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The Hillary Clinton Recession Is Going to Be Ugly

It won't be her fault: Republican obstructionism, internal divisions, and austerity fetishism will leave the next president no good options for dealing with a downturn.

Justin Sullivan/Getty Images

As this election mercifully stumbles toward its conclusion, liberals can’t help comforting themselves by pointing and laughing at the spectacle of the Republican crackup. Every insult flung between Donald Trump supporters and the party establishment, and every prediction of a post-Election Day split, fills Democratic hearts with glee. But for all the schadenfreude, it’s still fairly likely that the fractured Republicans will hold on to one house of Congress on November 8, if not both, even if Hillary Clinton performs like the polls expect and soundly wins the presidency.

And that raises a serious question: What if there’s a recession?

I’m not making a prediction here. Many economists put the prospects of recession in 2017 as unlikely, around a 1-in-5 chance. And there’s no rule that economic expansions have a definitive end date; they can theoretically go on for decades. At the same time, a lot can happen over the next four years, so it’s reasonable to wonder about the consequences of an economic downturn in the next presidential term. And from where I’m sitting, that next recession is going to be ugly.

It won’t be because of Clinton’s policies or her politics. It won’t be because she doesn’t know how to handle a recession. It’ll be because the next president will have fewer options than George W. Bush and Barack Obama had for dealing with the last one. And the Republican divisions the left loves to celebrate represent one big reason why.

The economy is considered to be humming along right now, but there are signs of trouble ahead. Just look at one indicator weighing on economic growth right now—state and local government spending. The Wall Street Journal reports that state and local infrastructure spending in August plummeted 11 percent relative to a year ago, an especially big plunge after eight years of economic expansion. Infrastructure spending can be volatile, with a lot one month and less the next. But rising costs for health care and education have crowded out job-creating public investment in state and local budgets. And tax revenues have not rebounded in many areas since the Great Recession, leading to austerity in the states.

That last point is critical, as it reflects weaker sales-tax collections and less paycheck-withholding. A handful of states that are dependent on oil revenues hit a recessionary condition earlier this year. But falling tax revenue overall—down 2.1 percent in the second quarter, according to the Rockefeller Institute of Government—suggests a more widespread problem.

This could certainly be a blip, and spending could rebound in future months. But even if that happens, the question will still linger: How would Washington react to a sustained slowdown, whether it comes early in the next president’s term or later?

Both Hillary Clinton and Donald Trump have proposed the kind of economic stimulus package that would jolt the economy, focused on boosting infrastructure spending. Clinton’s plan is intertwined with a controversial corporate tax cut that could theoretically appeal to Republicans. But imagine trying to get that done in a political environment so corrosive that hard-right conservatives are arguing over whether they should oust Speaker Paul Ryan in the lame-duck session, or wait till January.

There isn’t any consensus on who belongs in the House Republican leadership; how would this crowd get it together to negotiate a compromise deal to boost the economy if circumstances require one? The GOP crackup practically assures gridlock and uncertainty. Congress in its current state can’t effectively respond to emergencies; it’s far less likely to act quickly in an economic crisis, especially amid right-wing crusades to purge their impure colleagues.

But even if predictions of Republican chaos turn out to be exaggerated, the party would be a terrible partner for a President Clinton—or, for that matter, a President Trump—in a recession. A deep ideological fissure has emerged over the proper response to recessions. When the economy sagged under George W. Bush, the Republican Congress did act, by sending everybody in America checks. Individual taxpayers got $300 in 2001, and another $600 in 2008. This wasn’t the most targeted economic stimulus in the world (one study finds that only 22 percent of the 2001 tax rebate got spent), but it fit with the basic theory that government is the spender of last resort when businesses and consumers dial back.

Obama’s stimulus package included some tax rebates, but also a mass of federal spending to kick-start job creation. No Republican House members and only three GOP Senators—just one of whom, Susan Collins, remains in politics today —supported it. And despite evidence to the contrary, it’s become conservative doctrine that it didn’t work. The GOP claims Obama’s stimulus only expanded the national debt rather than the economy. Republicans roundly dismiss it, as John Boehner said in 2014, as one more example of “big promises and big spending with little results.”

The GOP has become the party of austerity—it’s their answer to every economic problem. Indeed, the House Freedom Caucus, the soul of economic conservatism, has responded to every attempt to increase spending as a betrayal. The caucus refused to sign on to this year’s quite austere House Republican budget; their dream policy is a balanced budget amendment to the Constitution. And however this year’s election shakes out, they’ll probably have a stronger, not weaker, influence on the GOP caucus; the representatives most likely to lose are moderates in swing districts, not Freedom Caucus members.

House Republicans’ austerity fetish wouldn’t be the only roadblock for the next president to halt an economic slide. Along with fiscal spending, that other great lever for responding to recessions, monetary policy, is less likely to work in the short term. Normally, central banks will drop interest rates when the economy slows. But interest rates are too low to bring down, already sitting at just 0.25 percent. Raising rates quickly to prepare for the next recession would only create that recession, so that’s not an answer either.

To describe a President Clinton’s options for quelling a potential recession as limited would be understating the case. Republicans have for years associated stimulus with failure, and the most empowered faction in the party rejects the notion of job-creating fiscal policy entirely. Plus, we know now, after Obama’s eight years, that congressional Republicans won’t let a little thing like potential economic disaster prevent them from obstructing a Democratic president at every turn. And the zero-sum game of politics says that a recession equals a perceived political advantage in the next election for the party that’s out of the White House. Anyway, how are Republican leaders going to collaborate with Clinton, when any cooperation with her is seen by a non-trivial portion of the base as tantamount to treason?

It’s certainly possible, as economist Dean Baker suggests, that Republicans could be bribed with tax cuts for the rich into some modest additional spending. But that puts a lot of faith in Republicans becoming less dysfunctional and more willing to cooperate with a Democratic president. I think it’s just as likely that Congress could exacerbate a mild recession by demonstrating an unwillingness to act. I’d be thrilled to be wrong about this. I’m afraid I’m not.