is opening an investigation into the circumstances of Mr. Epstein’s death.”

Epstein was placed on suicide watch last month but then taken off within about a week, a person familiar with the matter who spoke on the condition of anonymity told The Washington Post. But he was subject to higher security in a special housing unit.

Because Epstein is dead, the criminal case is over, but that doesn’t mean all investigations surrounding the allegations will cease, said Paul Butler, a professor of law at Georgetown University and former federal prosecutor.

He said investigators may now turn to others who were accused of being involved with the sex-trafficking activities. According to Butler, this is partly because accusers feel they haven’t received justice.

“Even though the criminal prosecution of Mr. Epstein ended this morning, there remained questions about co-conspirators,” Butler said.

Attorneys representing some accusers said they will continue to seek justice.

There’s a whole network that enabled him and allowed this to happen, and it’s time that everyone who was a part of this be held accountable,” said Kimberly Lerner, an attorney for one of Epstein’s accusers.

Jennifer Araoz, Lerner’s client and one of the women who has accused Epstein, said in a statement that she and others will have to “live with the scars of his actions for the rest of our lives, while he will never face the consequences of the crimes he committed — the pain and trauma he caused so many people.”

“Epstein is gone, but justice must still be served. I hope the authorities will pursue and prosecute his accomplices and enablers, and ensure redress for his victims,” Araoz said.

Brad Edwards, a lawyer who represents some of the other alleged victims said: “The fact that Jeffrey Epstein was able to commit the selfish act of taking his own life as his world of abuse, exploitation, and corruption unraveled is both unfortunate and predictable. While he and I engaged in contentious legal battles for more than a decade, this is not the ending anyone was looking for. The victims deserved to see Epstein held accountable, and he owed it to everyone he hurt to accept responsibility for all of the pain he caused.”

How are lawmakers reacting?

Lawmakers on both sides of the aisle reacted to Saturday’s news with frustration and sadness. Reactions were especially strong from New York and Florida, where Epstein had residences and allegations were made.

Rep. Alexandria Ocasio-Cortez (D-N.Y.) tweeted: “We need answers. Lots of them.”

Rep. Frederica S. Wilson (D-Fla.) said the “victims have once again been denied their day in court.”

Sen. Rick Scott (R-Fla.) said in a statement on Saturday: “The victims of Jeffrey Epstein’s heinous actions deserved an opportunity for justice. Today, that opportunity was denied to them. The Federal Bureau of Prisons must provide answers on what systemic failures of the MCC Manhattan or criminal acts allowed this coward to deny justice to his victims.”

Sen. Rick Scott (R-Fla.) said in a statement on Saturday: “The victims of Jeffrey Epstein’s heinous actions deserved an opportunity for justice. Today, that opportunity was denied to them. The Federal Bureau of Prisons must provide answers on what systemic failures of the MCC Manhattan or criminal acts allowed this coward to deny justice to his victims.”

Rep. Lee Zeldin (R-N.Y.) said on Twitter he couldn’t “even begin to imagine how many horrific secrets this sick perv is taking to the grave.”

Sen. Ben Sasse (R-Neb.) wrote in a letter to Barr: “Every single person in the Justice Department — from your Main Justice headquarters staff all the way to the night-shift jailer — knew that this man was a suicide risk, and that his dark secrets couldn’t be allowed to die with him. Given Epstein’s previous attempted suicide, he should have been locked in a padded room under unbroken, 24/7, constant surveillance. Obviously, heads must roll.”

Rep. Jerrold Nadler (D-N.Y.) tweeted he was “pleased the @TheJusticeDept Inspector General and FBI will be investigating. There are many questions that need to be answered in this case.”

On Saturday afternoon, Trump retweeted conspiracy theories that blamed the Clintons for Epstein’s death. Earlier in the day, Trump appointee Lynn Patton, an administrator at the U.S. Department of Housing and Urban Development (HUD), similarly targeted Hillary Clinton in an Instagram post.

What do we know about the Metropolitan Correctional Center, where Epstein was found dead?

The Metropolitan Correctional Center in Manhattan has held various criminals, ranging from Bernard Madoff, who orchestrated an enormous Ponzi scheme, to notorious drug lord Joaquín “El Chapo” Guzmán. In June, former Trump campaign chairman Paul Manafort was moved to the MCC, The Post reported.

According to Ahmed Khalfan Ghailani, an al-Qaeda conspirator, the prison at Guantanamo Bay was “more pleasant” and “more relaxed” than the federal facility, the New York Times reported in 2010.

What do we know about suicide in jail?

Suicide is the most common cause of death in jails, where 50 of every 100,000 inmates died by suicide in 2014 — a rate 3.5 times that of the general population, the Associated Press reported. High rates of addicted and mentally ill people behind bars are believed to contribute to the problem, as well as possible poor treatment of inmates and the stress of being incarcerated.

Among the most high-profile inmate suicides in recent years is the death of Sandra Bland, a Texas woman whom police say they pulled over in July 2015 because she failed to signal while she changed lanes. Authorities said Bland, 28, hanged herself within three days of being arrested on a charge of assaulting an officer.

In the year after Bland’s death, at least 815 people died by suicide in U.S. jails, HuffPost reported. Suicides accounted for nearly one-third of the jail deaths counted by the news organization, which said its numbers were incomplete because of lack of access to data.

Former deputy attorney general Rod J. Rosenstein said Saturday on Twitter that preventing self-harm by people accused of pedophilia is difficult. A report in the journal Federal Probation that he posted says defendants charged with sex crimes often experience suicidal ideation because of shame and the likelihood of a prison sentence.

The report cites a suicide prevention program in the Central District of California that involves a psychological assessment, support group sessions, cognitive behavioral therapy, lessons on healthy coping skills and education about the federal prison system. None of the 100 defendants that had gone through the program when the report was released had died by suicide.

In addition to whether a defendant is a flight risk and the likelihood that they will commit criminal activity, the report said, judges should consider the risk of suicide when deciding whether to grant someone pretrial release.