The Politics of Recession

Andrew Deerin

SignalCast sat down with Charles Cooper and Elizabeth Northrup to discuss the potential of a recession and best practices for client preparation.

 

SIGNALCAST: Welcome to SignalCast, the podcast from Signal Group. Signal is a bipartisan, modern, public affairs firm located in Washington, DC. As always, I’m your host, Andrew Deerin, Creative Director at Signal.

SC: The United States is in the second longest economic expansion in 50 years. So does that mean we’re due for a downturn, or, even worse, the dreaded R word? And if so, how does that shape the focus of Congress, the administration and the 2020 election? On today’s show, I’m joined by two of my Signal colleagues, Charles Cooper and Elizabeth Northrup. Charles is a Managing Director and heads up our advocacy practice and Elizabeth, also a Managing Director, is the co-lead of our communications practice. I feel like we really brought out the big guns for this episode. Nice job guys and welcome to the SignalCast studios. So I guess my first question would be are we headed for a recession?

ELIZABETH NORTHRUP: Andrew, I think that Charles and I would both state very clearly that we are not economists, and so we can’t state definitively if we are heading for a recession. But what we can look at is that there are a number of economic indicators, as well as what economists, pundits, political candidates, the media and others are saying. And we can look at what happened in 2008 leading up to the great recession, and what we’re seeing right now, and give some analysis of what we think our clients and others should be looking at as insights that they can take to insulate themselves against the potential of an economic downturn.

SC: So now that Elizabeth has given us the disclaimer, what do you think Charles? Do you think we’re heading for a recession based on what you’re seeing?

CHARLES COOPER: I would agree. I think it’s a little tough to say. I think the reality from our perspective, where we’re dealing with clients all the time that are responding to the policy and political climate, there’s certainly a lot of talk about a recession or a weakening economy. And so regardless of whether one happens or not, we’re spending a lot of time scenario planning with our clients in case there is one or in case the economy weakens.

SC: Well, I mean economies are always cyclical. I mean, everything’s up, everything’s down, things go up, things go down. So inevitably something is on the horizon just based on the history of really the world. I mean it goes up and things go down. But, we are exactly a year out from 2020 so how do you see a potential recession, or even just an economic downturn affecting that election’s outcome?

COOPER: Well, I think that’s a good question. We are really close to the heat of the political season coming up in November. And it seems like a recession, or the potential of a recession, is really big news right now. And the reality is for political campaigns, there’s almost no bigger indicator of where people are going to be than the economy. People support candidates during a strong economy and they have concerns when the economy weakens. So up until this point, President Trump has enjoyed a very strong economy and I think he has taken a number of victory laps around the country talking about the strength of the economy. And for Democrats, especially those running for president, it’s been a little bit of a vulnerability for them. Now that there’s more talk of the potential that the economy’s weakening, I think you’re seeing more Democrats talking about the economy and seeing it as an offensive opportunity as opposed to something that is a defensive opportunity.

SC: So Elizabeth, from a communications standpoint, I mean, is it fair to say if Trump’s going to live by the economy, he can also die by it?

NORTHRUP: Absolutely. And one of the things that President Trump is already doing right now is he’s warning that an economic crash will be inevitable if he loses the election. So I think that he’s trying to, from a messaging standpoint, warn voters that, even if you don’t like him personally, if you’re going to vote with your pocketbook, you need to keep him in office.

SC: So I guess Charles, election aside, do you think a slowing or weakening economy would bring Congress to a grinding halt? I mean we’re currently sort of ramping up into this impeachment scenario, which I think will obviously have its own negative effect on pushing things forward. Is a potential recession or downturn going to even further hamper a Congress’s ability to get anything done?

COOPER: Well if you read polls or watch some of the news, I think people already think Congress has come to a grinding halt, which isn’t accurate if you just look at the numbers. But the easiest way to look at this, thankfully there’s been other case studies to look at when it comes to a weakening economy. So 2008 and 2001 are both good examples of a recession; the economy weakens, what does Congress do? And in both cases they turn to policy to try to provide a boost to the economy.

In 2001 and 2008 Congress passed and the president signed into law tax cuts and tax relief. In 2008 it was also paired with a much broader stimulus package, with 700 plus billion dollars in stimulus funding for short term projects. After that, in 2008 Congress passed both the Dodd Frank Bill, which was sort of regulatory reform as well, as a bill that people now refer to as sort of a bank bailout in response to some of the structural problems that happened in 2008. But the reality is Congress doesn’t sort of come to a grinding halt. This is when Congress steps up and needs to be a solution provider to some of the economic problems. And that’s what we’ve seen in both 2001 and 2008.

SC: Now Republicans used the Democratic sort of bail out and response to the 2008 Great Recession as political talking points. So what happens now that the Republicans are in charge? Do they just become scared that anything that they do to try and help whatever happens is just going to get used against them? How can we come together? Is there a bipartisan way to approach this kind of relief?

COOPER: Well, clearly in the political dynamic that exists today, where you have to have bipartisan support and the President of United States on board with anything that goes through Congress, it will have to be bipartisan. So there will not be partisan solutions, recession or no recession. Partisan solutions will never make it to the President’s desk period, unless the elections dramatically change that.

So I would anticipate that this is actually a time where Congress will come together on some issues. They may not agree on everything, but during times of a weakened economy, every district has a reason and a priority for their members of Congress to be for solutions that help the economy, and the president as well. So for example, the president has already come out and talked about maybe the need for some tax relief to help strengthen or protect the economy. Congress has indicated the same in the past. So we anticipate not that tax relief is the only policy mechanism out there, but it’s certainly indicative of the fact that a lot of policy makers are going to be thinking about what the policy response should be, and in today’s climate it will have to be Republicans, Democrats coming together.

SC: Now you both were a part of a really interesting webinar that you guys did last week on this topic, and one of the things that I thought was certainly an interesting insight Elizabeth from your side of things is that you see a difference between sort of the media’s approach to the 2008 recession. What are you seeing different now or what do you think is going to be sort of different about the media’s approach to how they cover this event, whether it happens or not?

NORTHRUP: Absolutely. There is a very different approach that’s happening now versus 2008. And one of those reasons is because President Trump is out talking very publicly blaming the media as well as the Federal Reserve for fears of a recession. And what I mean by that, Andrew, is that in 2008, there were a number of factors leading up to the Great Recession, and one of those was when Lehman Brothers shut down and failed after a rescue, a failed rescue attempt by the US Treasury and Federal Reserve. And it was at that moment in time, that was this watershed moment, that you really saw business journalists rally and start covering and talking about the recession and taking center stage. At a point where typically it had been their other colleagues, who were political reporters, who were doing this. But very quickly what happened is that these same reporters were being criticized for not getting out there and reporting on this earlier.

So here we are, fast forward, we’re seeing reporters who don’t want to be criticized in the same way, and they are out there talking about the potential of a recession earlier than they did in 2008. And what we have to look at is whether that reporting is an alert for us to start taking notice of what’s going on, or is it somehow pushing a recession in a way that would not have had without the reporting there.

SC: They’re causing the hysteria?

NORTHRUP: Exactly.

SC: So Charles, from a policy standpoint, I mean what are you guys seeing that’s different from 2008 to 2019?

COOPER: Well I think the main difference is clearly there were some structural challenges within the economy in 2008, but the response is something that I think we’re looking at as there’s only so many ways to provide some boost to the economy. And I had mentioned before how it seems consistent that people look to tax relief as a potential solution. The other thing that Congress has done in the past, I mentioned the stimulus package, they could move sort of some near term stimulus type projects, probably under a different name, but some near term projects that would help create jobs and boost the economy.

Obviously in 2008 the fed lowered rates eight times. They haven’t done so until this past August, where they lowered rates. So that’s another option beyond what Congress could do. And from the administration’s standpoint, there’s only so much a president can do without Congress. One thing that he has within his own authority is dealing with some trade issues, and obviously right now there’s a lot of talk around the tariffs and China and USMCA and a bunch of other stuff. He has the ability to sort of provide some urgency around some of those negotiations.

SC: I see. So you guys both head up your respective practices, Charles on advocacy, Elizabeth on communications. What are you advising Charles, your clients in terms of how to prepare for a possible recession?

COOPER: You know for, and I’m sure Elizabeth and I have somewhat similar answers on this, but from my perspective it’s first of all you have to plan. Just like for any scenario that’s out there, if you’re a company or organization that remotely cares about what’s happening in the federal government, you really need to be able to have a plan in place. The space will get really crowded really fast if the economy weakens. And organizations are not going to have an opportunity to sort of pop up at the 11th hour and say, “Hey, well this is something that we need.”

So step one is plan. I would say the second piece of it is, you really need to find priorities that are bipartisan. As I mentioned before, nothing is happening on a partisan basis, except for messaging bills that ultimately never reach to the president’s desk. And third, it’s when you’re thinking about what your priorities are, they really have to have a component of jobs and the economy in it. Whenever the economy weakens, the congressional focus and focus of all policy makers at all levels really is narrowly around increasing jobs and strengthening the economy. There’s a lot of policy priorities within that. And so we would advise people to make sure that, whatever their priorities are, that it’s both messaged and from a policy perspective fits narrowly within that category.

NORTHRUP: And Charles, I agree absolutely. One of the things that I would add, from a messaging standpoint, is that when we are talking about economics and numbers, it is sometimes not as compelling in telling the story as putting a human narrative and face on this. So for any client who has put together priorities that they feel are important to move in the face of a potential economic downturn, they need to be able to tell that story through the faces and stories of their employees, or of some way to put a humanizing impact on this, and not just make it about the numbers.

SC: All right, well guys, that’ll do it for today’s show. My thanks to Charles Cooper and Elizabeth Northrup for all of their insights into what may or may not lie ahead. Fingers crossed, the dollar stays strong and our 401ks forever rise. It sounds like maybe an Irish poem? All right. Anyway. For the entire production staff, I’m Andrew Deerin and we will see you next time.