Democrats Will Be Punished for Republicans’ Mistakes
No, it’s not fair.
1. The R-Word
William Cohan has a long discussion about our near-term economic future:
The White House is supposedly sweating next week’s G.D.P. data, as well they should, but does it really matter if we’re in an official recession, or not? I don’t think so. If inflation is raging along at 9 percent annually and G.D.P. is in decline, the question is what will the American people actually feel? Higher prices for nearly everything or some amorphous sense that our gross domestic product has fallen two quarters in a row? Hence the Biden administration’s new talking points, previewed in this White House blog post, that notes “there are no fixed rules” for determining a recession.
What will be far more telling than a secular decline in G.D.P. will be rising unemployment, job cuts at big tech companies or at Wall Street banks, and a general sense that it will be increasingly more difficult to find a job and to avoid being laid off from a job you have. New filings for unemployment claims last week were the highest since November, although not much ink was spilled about this turn of events. . . . You can’t have more than a decade of risk being mispriced, courtesy of the ZIRP-style policies of our central bank, and expect there to be no consequences, or few consequences.
That emphasis is mine, but it’s something I keep coming back to: Joe Biden is going to get blamed for this economy.1 That’s just reality. But whatever you want to call this thing happening now, the responsibility for it starts with the Fed and the former presidents who increased spending even during the boom cycles. The American Rescue Plan’s $1.9 trillion stimulus isn’t what did this.
Anyway, back to Cohan doing his impression of the philosopher Clubber Lang2:
Unless the Fed has tricks up its sleeve that we have never seen before, we are closer to having to endure a Paul Volcker-like interest-rate cycle (of the extended double-digit variety) than we are to a near-term return to anything like the low-interest rate environment that the Fed engineered between 2009 and early 2022. With the annual inflation rate now close to double digits, what will it take for real interest rates—the interest rate that investors need to overcome the effects of inflation—to be positive? Wouldn’t that require the yield on the two-year Treasury to be closer to 10 percent than the 3 percent yield it has now? That’s a 700-basis point increase. How many Fed rate hikes will it take before we get anywhere near there and what will the consequences of that be? You want a recession? That will get you a recession.
The choices are stark: either more of the inflation rate that has been the highest in 40 years or a bona fide recession that will lower prices, lower demand, lower profits and lower employment. This is the table the Fed set with its 13-year addiction to low interest rates that was then exacerbated by events beyond its control—a pandemic that interrupted many supply lines and a war in Europe that pushed the price of fossil fuels to historic levels without any substitutes to reduce demand for those fossil fuels. I am not sure how the Fed engineers this landing. It seems to be in hope-and-pray mode now.
700 basis points? I doubt there are many people in America prepared for what that would look like. Yikes.
Anyway, Cohan then moves on to the question of the stock market, which keeps rallying. Despite everything:
The Wall Street Journal quoted a funny line from a money manager last week about how “in order for the stock market to live, Cathie Wood has to die”—that a new bull market can’t begin until investors finally capitulate. Instead the market is trending back up this month, thanks to generally better-than-expected corporate earnings. It’s enough to make one wonder: Are we in for another 2000-2003 style correction, where the Nasdaq gave us eight false-hope rallies before finally finding the bottom? . . .
Until investors capitulate to the bear market, as they did in and around March 2009, when the Dow Jones Industrial Average reached 6500, we’ll have to wait longer for a genuine opportunity to restart the stock-market engines. The Dow is just shy of 32,000 at the moment, merely 14 percent of its all-time high. It’s worth remembering that in October 1987, the Dow fell 22.6 percent in one day. So we’re still far from that kind of capitulation.
The fact that Wood, who has rightly earned her spot as the poster child for investing excess in the past five years, has managed to attract some $2 billion in new money is all the proof you need to know that investors are in “buying the dip” mode rather than “capitulation” mode.
Read the whole thing. It’s worth subscribing to Puck just to get Cohan. He’s very smart.
I wish I had something positive to say here, but I don’t. The economics of this moment are not great. The politics of it could be murderous for Democrats.
If they somehow manage to hold Republicans to modest gains in the House (meaning < 30 seats) and keep the Senate, it will be nothing short of a miracle and a signal of something important.
2. The Law Is the Law
Ian Bassin and Erica Newland have a long, interesting piece in the NYRB about Merrick Garland’s responsibilities:
On the afternoon of August 30, 1974, President Gerald Ford gathered four of his top advisers in the Oval Office. “I’m very much inclined,” he told them, “to grant Nixon immunity from further prosecution.” For the previous twenty-one days, since Richard Nixon’s resignation, Ford had been playing a game of chicken with Watergate Special Prosecutor Leon Jaworski over Nixon’s legal fate. Jaworski had long since concluded that Nixon had engaged in criminal acts. But should he be prosecuted, or would abstaining better serve the interests of national healing? That was a question Jaworski felt Ford, rather than he, should answer.
Oddly, no similar standoff exists today. All eyes are on how Attorney General Merrick Garland will resolve the question of whether Donald Trump should be prosecuted for his role in trying to overturn the results of the 2020 election, which led to the insurrection on January 6. But that singular attention is misplaced. As in 1974, the Department of Justice has a responsibility here, but so does the president, and neither may interfere with the other. The president cannot tell the department whether or not to indict. And if the department determines there is sufficient evidence to convict Trump of criminal acts and the principles of federal prosecution counsel in favor of an indictment, DOJ has no jurisdiction to do anything other than indict. It would be beyond its proper powers to weigh whether indicting would be in the national interest. That is a decision reserved to the president through the power to withhold or issue a pardon. . . .
However, the former Justice Department official Jack Goldsmith, among others, has argued that prosecuting a former president requires the attorney general to ask a further question, not included in the Justice Department’s instructions: “whether the national interest would be served by” doing so. “This is not a question,” Goldsmith adds, “that lawyerly analysis alone can resolve. It is a judgment call about the nature, and fate, of our democracy.”
But precisely because that question cannot be answered by “lawyerly analysis alone,” it is a mistake to make the attorney general responsible for answering it. “Whether the national interest would be served by” prosecuting a former president is, as the Watergate prosecution team recognized, fundamentally not a legal question—the principles of federal prosecution offer no guidance for answering it—but a political one. It is, in other words, a values-based question about how government can best advance what George Washington called the “public good.” “The only factor (apart from matters of health) preventing the prosecution of a case with evidence of serious criminality as strong as that which we had against ex-President Richard Nixon would be political in nature,” the former Watergate prosecutor Richard Ben-Veniste told us in an interview. “Such a decision would not be in the province of the prosecutor, but rather would rest in the pardon power that can be exercised only by the president.”
This is true not only because of the presidency’s greater capacity to balance all the political interests at stake, but also because the president, not the attorney general, is directly accountable to the people.
Over at the Reddit Bulwark community (r/theBulwark) I’ve been criticized by readers for suggesting that Garland choosing to prosecute Trump followed by Biden choosing to pardon him might be the best of a batch of very bad outcomes.
The reddit response has been that such a choice would split the Democratic party and cause Biden to lose the 2024 election.
That is absolutely one possible—even likely—outcome and I would view it as a very bad one.
But here are three other possible outcomes:
(1) Garland declines to prosecute, establishing that sitting presidents can attempt coups.
(2) Garland prosecutes and establishes a precedent that the DoJ can use criminal law against former presidents and current candidates for president—a precedent which I would not trust a Trump or DeSantis administration not to abuse wildly. This would be the case irrespective of whether or not a jury convicts Trump.
(3) Garland prosecutes and a jury acquits Trump—thereby establishing for a fact that the law is impotent and incentivizing future presidents to pursue the same actions Trump took.
These aren’t the only three possible outcomes, but they do seem to be the most likely.
Compared with them, Biden losing re-election because a pardon splits the Democrats seems like it might be both (a) the least-terrible and (b) the easiest for the country to recover from. It’s an imperfect analogy, but Republicans recovered from Nixon’s pardon pretty damn quick.
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Okay, now back to the Triad.
Like with ZIRP and our economic situation today, it would be supremely unfair for Biden and Democrats to suffer consequences from pardoning Trump.
But this is what happens when systems break down.
Our system is supposed to prevent guys like Trump from getting anywhere near power.
If a guy like Trump gets into power, the system is supposed to act like a circuit breaker preventing him from doing anything dangerous.
If the guy does something dangerous, the system is supposed to remove him from office.
And if the system doesn’t remove him from office, the assumption in a functioning democracy is that the public will so recoil from such a man and his actions, that he could not possibly return to power.
Our party system allowed Trump in the door. Or governing system mostly let him do what he wanted, with a few notable exceptions.
The legislative system declined to remove Trump from office twice, thus proving that the Constitutional mechanism for disciplining chief executives has become a dead letter.
And the entire system’s final authority—the people—are entirely open to returning Trump to power, despite (or maybe even because of) everything.
We are in this place because every aspect of our political system has failed except for Joe Biden and the Democrats.
Yet because the current president and his party are still functioning little-d democratic actors, they have to shoulder the responsibility and the consequences for what comes next entirely on their own.
3. Famous Last Words
Instead of a longread, I’m giving you a reddit thread to peruse, because it delighted me: What is your favorite last sentence in a book?
I’ve seen lists of best first sentences or favorite quotes, but what is the best final sentence of a book that you’ve ever read? Maybe it’s just a great line, maybe it’s great in respect to the story, or maybe it just connected with you.. but what is your favorite? Mine is cliche, but it has to be the one from The Great Gatsby: “So we beat on, boats against the current, borne back ceaselessly into the past.”
Too many posters responded with Return of the King or The Hobbit, because this is reddit. But there were also some great entries:
"All human wisdom is contained in these two words, 'Wait and Hope.'" —The Count of Monte Cristo
"Then all collapsed, and the great shroud of the sea rolled on as it rolled five thousand years ago." —Moby Dick
“Isn’t it pretty to think so?” —The Sun Also Rises
Give me your favorites in the comments. I’m not sure I have single favorite, but “Only connect” is on my list.
Here’s me tilting at windmills in May talking how Biden’s ARP caused inflation: “[A]s if that one bill, on top of decades of free money, other federal stimuli, and massive tax cuts and deficit spending that goes back at least to 2001—is what tipped over the economy.”
Clubber Lang: “My prediction? Pain!”