Trump Dismisses Recession Fears, Saying Fed Must Help The Economy | WYPR

Trump Dismisses Recession Fears, Saying Fed Must Help The Economy

Aug 19, 2019
Originally published on August 20, 2019 1:02 pm

Updated at 4:26 p.m. ET

The Trump administration is acting as a cheering section for the U.S. economy. And at least on Monday, investors were cheering along. The Dow Jones Industrial Average rose nearly 250 points or 1%. The S&P 500 jumped 1.2% and the Nasdaq was up 1.35%.

President Trump and his team are downplaying warnings of slower economic growth, despite signals from the bond market that a recession could be looming. At the same time, the president is also calling on the Federal Reserve to cut interest rates again to help boost growth.

"Our Economy is very strong," Trump tweeted Monday, accusing Democrats of badmouthing economic conditions to boost their chances in the 2020 election.

Vice President Pence echoed that confidence in a speech Monday to the Detroit Economic Club.

"Despite the irresponsible rhetoric of many in the mainstream media, the American economy is strong," Pence said. "And the U.S. economic outlook remains strong as well."

A day earlier, Trump and White House economic adviser Larry Kudlow pointed to consumer spending as a sign of the economy's resilience.

"I don't see a recession," Kudlow said on NBC's Meet the Press. "Consumers are working at higher wages. They are spending at a rapid pace."

Consumer spending is a major pillar of the U.S. economy, and data from the Commerce Department last week showed retail sales are still strong.

That helped to temper recession warnings from the bond market, which triggered the year's biggest sell-off on Wall Street last week. The Dow and the S&P 500 both fell about 3% last Wednesday.

Despite his professed confidence in the economy, the president continued to press the Federal Reserve to keep lowering interest rates.

"I think I could be helped out by the Fed," Trump said Sunday. "But the Fed doesn't like helping me too much."

Last month, the central bank cut rates by a quarter point. Trump is urging the Fed to cut rates by an additional percentage point as quickly as possible.

"The Fed Rate, over a fairly short period of time, should be reduced by at least 100 basis points," Trump tweeted Monday. "If that happened, our Economy would be even better, and the World Economy would be greatly and quickly enhanced-good for everyone."

The Commerce Department granted a partial reprieve on Monday to Chinese telecom giant Huawei, allowing the firm to keep buying components from U.S. suppliers for 90 days to serve its existing customers.

Trump said a larger trade deal with China may have to wait.

"I'm just not ready to make a deal yet," Trump told reporters on Sunday. "China would like to make a deal. I'm not ready."

Trade tensions with China and other countries have depressed manufacturing in the U.S. and limited business investment. Economic growth slowed from an annual rate of 3.1% at the beginning of the year to 2.1% in the second quarter.

A survey by the National Association for Business Economics found nearly 4 in 10 economists expect a recession next year, though an even larger share (48%) don't expect a downturn until 2021 or later.

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With reelection on the line, the Trump administration is acting as a cheering section for the U.S. economy right now. And at least for today, investors are cheering right along. The Dow Jones Industrial Average rose nearly 250 points, or 1%, today. That's after a sharp drop in the stock market last week, when investors reacted to warning signs of a looming recession. NPR's Scott Horsley reports.

SCOTT HORSLEY, BYLINE: President Trump knows his best hope for winning a second term in the White House is a solid U.S. economy. So after three rocky weeks on Wall Street, including the biggest sell-off all year last Wednesday, it was time for a little damage control. Trump and his advisers offered a chorus of upbeat assessments about the economy over the weekend, while accusing Democrats and reporters of painting a picture of doom and gloom.

This afternoon, Vice President Pence was in the swing state of Michigan delivering a rosy forecast to the Detroit Economic Club.


MIKE PENCE: Despite the irresponsible rhetoric of many in the mainstream media, the American economy is strong. And the U.S. economic outlook remains strong as well.

HORSLEY: White House economist Larry Kudlow will underscore that message this week in a series of phone calls with business and community leaders around the country. The administration says those calls were long planned. On NBC's "Meet The Press" yesterday, Kudlow emphasized some of the positive forces boosting the economy, especially the robust level of consumer spending.


LARRY KUDLOW: We're doing pretty darn well in my judgment. Let's not be afraid of optimism.

HORSLEY: Consumer spending has been strong. A lot of people are working and getting modest pay raises, so they have money to spend. But consumer confidence has dropped in the last month, and volatility in the stock market could make shoppers more cautious about opening their wallets.

Business spending has already taken a hit, partly as a result of the ongoing trade war with China. Today, the administration granted a temporary reprieve to Chinese telecom giant Huawei. But Pence says the president is not about to go soft on Beijing.


PENCE: The time has come for China to come to the table, open their markets and live by the rules of international commerce like every other industrialized nation does.

HORSLEY: Trump argued to reporters over the weekend the trade war has taken a bigger toll on other countries than it has on the United States.


PRESIDENT DONALD TRUMP: You look at a lot of countries, they're not doing well. China is doing poorly. Parts of Asia are doing poorly. We are doing better than any country or even area, anywhere in the world. We're doing great.

HORSLEY: Trump often views other countries' pain as a potential gain for the United States. But that approach can backfire in a globally connected economy. News of a slowdown in China and Germany last week contributed to investors' jitters in this country. Trump also shrugged off a warning sign from the bond market last week that often signals a recession is looming within two years.


TRUMP: That's a long time, two years. But I don't think so. Interest rates are low. I think I could be helped out by the Fed, but the Fed doesn't like helping me too much.

HORSLEY: The president continues to browbeat the Federal Reserve to cut interest rates, even though rates are already low - around 2%. Trump tweeted today they should be at least a full percentage point lower.

The National Association for Business Economics released a survey today showing 4 out of 10 economists now expect a recession by the end of next year. That's actually down a bit from the group's last survey back in February. Nearly half the economists surveyed now think a recession won't come until 2021 or later. Even as he talked up the economy in Detroit today, the vice president had a warning of his own.


PENCE: I honestly believe if any one of the Democrats on that debate stage wins the presidency, the gains of the last two and a half years would be wiped out.

HORSLEY: That message might resonate if the economy is still going strong next November. If not, it's the president himself who could be vulnerable.

Scott Horsley, NPR News, Washington. Transcript provided by NPR, Copyright NPR.