| | | | |  | | By Ben White | Presented by American Fuel & Petrochemical Manufacturers | | 
President Joe Biden speaks about the economy in the South Court Auditorium in the Eisenhower Executive Office Building on the White House Campus on Jan. 12, 2023. | Andrew Harnik/AP Photo | SUNSET BOULEVARD — President Joe Biden formally launched his reelection campaign this week echoing Ronald Reagan’s 1984 “Morning in America” message, declaring that he’s “never been more optimistic about America’s future.” Unfortunately for Biden, it is very much not Morning in America, at least from an economic perspective. It is more like late afternoon with the sunset, in the form of at least a shallow recession, very much poised to descend upon the land. This was pretty clearly evident from the initial read on gross domestic product growth for the first quarter of the year, which came in today at just 1.1 percent, about half of what Wall Street expected and a decline from 2.6 percent in the fourth quarter of last year. Sure, there were some bright spots in the report. Consumer spending continued to remain remarkably strong. And some of the big miss over Wall Street expectations came from quirky stuff like inventory changes. But outside of consumers, who most economists expect will at some point fairly soon run out of extra cash to keep spending, the report showed that a long and sharp campaign of inflation-fighting Federal Reserve interest rate hikes is finally biting the economy in a significant way. The housing market is declining. Businesses are investing less in hiring and major investment. These are usually the hallmarks of an impending recession which, as we’ve noted before, nearly always follows a series of rate hikes this severe. And perhaps most troublingly, inflation rose at 4.2 percent pace in the first quarter according to figures out Thursday, faster than at the end of last year and at least double the Fed’s preferred pace of around 2 percent. That means that another interest rate hike is highly likely — if not certain — when the Fed meets next week. That could very well be the last of the hikes. And 2024 could actually see rate cuts. But most Wall Street forecasters — and even some left-leaning economists like former Treasury Secretary Larry Summers — say the cumulative effects of the hikes are likely to cause a recession that features at least two quarters of negative growth and a significant increase in the currently rock-bottom 3.5 percent unemployment rate. “I think we’re going to have difficulty getting near a 2 percent inflation target until and unless the economy slows down substantially,” Summers said at an investment conference this week. Many economists were even more blunt in their assessments following Thursday’s anemic GDP report. A client note from Pantheon Macroeconomics' chief economist Ian Shepherdson on Thursday led with this: “In one line: Recession incoming.” And Shepherdson made the critical point that while spending still looks good at the moment, we may be seeing the last of such numbers for a bit. The strong consumer performance in the quarter “was flattered by much warmer-than-usual weather in January and February, and the 8.7 percent one-time cost of living adjustment to Social Security payments.” That’s now all fading. “We expect much weaker consumption in the second quarter,” Shepherdson wrote. “It could easily fall outright as people respond to the deteriorating labor market — rising layoffs and slower hiring will make people nervous — by choosing to save more.” None of this means Biden is cooked. While forecasters and top executives expect a recession later this year, few think it will be prolonged or severe. And if Biden’s promises about the impacts of his big-ticket legislative items from the last two years prove true, things could be looking significantly better as Election Day 2024 approaches, with rates falling instead of rising. It certainly won’t be the tax cut-fueled, gangbusters “Morning in America” economy that helped drive Reagan to a massive landslide in 1984. But it’s also not likely to be “Midnight in America.” Perhaps it will be the cool glow of the predawn hours. Welcome to POLITICO Nightly. Reach out with news, tips and ideas at nightly@politico.com. Or contact tonight’s author at bwhite@politico.com or on Twitter at @EconomyBen.
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Former Vice President Mike Pence looks up at supporters after speaking at the Federalist Society Executive Branch Review conference on April 25, 2023, in Washington. | Alex Brandon/AP Photo | — Guardsman spoke of ‘murder,’ may still possess secrets: U.S.: The Massachusetts Air National guardsman accused of leaking highly classified military documents kept an arsenal of guns, talked of “violence and murder” on a social media platform and an “assassination van,” prosecutors wrote before Thursday’s hearing for 21-year-old Jack Teixeira. The court filings raise new questions about why Teixeira had such a high security clearance and access to some of the nation’s most classified secrets, writes the Associated Press. They said he may still have material that hasn’t been released, which could be of “tremendous value to hostile nation states that could offer him safe harbor and attempt to facilitate his escape from the United States.” — Biden admin to set up migrant processing centers in Latin America ahead of end of Title 42: The Biden administration on Thursday announced plans to establish immigration processing centers throughout Latin America to help slow down the number of migrants coming to the U.S. The regional processing centers in Guatemala and Colombia should be up and running in the coming weeks, said Homeland Security Secretary Alejandro Mayorkas and Secretary of State Antony Blinken during a joint press conference. Additional details will be announced in the coming weeks about how many centers they will set up as they negotiate with additional countries. — Pence appears before Jan. 6 grand jury: Former Vice President Mike Pence testified Thursday before a federal grand jury investigating former President Donald Trump’s effort to subvert the 2020 election, according to a source familiar with the matter. Pence’s closed-door appearance marks an extraordinary flashpoint in special counsel Jack Smith’s probe. Smith’s team is investigating Trump’s last-ditch bid to pressure Pence into single-handedly derailing the transfer of power from Trump to Biden on Jan. 6, 2021.
| | | | STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president’s ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today. | | | | | | | | | FAN CLUB — Gov. Ron DeSantis’ biggest fan in the media, Will Witt, looks more like a Zack Morris stunt double than a digital reporter, with his coiffed hair and made-for-TV smile, writes POLITICO’s Holly Otterbein. But he is the editor-in-chief and CEO of the Florida Standard, an online conservative news outlet that instantly gained unprecedented access to DeSantis when it launched last summer. at the center of DeSantis’ norms-smashing media strategy. To circumvent the “legacy” reporters that he hates — and that his base loves him for hating — DeSantis has forged his own press corps in the Sunshine State. Made up of the Florida Standard and a constellation of similar sites, this media ecosystem has become a pipeline that feeds conservative culture war talking points and DeSantisland scoops to larger conservative outlets and, occasionally, even the mainstream press. INEVITABLE? — Standing before a room filled with lightly interested college students, self-described “political tourists” and even some honest-to-God undecided New Hampshire voters, Chris Christie used a town hall here last week to sketch out the political indictment against the defendant, Trump, he thinks Republicans must prosecute to deny the former president his party’s nomination. Yet near the end of his remarks, POLITICO’s Jonathan Martin reports, Christie articulated something more revealing: The sense of fatalism that’s fast gripping Republicans of all stripes about the inevitability of Trump again being the GOP standard bearer. Christie warned against giving in to such thinking. But in the very hour he was delivering that argument, Trump was on the opposite end of the Eastern Seaboard demonstrating how well-positioned he is at the moment. VEEP MATTERS — Anyone looking for a glimpse of what Vice President Kamala Harris could bring to the campaign trail would have found it this week at Howard University, where she headlined a rally for reproductive rights. After two years of tightly scripted, uneven performances that often dismayed Democrats and cheered Republicans, Harris is looser, more forceful and more willing to speak off the cuff following her trip to Africa a month ago, the Associated Press reports. Although vice presidents are rarely decisive in reelection efforts, Harris is poised to be an exception. Not only is she leading the charge on Democrats’ most potent issue, the battle over abortion rights, she’s the running mate for the oldest president in history, increasing scrutiny over whether she’s ready to step into the top job if necessary. PAGE-TURNER — Presidential campaigns often are waged on whether or not the country is ready to “turn the page.” Biden wants his reelection bid to hinge on whether or not there is a page to turn, write POLITICO’s Eli Stokols and Adam Cancryn. The president’s team has made the issue of book banning a surprisingly central element of his campaign’s opening salvos. He referred to GOP efforts to restrict curriculum — Toni Morrison’s “The Bluest Eye” was the third most banned title in America last year — in his first two campaign videos. He presents himself in each video as the defender of the country’s core values, a bulwark against an extreme Republican Party rolling back America’s freedoms.
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Austrian Foreign Minister Alexander Schallenberg speaks during a news conference in Vienna, Austria, Jan. 19, 2022. | Lisa Leutner/AP Photo | SPY GAME — French politicians continue to be a prime target of Russian espionage efforts despite a crackdown on Moscow’s operations in France, newly released documents show, according to POLITICO Europe’s Clea Caulcutt and Paul DeVillepin. French intelligence services have detected Russian spies trying to make contact with French lawmakers in recent months and have led operations to raise awareness among MPs on the risks of foreign interference, according to transcripts of parliamentary hearings released Thursday. AUSTRIAN OBJECTIONS — Austria will maintain its veto on the extension of the EU’s passport-free Schengen zone to Bulgaria and Romania until Vienna sees a “sustained decline” in asylum-seekers, Foreign Minister Alexander Schallenberg said in an interview with POLITICO Europe’s Matthew Karnitschnig. Asylum applications in Austria (not including Ukrainians) nearly tripled last year to about 110,000 — the highest per-capita rate in the EU — prompting the government to block the Schengen area’s expansion in December.
| | | | GO INSIDE THE 2023 MILKEN INSTITUTE GLOBAL CONFERENCE: POLITICO is proud to partner with the Milken Institute to produce a special edition "Global Insider" newsletter featuring exclusive coverage, insider nuggets and unparalleled insights from the 2023 Global Conference, which will convene leaders in health, finance, politics, philanthropy and entertainment from April 30-May 3. This year’s theme, Advancing a Thriving World, will challenge and inspire attendees to lean into building an optimistic coalition capable of tackling the issues and inequities we collectively face. Don’t miss a thing — subscribe today for a front row seat. | | | | | | | | | | | | | | | ALTER EGO — GISAID, a long-running database for influenza genomes, had established itself as the go-to repository for SARS-CoV-2 as well. But concerning findings surrounding the life of the creator and overseer of the database — and how he runs it — have emerged from an extensive Science magazine investigation. And it’s worrying scientists and funders because GISAID’s mission could hardly be more critical: preventing, monitoring, and fighting epidemics and pandemics, report Martin Enserink and Jon Cohen.
| | |  On this date in 1980: Remains of a burned-out U.S. helicopter lies in front of an abandoned chopper in the eastern desert region of Iran, one day after an abortive American commando raid to free the U.S. Embassy hostages. | AP Photo | Did someone forward this email to you? Sign up here.
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