The good news is. the director of the White House’s National Economic Council believes there’s no recession in sight. The bad news is, the director of the White House’s National Economic Council is Larry Kudlow.
Speaking to reporters outside the White House, the former Reagan associate budget director told reporters, “I’m reading some of the weirdest stuff [about] how a recession is right around the corner – nonsense. My personal view? Our administration’s view? Recession is so far in the distance I can’t see it.”
The public should certainly hope that Kudlow – the top voice on economic policy in Donald Trump’s White House – is correct and that the economy, which is currently healthy, stays that way. There are, however, a couple of reasons for skepticism.
The first is that Larry Kudlow, who is not an economist, has an extraordinary track record for being hopelessly wrong. Jon Chait had a great piece on this a couple of years ago, documenting Kudlow’s uninterrupted track record of failed economic predictions, starting with his insistence in 1993 that Bill Clinton’s agenda would “depress the economy’s long-run potential to grow.” A lengthy economic boom soon followed.
Kudlow than sang the praises of the Bush/Cheney economic agenda, denied the existence of the housing bubble, and as the Great Recession began, Kudlow assured the public, “There’s no recession coming.” He was equally wrong in the Obama era.
It was at this point that Donald Trump thought it’d be wise to make Kudlow the top voice on economic policy in his White House, and it’s from this perch that he’s assuring Americans that an economic downturn “is so far in the distance I can’t see it.”
But even if we overlook Kudlow’s embarrassing predictive record, there are some other yellow lights to contend with. The New York Times reported overnight:
The stock market’s struggles may seem incongruous against the backdrop of strong economic growth. But stocks often act as an early warning system, picking up subtle changes before they appear in the economic data.
In recent weeks, retail stocks have been hit over concerns of rising costs, a sign that President Trump’s global trade battles may be starting to take a toll and that higher wages are cutting into profits. Commodities and the companies that depend on them have been pummeled by the prospect of weaker demand should the global economy slow. Five tech giants – Facebook, Amazon, Alphabet, Apple and Netflix – have shed more than $800 billion in market value since the end of August, the fallout from slowing growth and regulatory scrutiny.
The Washington Post’s Matt O’Brien had a related piece yesterday, noting some of the reasons “there really might be a recession in 2020.”
To be sure, we’ve seen similar concerns more than once in recent years, and so far, the recovery that began soon after Barack Obama took office has persevered. We can obviously hope it continues.
But I wouldn’t take Larry Kudlow’s word for it.