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The Horrors of the Recession to Come - July 18, 2018 - SF Weekly
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The Horrors of the Recession to Come

Photo by Eric Pratt

The San Andreas Fault is the best-studied seismological feature on the planet, but immediately to our geological north is the Cascadia Subduction Zone, a comparatively enigmatic tectonic boundary. In the 2015 article for the New Yorker that won her a Pulitzer Prize, Kathryn Schulz examined the history of that quake-prone coastal region, which extends from just south of Eureka, Calif., through the middle of Vancouver Island. It’s a time bomb, capable of unleashing earthquakes vastly more powerful than the San Andreas can, and it’s overdue for the next one.

The next one will be a big one — with a one-in-three chance in the next 50 years of a Very Big One, as the article’s title states. It’s happened before, more or less at regular intervals. Through indigenous oral histories, dendrochronology — the study of tree rings — and Japanese tsunami records, scientists determined with eerie specificity that at 9 p.m. on Jan. 27, 1700, the Cascadian system lurched so violently that whole First Nations villages vanished into the ocean. Tension between the Juan de Fuca plate and the North American plate has been accumulating ever since. When it gives, as it someday must, the resulting magnitude 9.2 earthquake and its accompanying 60-foot tsunami will obliterate virtually everything along the coast of the Pacific Northwest, devastating Vancouver, Seattle, and Portland, and causing damage as far as Sacramento. Beyond the substantial loss of life, recovery will take decades. It will be the biggest and most expensive disaster in U.S. history.

Like earthquakes, recessions are cyclical events whose certainty is known but whose prediction remains an inaccurate science. The severity of the last one, now nearly a decade behind us, contributed to the rise of the Tea Party and the more fitful Occupy movements, fundamentally reshaping the political landscape. A rising tide is said to lift all boats, but the long, slow recovery sent some to the muck at the bottom of the marina. And considering the reeling dysfunction of summer 2018, the next recession could be worse.

 

These are the good times.

In all the frenzy about the country buckling apart, its craven leaders unwilling or unable to confront the crises at hand, it’s hard to remember that the U.S. is currently enjoying a growth streak nearly without equal. Since the nadir of the 2007-09 Great Recession, we’ve added 15 million jobs and wages are rising (albeit slowly, and often because progressive cities and states force them to). Politically, the situation may be dire, but economically, it’s been much worse. If the current economic expansion lasts another year, it will be the longest in American history.

Most people think of a recession as synonymous with what used to be called hard times. Technically, a recession is an academic term that refers to two consecutive quarters in which the U.S. economy shrinks, but even this can be unclear. For example, the mild recession of the early 2000s, which nominally lasted from roughly March through November 2001, effectively began a year earlier when the first tech bubble burst. Although the overall economy weathered the post-9/11 stock panic well, a full recovery didn’t occur until early 2003.

But the statistics can mask underlying truths. The regional economies of San Jose and Houston have grown tremendously during this still-young century, but no amount of urban farming or civic engagement by Quicken Loans can hide the precipitous decline of Detroit, or the near-invisible deterioration of smaller Rust Belt cities like Galesburg, Ill., and Elkhart, Ind. The “biggest fuck-you in human history,” as Michael Moore characterized Middle America’s embrace of Donald Trump, largely came from regions of the country where stagnation set in decades ago and never really went away.

Pundits have quibbled ever since over whether those proverbial white-working class voters pushed Trump over the finish line, or if that’s largely the romanticized creation of a cloistered media overcompensating to save its own hide from further embarrassment (and still failing). The political axiom that wealthier people vote Republican and working-class people vote Democrat still broadly holds, but perhaps what these competing analyses largely fail to account for is an unquantifiable element of human nature: Our bodies are finely attuned not to arithmetic but to calculus.

That is to say, most people don’t respond much to data points about how things are. Rather, our guts instinctively recalculate changes in the rate of change: Am I doing better than that person over there? Are the people I grew up with and who talk like me worse off than they used to be? When we say inequality is widening, we don’t just mean that the rich are doing better and the poor worse; it’s that people can measure the acceleration of the haves’ collective ascent into the economic stratosphere against their own glum station in life. Toss in the mutually reinforcing set of factors that have brought America to its current state of disunity — uneven economic growth, demographic changes, culturally bifurcated media consumption, and distortion-magnifying social media use — and, indeed, you have two countries in one, living in and responding to very different realities.

Again, these are the good times, a crazy-sounding statement supported by innumerable anecdotal and statistical data. June was the 81st month of employment gains in a row, a record. Although it pains progressives to confront the facts for fear of giving the president one iota of credit, unemployment — particularly for people of color — is at or near historic lows. (Of course, it would be more accurate to say that Trump inherited positive trendlines and a strong bull market from his predecessor, and more accurate still to note that presidents have little direct control over either labor participation rates or the intraday high of the NASDAQ.)

For all the talk of decline, the $19 trillion U.S. economy remains a juggernaut that represents just under one-third of all human economic activity. If it were a country, California would be the world’s fifth biggest economy — a factoid every booster in the hashtag-resistance with secessionist fantasies can recite by heart — and the Bay Area alone would be no. 19, ahead of Switzerland. With its 7.8 million residents, the nine-county region’s $748 billion economy is growing at twice the national average and represents nearly half the G.D.P. of our newly sworn enemy, Russia, which is home to some 145 million people.

Why is it, then, that these ironclad truths give us so little comfort? It can’t just be the ease with which Instagram influencers can buy fake followers or that Silicon Valley’s innovation is mostly solutionist bluster. It’s not even fear of a baking planet, a prospect that’s causing people to forgo having children. Not many of us lay awake at night plagued by the ominous future of the Sierra snowpack or the rising salinity of Kern County pistachio orchards — or the national debt, or the ping-pong-ing consequences of steel tariffs. We mostly worry about never being able to afford a one-bedroom apartment in an ugly condo with no view. But the housing emergency is in part a crisis of affluence, not of incipient poverty: Simply put, too many rich people want to live in California. And however you might feel about the gnomic Gov. Jerry Brown, his second stint as governor has demonstrated impressive fiscal prudence. A state recently considered “ungovernable” can confront the next financial calamity on much surer footing than in 2007.

But we don’t care. What worries us is that we know deep down that it all has to come crashing down at some point — and like tectonic plates, we, too, may be overdue for a jolt.

It’s not hard to imagine a future in which dozens of San Francisco restaurants close in rapid succession. Photo by Eric Pratt

 

The next recession, when it comes, has the potential to be catastrophic. Like reports of strange riots in a distant city that herald the zombie apocalypse, it will likely begin with whispers from people who play experts on TV. They will get their information from actual experts, people who are reluctant to put their thumbs on the scale, inadvertently setting in motion a self-reinforcing sense of panic. The recession’s beginning will be amorphous, truly apparent only in hindsight.

But let’s say, six months from now, our nine years of job growth begin to slow down. Brick-and-mortar retail continues its long, slow death spiral. Iconic companies like Sears or Federated Department Stores file for bankruptcy. Hammered by Amazon, Walmart releases quarterly earnings reports that stun Wall Street with the breadth of their losses, and the company pledges to close hundreds of stores, mostly in small towns with few other prospects for employment. Tariffs in an ever-accelerating worldwide trade war decimates a few niche industries: craft bourbon, Florida citrus, highly specialized tool-and-die equipment. In the run-up to the midterms, it starts to look like more than just background noise. As predicted, Democrats win a 33-seat majority in the House but lose two seats in the Senate, ensuring gridlock for the remainder of Trump’s term.

December’s jobs report is flat. By early 2019, the Fed pauses its program of raising interest rates. Some liberals, desperate for anything that will prove Donald Trump’s undoing, openly pine for a depression. Brexit negotiations drag on, causing an open rift in the European Union as right-wing populists clamor for sealed borders. Snap elections in the U.K. yield a hung Parliament and a Britain in limbo.

At home, signs worsen. A repeat of the 2010 “Flash Crash” causes confusion at the New York Stock Exchange, with millions of people convinced Russia was behind it. Uber signals that it’s running out of cash, bringing renewed scrutiny to the ride-hail industry and revealing dubious accounting practices at Lyft. Seemingly overnight, a ride costs twice what it used to. Black-hat hackers penetrate Google’s defenses, causing a Yahoo-style data breach at a company thought to be invincible. Dozens of high-profile San Francisco restaurants quietly close in August. Bitcoin crashes, Ethereum becomes “the new Bitcoin” until it crashes, then Bitcoin spikes. Robert Mueller’s investigation concludes with 23 indictments of various members of the Trump circle. The president pardons all but five. Widespread outrage yields only a mild censure of the president by a Republican Senate and a Democrat-controlled House leadership skittish about overplaying its hand.

Doom-and-gloom articles begin to appear: “Is this it?” The Economist asks. Style sections fawn over billionaire preppers’ tricked-out bunkers and their New Zealand citizenship applications. North Korea reneges on its denuclearization commitments, advancing the Doomsday Clock one minute closer to midnight. After another dry winter, wildfire season starts early, with a major conflagration destroying several Colorado resort towns. “Exceptional” drought returns to a wide swath of California. A Category 3 hurricane strikes southwestern Louisiana, devastating the petrochemical industry and sending oil prices higher. Q3 2019 growth clocks in at a meager 0.3 percent, the lowest since early 2014. Q4 growth registers at -1.2 percent, and the third quarter is revised down to -0.2 percent, which means the United States is officially in recession.

Sound plausible? That’s when things truly go off the rails. The backdrop of occasional mass shootings begins to take on political overtones. A Minnesota state senator is assassinated in broad daylight. The Oath Keepers occupy a courthouse in the Oklahoma Panhandle and Attorney General Sessions declines to intervene. Rising interest rates cause widespread defaults on student loans, then on mortgages. The economy sheds 270,000 jobs in January 2020, then 440,000 in February, then 730,000 in March. A spasm of foreclosures erupts. Trump calls every unflattering employment report “fake news” and blames Democrats for everything. Muddying the water further, contrarians and talking heads launch into bullshit treatises on U3 versus U6 unemployment and disquisitions on what really counts as a “job” in the age of the gig economy, anyway.

Cleft in twain by political affiliation, no one can agree on basic facts, yet everyone is enraged and dispossessed. The suicide rate inches up, fertility plummets, and the opioid crisis deepens. Migration rates quietly diminish as the U.S. simply becomes less desirable, although nothing persuades Fox News viewers of this. Bay Area rents fall, but not enough to make up for increasing unemployment and underemployment, and the Anti-Eviction Mapping Project says the displacement crisis has actually worsened. Construction, always the canary in the coal mine for a recession, remains in the doldrums and no one’s building any housing. Facebook bans InfoWars, and the resulting conservative boycott causes the social-media giant to backtrack, but the damage has been done; Silicon Valley is as much a part of the liberal media as CNN.

Although the U.S. dollar has been synonymous with global capitalism since 1945, the prophecy of a world reoriented around a more authoritarian, Chinese-led system slowly comes to pass. The Regional Comprehensive Economic Partnership, China’s alternative to the Trans-Pacific Partnership, woos Russia, Turkey, and Indonesia. After the E.U. bloc enters recession, Mexico joins the Asian-centric partnership and Prime Minister Justin Trudeau dithers about Canada following suit. Chatter about #CalExit increases, with prominent state legislators forced to state their opposition.

Meanwhile, the national debt continues to go up, yet cuts in military spending remain taboo. Renewable energy remains one bright spot, but it’s not growing fast enough to reduce emissions in any meaningful way or put millions of people to work. A depleted social safety net means unemployment benefits are inadequate in keeping families in their homes, yet marches against the system’s unfairness are met with cries of “Get a job!” Confronting an aging population of its own, China opens its doors to waves of foreign guest workers, becoming the globe’s new land of opportunity. Weakened and isolated, America confronts its own limitations in a way Jimmy Carter’s so-called “Malaise” speech identified 40 years before — only this time, its citizens have begun to fight one another.

Courtesy photo

 

The Three Percenters, a Second Amendment-obsessed paramilitary group, takes its name from the belief that only three percent of American colonists took up arms against the British and managed to win the Revolutionary War. What if an entire generation of right-leaning young white men, steeped in resentment politics and Pepe memes and fake news, and convinced they’ll never attain a higher standard of living than their parents, decides they have nothing really left to lose? Would you even need three percent of them to destabilize a society already awash in guns? White nihilism is a potent force. How about 10,000 or so unemployable incels, persuaded their country has been taken away, shooting up movie theaters and churches and music festivals partly out of anomie and partly for the thrill of getting in everyone’s heads? Scattered around the country, ideologically muddled, and only loosely allied, they could nonetheless wreak havoc.

Americans’ tendency toward complacency in the face of social ills has bedeviled activists for decades — if not forever. The mysterious non-appearance of a strong social-democratic left in our political system can be attributed to many factors, but most anyone who’s ever gotten involved in grassroots politics has met a true believer who’s convinced utopia could be ours, if people would only Wake Up.

They do — except not to single-payer or an infrastructure stimulus centered on the decarbonization of the economy. Instead, it’s the worst-case scenario: a low-intensity civil war, as both sides feel equally shut out of an ossified political system incapable of responding to an enduring recession.

Take this two-part thought experiment: Ruth Bader Ginsburg retires from the Supreme Court in June 2020 owing to failing health, allowing Trump to appoint a third justice and cementing a hard-right majority practically indefinitely. But the larger public’s dissatisfaction with the Trump administration is so extreme that in November, his Democratic opponent triumphs in a landslide, adding Georgia, Arizona, and all 38 of Texas’ electoral votes to Obama’s winning 2008 map. (Not even the most overzealous Trump partisan could claim the Democrats’ 424-114 win in the electoral college was the result of fraud.) A Blue Texas is the liberal white whale, the ultimate proof that the Coming Democratic Majority that’s always one election away has finally arrived. But what if such a realignment were to occur as the Supreme Court was gutting every last achievement of the 20th century and ruling that the EPA’s classification of carbon dioxide as a pollutant constituted governmental overreach?

“This Nation asks for action, and action now,” Franklin D. Roosevelt said in his 1933 Inaugural Address. But any incoming Democratic administration would find its efforts stymied at every turn, while enraged conservatives, perceiving themselves to be locked out of power, begin to conclude that representative democracy is a farce and declare their open admiration for authoritarian capitalist regimes like Russia’s. Everyone feels like “their” country has been taken from them and no amount of winning will ever get it back.

This is America: at sea, adrift. Democracy was simply not meant for a continent-spanning polity of 330 million citizens after a quarter of a millennium, people conclude. It was a great and noble experiment, a necessary phase, but in the end, entrenched elites simply grow too unaccountable and remote — plus Jeff Bezos’ personal fortune becomes equal to the bottom two-thirds of all Americans’ wealth combined. The American imperial magisterium winds down.

Now use this scenario as the jumping-off point for another thought experiment. What if some combination of corruption, overinvestment, and environmental degradation cause something truly unthinkable: a Chinese recession? (In its modern era, it’s never had one.) What if a famine in North Korea leads to a murky power struggle and Pyongyang nukes Tokyo? What if the far-right wins power in both France and Germany? What if the long-rumored methane burp releases immense amounts of greenhouse gases into the atmosphere, all at once?

Putting aside the Cascadia Subduction Zone, what if California experiences a massive earthquake? Although the government opened the disaster-relief spigot for Santa Rosa after last October’s wildfires, it is not inconceivable that to placate “the base,” our capricious and miserly president might drag his feet over assisting California in the event of a major disaster. We know how widely loathed this state is on 4chan, and the current administration is often little more than a 4chan thread made flesh. Watching Los Angeles descend into food riots would be the ultimate in owning the libs. In the end, it’s not so much a crisis as the ineffectual response to that crisis that generates despair. The realization that no help is coming causes us to lose faith in the entire enterprise. It’s the calculus of it all.

This sounds like yet another in a long string of dystopian fantasias, political torture-porn like the Handmaid’s Tale scenes set in Toronto’s “Little America.” And misfortune is always ghoulishly popular as long as we macro-dose on it. No one wants to see their house burn down; everyone wants to see the wave destroy the Golden Gate Bridge or the aliens annihilate the White House. It’s unlikely that tariffs on badger hair, turnips, and lawn mower parts will unravel the fabric of space-time, but a country whose president pledges fealty to a foreign autocrat is a grievously sick country. Sooner or later, like the fault lines deep under our feet, the current prosperity will buckle and the United States may face a test of its endurance like never before.