For the second straight week, this column is focused on economics—specifically, the economics of downturn. This is something we haven’t seen in roughly a decade, but people are beginning to expect it. We’ve seen the news about the inverted yield curve. We’re getting close to it, and that’s a bad thing. It means interest rates on short-term bonds are higher than on long-term, which drives investor fear.
At the same time, the federal deficit is growing. Over the first four months of the fiscal year, it’s increased by 77 percent. The federal government has been spending with reckless abandon. Sort of like the TARP era a decade ago, but this time, instead of stimulus, it’s just to keep the current momentum going.
All this while federal revenue is falling. From October 2018 through January 2019, individual tax collections fell 2 percent to $19 billion, CNN reports. Corporate revenue is down, too: 22 percent, from $75.5 billion to $58.9 billion. The decline in corporate tax collections, of course, runs counter to what the president and his allies promoted locally when tax reform was pushed some quarters back.
When I asked him about the seeming incompatibility of tax cuts and spiking deficits, U.S. Senator Marco Rubio said the problem wasn’t with corporate taxes but with demographics. “I think the rate of spending needs to be controlled,” he said a year ago. “Ultimately, the thing that drives long-term debt is the structure of very important programs that I support, Medicare and Social Security. I want to save those programs. They need to be reformed for future generations.”
He went on: “We’ve got a historic number of people who are going to retire, they’re going to live longer than they’ve ever lived, in programs that were designed when we had 16 people working for every retiree.”
The ratio is now 2:1.
“I support those programs. My mom is on Social Security and Medicare,” Rubio said. “I don’t want to see any changes to [those programs] that would harm her or people like her.”
“I’m talking about my generation and people younger than me. We want there to be Social Security and Medicare … that they’re able to exist and provide services long-term. We have to address that in Congress,” Rubio added.
So far, not much has happened to address that crisis. And per the Congressional Budget Office, we’re going to see deficits around a billion dollars for the foreseeable future.
Rubio eventually gave some populist quotes, saying corporations bought back stock rather than doing what he expected.
“There’s no evidence whatsoever that the money’s been massively poured back into the American worker,” the senator said, as if surprised.
We know what happens when corporations get windfalls. C-suite bonuses and hiring a few more heads devoted to cost-cutting. We are seeing layoffs locally; even Web.Com, the Jacksonville internet magnate that built its brand off M&A, quietly cut 90 people last week.
Floridians expect things to get worse and keep on getting worse, according a recent University of Florida survey. Expectations are for a decline within the next year … and a sharper decline in the next five years.
Decades ago, the joke was on bumper stickers: “We’re spending our children’s inheritance.”
No one has those stickers anymore. Because fewer and fewer people see an inheritance as anything other than a theoretical possibility, like American Exceptionalism.
That, in a sense, is what Rubio was talking about: the idea of legacy costs. In another sense, he must know the demographic crisis we and other late-stage, circling-the-drain democratic republics are in is non-negotiable. There aren’t going to be enough babies to turn the tide.
So, yeah, a recession. It’s about to be real. It won’t be spectacular. Those of you who wait tables will have fewer shifts. Those of you who rent may need roommates you hadn’t considered. Side hustles on top of side hustles, like body bags on a battlefield. And if you have kids? Hope they don’t mind competing with better-trained and more reliable displaced workers for the kinds of sh*t jobs that build character and, if all goes well, keep the lights on.
Media will suffer, too. As businesses tank, papers slim down and ad routes get more treacherous. On the television side, expect faster consolidation. Economies of scale will be the watchword.
Beyond that? I can recommend some really good recipes involving dried beans and brown rice.