Monthly Archives: March 2020

Ready or Not, Here Comes the Recession

The U.S. economy is heading into recession. Washington politicians are trying to prevent this but a prolonged period of negative growth appears inevitable. What should we expect?

The Coronavirus pandemic has impacted the economy: the stock market (DJIA) has fallen about 7,000 points; there’s been a huge spike in unemployment claims; and economists are predicting that the U.S. economy will have negative growth for at least the next two quarters — the technical definition of recession.

Both Democrats and Republicans worry about the recession.  Congress is on the verge of passing a massive ($2 trillion) stimulus bill.

Meanwhile, Donald Trump is toying with the notion of declaring (premature) victory over the Coronavirus and broadcasting that “America is open for business.”  On March 23rd, Texas Lieutenant Governor Dan Patrick (R) argued that social distancing measures against the Coronavirus should be lifted to let Americans go back to work, even if it means older people becoming infected with the illness. “Those of us who are 70+, we’ll take care of ourselves but don’t sacrifice the country…  We all want to live with our grandchildren as long as we can. But the point is our biggest gift we give to our country and our children and our grandchildren is the legacy of our country, and right now, that is at risk.”  ( )  There’s an emerging conservative stance that values stock-market gains over American lives.

Meanwhile, three factors have pushed the economy into recession: unemployment produced by the Coronavirus pandemic; collapse of the oil market; and perforation of the corporate debt bubble.

1. Unemployment resulting from the pandemic.  On March 23, St. Louis Federal Reserve president James Bullard warned that the U.S. unemployment rate could hit 30 percent in the second quarter. On March 26, the Department of Labor announced that a record 3.3 million Americans had registered for unemployment benefits (

Unemployment will play out differently throughout the country.  On March 25, California Governor Newsom reported that, since March 13, one million Californians had applied for unemployment insurance.  Golden State economists say the hardest hit economic sectors will be hospitality and food services, and transportation.

In terms of contribution to California’s GDP, the largest sector is “Finance, Insurance, and Real Estate;” this sector, and “Construction,” will be certainly impacted by the pandemic, and by the concomitant credit crisis. California’s “Manufacturing” and “Publication/Media” sector’s have already been affected.  (in fact, all the sector’s will be impacted with the exception of “Government” and “Health Care/Social Assistance.”)

In Sonoma County, where I live, the biggest impact has been on the “Hospitality/Food Services” sector, which has, for the most part, shut down.   (Hospitality is the largest industrial sector in the County; it includes hotels, motels, vacation rentals, restaurants, wine tasting rooms and brewpubs.)  Outdoor recreation has also cratered.  As a result, the unemployment rate in Sonoma County is likely to spike to 20% or more.  (

In my small community, we all know someone whose business has shut down or whose friend or relative has lost their job.  Looking at the Bay Area, in general, we all know someone who was working a couple of jobs, in order to make ends meet — participants in the “gig” economy.  Typically, one of those jobs is now gone — such as driving for Uber.  For those who rented out a room or “granny unit” via Airbnb, this source of income has also dried up.

2. The collapse of the oil market.  On December 30, the price of a barrel of oil was $63.05; on March 26, the price had fallen to $21.90.  Forbes ( reported that some analysts expect the price to fall to $10 per barrel.

This abrupt change has dramatically affected the “Energy” sector.   While this has only a slight impact on the California economy, it has major consequences for Oklahoma, Texas, Wyoming, North Dakota, Alaska, and Louisiana.  (A recent Brookings study indicated: “The most exposed metro area nationwide is the oil-and-gas town of Midland, Texas, with 42% of its workforce in high-risk industries. Other major energy producers such as Odessa and Laredo, Texas as well as Houma-Thibodaux, La. also land in the top 10 most affected.”)

In other words, in parallel with the pandemic impact on economic sectors such as Hospitality and Transportation, much of the fossil-fuel energy sector is likely to collapse.

3. The perforation of the corporate debt bubble.  Recently the Financial Times ( reported:
“The shock that coronavirus has wrought on markets across the world coincides with a dangerous financial backdrop marked by spiralling global debt. According to the Institute of International Finance, a trade group, the ratio of global debt to gross domestic product hit an all-time high of over 322 per cent in the third quarter of 2019, with total debt reaching close to $253tn… A comparison of today’s circumstances with the period before the [2008] financial crisis is instructive… an important difference now is that the debt focus in the private sector is not on property and mortgage lending, but on loans to the corporate sector…  The rise is most striking in the US, where the Fed estimates that corporate debt has risen from $3.3tn before the financial crisis to $6.5tn last year.”

Corporations with excessive debt include Ford, Halliburton, Kraft-Heinz, and Macy’s.  Some banks are affected as are many corporations in the Energy sector.

What this means is that, aside from the impact of the pandemic, some U.S. companies will fail because of the collapse of the debt bubble.

Summary: On March 26, the Chairman of the Federal Reserve, Jerome Powell, said, “We may well be in a recession… The virus is going to dictate the timetable.”

On March 25, NYU Economics Professor Nouriel Roubini ( spoke of the timetable:

“[E]very component of aggregate demand – consumption, capital spending, exports – is in unprecedented freefall… The contraction that is now under way looks to be neither V- nor U- nor L-shaped (a sharp downturn followed by stagnation). Rather, it looks like an I: a vertical line representing financial markets and the real economy plummeting….Not even during the Great Depression and the second world war did the bulk of economic activity literally shut down, as it has in China, the US and Europe today.”

Hold on tight, we’re entering rough water.

The Pandemic Election: 10 Predictions

The first U.S. Coronavirus case was reported on January 20th. Since then, 19,155 Americans have tested positive and 250 have died. There are many consequences of this pandemic but it’s sure to affect the 2020 presidential election. Here are ten predictions.

1.The Coronavirus pandemic will not be over quickly and, therefore, it will affect the conduct of the presidential election.  The Democratic convention is scheduled to open July 13th.  It seems unlikely that it will convene in its normal form.

Recently, Donald Trump stated that he expects the pandemic to go on until “July or August.”  Some experts believe it may go for a year or more — until a vaccine is developed to deal with the Coronavirus.  Therefore, it’s likely that the pandemic will be with us for, at least, the next six months and dramatically affect the conduct of the presidential election.

2. The pandemic will affect the economy.  It’s obvious that the Coronavirus pandemic will impact the economy: the stock market (DJIA) has fallen over 10,000 points; there’s been a spike in unemployment claims; and economists are predicting that the U.S. economy has slipped into a recession — with negative growth for at least the next two quarters.

To say the least, times are dire.  Americans have to fear the Coronavirus and the collapse of our economy.  (It seems the two are intertwined; the economy will not recover until the course of the pandemic is more predictable.)

Obviously, this recession will be fodder for the 2020 election.

3. All aspects of the Republican and Democratic political campaigns will be impacted by the pandemic and recession.  We’ve already seen the end of political rallies and conventional — press-the-flesh — fundraisers.

At the same time the Coronavirus crisis has deepened, Joe Biden has emerged as the presumptive Democratic candidate. In the meantime, Donald Trump is on the news each morning, playing the role of “wartime President” in the daily Coronavirus press briefing.  The question for Biden is how can he get a reasonable amount of media time.

4. The format of the political conventions will be altered.   The Democratic convention is in July and the Republican convention will occur in August.  It’s unlikely that the pandemic will have sufficiently abated to permit these event to go forward in their usual manner; no doubt there will be “virtual” conventions.

There are all sorts of logistical issues to be solved in the virtual convention format: how will votes be counted?  How will typical convention items — such as the Party platforms — be determined?

5. Some prominent politicians will be infected.  Two members of the House of Representatives have tested positive for the Coronavirus and approximately twenty others are in “self-quarantine.”  (  At least one member of the White House staff has tested positive and others are in self-quarantine.

It’s only a matter of time before a major American political figure tests positive for the Coronavirus.  When this happens, it’s conceivable that the course of the election may be impacted.  (For example, a Senator — up for reelection — may be stricken.)

6. Congress will change the way it votes.  At the moment, Congressional votes require Senators or Representatives to come to the floor of their respective chambers.  It’s highly likely that these rules will change, permitting members of Congress to vote without leaving their regional offices.  (Obviously, this change has security consequences.)

7. Both the Biden and the Trump campaign will be impacted by the pandemic.  The crisis will particularly hurt Donald Trump ( ): a. The state of the economy had worked in Trump’s favor but now the economy has gone into the tank.  b. Trump has done a terrible job handling the pandemic and this will hurt him in the polls. c. The current situation emphasizes the need for an improved healthcare system and Trump has taken many actions to undermine the current healthcare system.  In addition, moving the presidential campaign into a virtual format will hurt Trump because it will deprive him of his big rallies.

On the other hand, Trump has amassed a war chest of millions of dollars intended to go after the Democratic candidate via social media.  This strategy could give Trump a huge head start over Biden.

8. Biden and Trump will definitely debate.  The first presidential debate is scheduled for September.  Before the pandemic hit, Trump was making noises that suggested he would not debate the Democratic candidate.  (  Now he doesn’t have a choice.  At the moment, Real Clear Politics shows Biden with a 7.4 percent lead over Trump and, as the pandemic/recession plays out, the gap will widen.  Trump will complain about the debate format and moderator, but he will be forced to debate.

9. The debate issues will be shaped by the pandemic.  If the presidential debate were to be held today, the issues would be the economy, healthcare, and presidential leadership.  Biden would have the advantage.

10. The format of the November election will be impacted by the pandemic.  On November 3rd, it’s likely that vast swaths of the United States will still be under orders to “shelter in place.”  This means that most states will have to offer residents the choice of voting by mail.  (29 states already permit some form of voting by mail.)

Or maybe I’m wrong.  Perhaps this will all be over in a week.  In any event, we should hope for the best and prepare for the worst.  Stay safe.

Joe Biden: Pro and Con

Wow! Over a four day span, stretching from the South Carolina Democratic Primary to the conclusion of “Super Tuesday,” Joe Biden vaulted from the position of a marginal Democratic presidential candidate to the frontrunner. The 538 website now predicts that Biden has a 93 percent chance of winning the Democratic nomination.  Here’s my assessment of Biden’s pros and cons.

The latest Real Clear Politics summary of national polls shows Biden beating Trump by an average of 6.3 percent.  Nonetheless, we remember all too well that Clinton led Trump throughout a long and agonizing campaign and then lost the election, courtesy of the electoral college.  Uncle Joe can beat Trump but it’s far from certain.

Pros.  1. Electability: After the South Carolina primary, it was clear to most Democrats that the race for the nomination had narrowed to four contenders: Biden, Bloomberg, Sanders, and Warren.  Before Super Tuesday there was a massive shift towards Biden, primarily on the basis of electability; late-deciding voters preferred Joe.  (

Bloomberg appeared to lose favor after being savaged by Elizabeth Warren in the February 19th Democratic debate.  As for Senator Warren, she never broke into the top tier in any of the early Democratic contests — there are a lot of theories about why this was the case, but the simplest explanation is that she was the victim of sexism; most Democratic males did not take her candidacy seriously.

Given this, why did late-deciding voters break for Biden rather than Sanders?  Probably because of the Coronavirus pandemic: Democrats wanted a steady hand on the wheel and decided that, because of temperament, their choice would be Joe Biden rather than Bernie Sanders.

2. Broad Coalition:  Exit polls from the March 10th Michigan Democratic Primary, showed that Biden assembled a much broader coalition than did Sanders.  Biden carried women, African-Americans, white men (with college degree and without), and “mainstream” Democrats; Sanders strongest categories were young voters (18 to 29) and those defining themselves a “very liberal.”

3. Coattails: There is a broad perception, among Democratic voters, that Joe Biden will have stronger coattails than Bernie Sanders.  Democratic candidate Michael Bloomberg made this assertion: “Bernie Sanders would ‘jeopardize’ the re-election of 42 House Democrats in battleground districts and therefore the party’s majority rule of the chamber if the self-described Democratic socialist becomes the party’s nominee for president.”

In 2020, Democrats have to take back both the Presidency and the Senate.  If “Moscow Mitch” McConnell remains Senate Majority Leader, he will block most Democratic legislative initiatives.  From here, the contested Senate seats are: Arizona, Colorado, Georgia, Maine, and North Carolina.  (Democrats have to win four.)

Consider the situation in Arizona, where there’s a contested Senate seat now held by Republican Martha McSally — a Trump acolyte.  In the 2020 Arizona Senatorial election, she’ll be opposed by former astronaut Mark Kelly — husband of former U.S. Representative Gabby Giffords.  In 2016, Arizona narrowly went to Trump.  At the moment, Biden and Trump are even in Arizona; Trump is ahead of Sanders by seven percentage points.  (In the other states, Biden consistently outperforms Sanders in a head-to-head contest with Trump.)

Cons.  1. Mental Acuity: Biden has long had a reputation for gaffes.  (Just recently, he told a Detroit gun enthusiast that he was “full of shit.”)  Part of the problem has been that Biden tends to be longwinded, and go off script and this creates the opportunity for gaffes.  Recently, Biden’s speeches have been more disciplined.  ( )

In the general election, Trump will probably attack Biden’s mental health (  After Super Tuesday, Trump tweeted: “Then we have this crazy thing that happened on Tuesday, which [Biden] thought was Thursday, but he also said 150 million people were killed with guns and that he was running for the United States Senate. There’s something going on there.”  Look who is talking about mental health!

Biden has always been gaffe-prone.  As long as he stays on script, Uncle Joe’s mental health shouldn’t be an issue in presidential contest.

2. Insider Status: Bernie Sanders has attacked Joe Biden as the consummate Washington insider.  In 1972, at the age of 30, Biden became Delaware’s U.S. Senator and served in the Senate for the next 36 years, leaving when he became Vice President in 2009.

Of course, Sanders and Trump paint themselves as populist outsiders who intend to “drain the swamp.”  (Trump has little to show for this pledge.)

Because of the Coronavirus pandemic, most voters want a steady hand on the wheel of state and are likely to consider Biden’s long Washington experience as a plus, as an indication that he knows how to implement the programs required to deal with this emergency.

3. Track Record: Because Joe Biden has 44-year record of service, as Senator and Vice-President, he’s been involved in a lot of legislation: some good and some not so good.  For example, Sanders and Trump have attacked Biden because he voted for NAFTA.

In normal times, Biden’s track record might be a problem for him but these are not normal times.  And Donald Trump has a track record, too; a record of broken promises and bungled initiatives.  (For example, we remember Trump’s campaign promise to invest $550 Billion in America’s infrastructure.)

Bottom Line:  This has turned into a confidence and competency election.  Biden leads Trump on both of these factors.