Congress returned for its lame duck session and faces a December 7 deadline to pass a spending bill to avoid a partial federal government shutdown. However, deeper economic rumblings presage more difficult times ahead, and there is a new tweeter in town.
General Motors stunned its workforce – and the White House – with a pre-holiday announcement that more than 14,000 employees will be laid off and five factories (four in the United States and one in Canada) will be shuttered. The news undermines President Trump’s boast that his economic policies will bring manufacturing jobs back to America. GM said it was restructuring as Americans abandon passenger cars and Trump’s tariffs eat into profitability.
Trump is threatening to shut down the US-Mexican border over continuing attempts by thousands of migrants to enter the United States and seek asylum. Even though US law permits migrants to enter the nation legally at ports of entry and apply for asylum, Trump is trying to prevent them from gaining entry, including use of force such as tear gas. A complete shutdown of the border would have severe economic consequences on the daily $1.7 billion movement of goods between the two countries.
A longer-term threat involves the United Kingdom’s unexecuted exit from the European Union. Prime Minister Theresa May has negotiated a complex pull-out deal that still must be approved next month by the British Parliament, which is not a foregone conclusion. Trump weighed in and undercut May’s bargaining position by raising doubt the agreement with the EU would permit a US-British bilateral trade deal, something the prime minister has touted as a positive payoff for Brexit. British officials deny the EU-exit agreement bars Britain from entering into bilateral trade deals.
The United States is still on a glide path to impose even more tariffs on Chinese goods on January 1, which would likely result in reciprocal tariffs on US exports to China. Trump trade officials insist China must act to end what amounts to an escalating trade war. Ahead of a summit this week, Trump’s officials also poured cold water on a suggestion that the G20 group of industrialized nations could play a role in resolving the dispute. For its part, China says it is opening up key markets such as banks, automobiles, aircraft, telecommunications and medical. It calls many US demands “unrealistic.”
While no one is exactly predicting an economic downturn, there are some cracks surfacing in the current economic boom. The US stock market has plunged from its dizzying record heights. There has been a slight uptick in unemployment filing. Interest rates continue to inch up, which could cool hot housing markets. Millennial trends away from car and homebuying are beginning to disrupt traditional industries and their extensive supply chains. In addition, China’s economy may be weaker than most economists thought. All of which suggests the international economy may be fragile and capable of slowing US economic growth.
Another drag on the US economy is higher-than-promised national deficits, mostly attributable to the GOP-backed tax cut. The beneficial effects of the tax cut may be mostly used up as the country heads into a new year.
In January, Democrats regain control of the House, which may add more complications to charting an economic path to avoid a downturn.
Then there is Congresswoman-elect Alexandria Ocasio-Cortez, who as the youngest member of the new Congress is already stirring the DC pot with Twitter posts about Medicare-for-All, a Green New Deal, immigration and reducing student college loan debt. She has fended off criticism from conservatives, who have singled her out because of her potential political stardom. She has tried to avoid irking Democratic leaders while still extoling her more left-leaning positions (she announced she will vote for Nancy Pelosi as Speaker). She has traded tweets with Senator Lindsey Graham and the tweeter-in-chief.
Ocasio-Cortez, who started the year working bar in New York, is part of a wave of more diverse congressional newcomers, but her quick rise to political prominence – matched by her quick wit and knowledge of social media – make her a force beyond her years, experience or congressional seniority.