Morning Wire - Is Recession Inevitable? | 5.24.22

Episode Date: May 24, 2022

More economic trends point to a looming recession, the baby formula supply crisis continues, and an expert explains why monkeypox will not be the next Covid. Get the facts first on Morning Wire. Learn more about your ad choices. Visit podcastchoices.com/adchoices

High food and gas prices, a struggling stock market and an increase in loan defaults, are all pointing to a possible recession. We talk to an expert about the state of the economy and what Americans should expect in the coming months. If the economy slows and we go into recession, which is what I expect, the unemployment rate will rise. The question is, is it a deep recession or a very mild recession? I'm Georgia Howe with Daily Wire editor-in-chief John Bickley. It's Tuesday, May 24th. is Morning Wire. Nearly 40 tons of baby formula have arrived from Europe.

These planes that are landing right now are going to provide some incremental relief in the coming days. But is it enough to end the crisis? And we talk to Dr. Marty McCarrie about why Americans should not be panicked about monkeypox. Thanks for waking up with Morning Wire. Stay tuned. We have the news you need to know. Do you have a will? You might be shocked to learn how many people don't. Creating a will is fundamental to protecting yourself and your family because if something happens to you and your spouse, the state will decide what happens to your kids and your assets. Take control. Go to epicwill.com promo code wire. Epicwill.com where you can secure your future in as little as five minutes with a complete will package starting at $119. And when you use promo code wire, you'll save 10%. That's epicwill.com, promo code wire.

With gas prices still climbing and the stock market continuing to struggle, some other economic metrics are showing some troubling trends. Joining us to discuss is Joe LaVorna, former chief economist of the National Economic Council. Now, Joe, on Monday, President Biden said a recession is not inevitable. On the other hand, we have former Clinton Treasury Secretary Larry Summers, who said he believes the risk of a recession is actually quite substantial. Is a recession inevitable? Nothing is ever inevitable, but from a probabilistic standpoint, in other words, do I think a recession is likely?

The answer is yes, because the policies we have in place, by gearing us toward a recession. So to that extent, former Treasury Secretary and former NEC advisor Larry Summers is spot on, in my opinion. Yes, the risk of recession is quite high, meaning well above 50%. One of the trends we're seeing right now that's a bit troubling is the stock market. It's been down for eight straight weeks in a row, and we haven't seen that in about 100 years. Another troubling trend is gas prices, which have reached really crippling levels, nearly $5 per gallon nationally.

First, our price is going to continue to climb for gas. The summer driving season is kind of right now, and believe it or not, the peak is around Memorial Day. Now it's possible, given the COVID reopening and people wanting to get out and travel more, that gets extended further into the summer months. So hopefully, maybe fingers crossed, we've seen a peak. But what's interesting is, you highlight gas.

What's actually even more concerning to me is what's happening with food. food outlays, food expenditures are actually significantly higher share of the consumer basket than energy, and those costs are also exploding higher. So you really have a double whammy just on the food and energy side in terms of sapping household purchasing power, hurting their cash flow, and this again would tie into why we think recession is the better or more likely scenario. Treasury Secretary Janet Yellen actually mentioned both of those things recently, food costs and energy prices. She said this could lead to stashions. stagflation. Is that a correct assessment?

I guess it is. I mean, to the extent that, you know, GDP was negative in the first quarter, I don't expect it to be particularly a robust this quarter, though it would probably be slightly positive. And inflation's running where it is, absolutely. But let the record be clear. Secretary Yellen last year talked about, you know, basically go bigger bill home with respect to fiscal stimulus. And that fiscal stimulus that we passed through reconciliation, so there was not a Republican senator that was on board with it, that budget bill. That budget bill, from March of 2021, certainly exacerbated the inflation problem. So, yes, we've got stagflation, but again, I would say a large part of this is due to administration policy.

Let's talk about credit cards and personal loans. We're seeing some defaults at pretty high numbers for people with limited or troubled credit histories on car loans, personal loans, credit cards. What could that mean for the economy? The deterioration and credit at the lower tier borrower, those that have, say, the low credit scores, that typically is a sign of greater distress to come elsewhere in the economy. Typically, the distress starts at that point in the economy and then starts to spread elsewhere. We saw it with subprime, for example, back in 0607, the Fed thought it was contained. It wouldn't be an issue. And of course, we had a very deep downturn. And the reason why there are these delinquencies, these subprime borrowers

are having such difficulties. Many of them, unfortunately, have to lift paycheck to paycheck, and they're paying extraordinarily high costs for food, extraordinarily high costs for gas, and this is why they're not being able to pay their bills elsewhere. But then if you think about what's happened with the rise in mortgage rates that is going to significantly depress housing prices, you basically have the perfect storm of a consumer spending pullback where both the low, middle, and upper income households are all going to suffer in one way or another. Of course, the bottom, and unfortunately suffers the most. But the point is the broad economic trends are not particularly good.

And there was a front page Wall Street Journal article today, even that highlighted that businesses, small businesses, which are the engine of the U.S. backbone and growth and labor market dynamism, we're saying it's the worst outlook they see really in many, many decades, excluding the pandemic. I would like if we had a more pro-growth, less hostile business environment, less regulatory overreach, that might help. but unfortunately, I just don't see the administration pivoting back toward the center. Well, a lot certainly hinges on which direction the administration goes. Joe, thank you so much for joining us.

Thank you. That was Jill Livorna, chief economist for the Americas at Natixis. Coming up, New York's mayor declares a state of emergency over the shortage of baby formula. Have you considered what could happen in the stock market if our economy stalls out? Don't wait until it's too late to solidify some of your investment portfolio with gold from Birch gold. Throughout history, gold has maintained its value better than any other investment in the world. Text wire to 9898998 today for a free zero-obligation info kit on holding gold in a tax-sheltered retirement account. Again, text wire to 9-8-9-8 and secure the gains you've made while you can.

The baby formula shortage in the U.S. is reaching crisis level as parents across the country scrambled to feed their children. But the country is still struggling to get the product in the hands of families. Daily Wire investigative reporter, Marade Allorty, is here with the details on where we are now with this crisis. So, Marade, we've been tracking this baby formula shortage for a few weeks now. What's the latest? The latest is moms are still unable to get baby formula at stores at this point, though there may be some hope. 38 tons of formula were flown to Indianapolis from Germany on Sunday after being acquired in Switzerland. This was part of an Air Force mission named Operation Fly Formula. A second shipment is supposed to arrive this week.

However, the product is not going to go immediately to regular stores. Authorities say it's going to the most needy parents, which means it'll be distributed to medical centers and children's hospitals first. Parents have been instructed to bring their children to these locations if they're facing a food crisis. There's still no confirmation on when baby formula will be back on supermarket shelves. One thing that's exacerbated the situation is FDA regulations that make it nearly impossible to get formula not made by major manufacturers. The FDA often bans.

overseas brands, not for nutrition or safety reasons, but because they don't meet the FDA's labeling requirements. However, last week, the FDA announced that it will relax some of those regulations, so new suppliers will be motivated to make and sell formula. The U.S. produces about 98% of its own baby formula with only a tiny percentage coming from imports, so other countries have never been major suppliers in the U.S., but loosening those regulations will help get us through the crisis. Now, have other countries been stepping up to donate baby formula? what kind of international response are we seeing? Well, so far, there's been relatively little international response on a governmental level.

However, multiple outlets are now reporting that moms are taking it upon themselves to travel across the border to obtain formula from Mexico. The CEO of the Tijuana supermarket chain, Calli Max, says that formula sales are up 19% year over year, suggesting that a lot of mothers are making the trip. Well, this is a scary time for a lot of parents. Maire, thanks so much for reporting. Thanks, Georgia. That's Daily Wire investigative reporter, Marade Allorty.

An outbreak of the monkeypox virus in Europe and North America is making headlines, but how worried should we be? Johns Hopkins, Dr. Marty McCarrie, joins us to discuss the viral outbreak and what we can expect going forward. Dr. McCarrie, thanks so much for coming on. Great to be with you. So we've been seeing headlines about the monkeypox virus that's spreading in several countries right now. What do we need to know and how concerned should we be?

Well, the first thing I would say is not to be alarmed. And I understand it's easy to look at any new infection through the lens of COVID-19. But monkeypox is really extremely different. It's not highly contagious. In fact, it requires a lot of direct contact. It may even require sexual transmission, that level of direct contact. We're not sure yet. But what we are seeing is a cluster that is occurring in settings that appear to be a subgroup of gay individuals. sexual transmission has been implicated. And monkeypox really does not have the ability to spread in the incubation phase. That is when you feel great before you develop symptoms. So those are some distinct aspects why I would say we shouldn't really be alarmed about monkeypox on a widespread basis. Many experts I talk to say that monkeypox does not have the ability to cause a pandemic. Now, is this a deadly infection? How does it compare to say COVID?

Sure. So we've got a lot of infections that circulate, tuberculosis and others. This has a mortality rate of about 1%. Typically, it lives in animal reservoirs, but now we are seeing this human-to-human contact. We've got a few cases confirmed in the United States. There's likely going to be more. I would say a few dozen more could be one or 200. So we will see, I think, more community transmission, but we're learning more and more about it. Right now, both the UK and the CDC have recently put out more specific guidance about sexual intimacy among gay individuals, particularly when there is a rash. The infection causes flu-like symptoms after an incubation period of about 10 days. This sort of characteristic rash with these vesicles appears. Typically, it starts in the head and neck region. It goes down. But if you see that, for example, in a...

child, that's likely not monkeypox. It's likely hand foot mount disease or other infections that can cause something similar. Now, I'd also read that a good portion of our population is already inoculated against this because there's some crossover between smallpox and the monkeypox virus. What percentage of the population is probably already inoculated against monkeypox? Well, I would say probably everybody over age 55 because we stopped routinely giving the smallpox vaccine in 1972. And so the smallpox vaccine is very effective. It has an efficacy of about 85%.

And it may provide partial immunity, even for some of those where it doesn't provide complete immunity. Scientists are actually looking at giving the smallpox vaccine to people who recently got exposed to monkeypox because you may be able to fend it off during that incubation phase, the time when you feel good before you develop symptoms, something we couldn't really do with COVID-19. All right. So it sounds like you're not ready to panic yet about monkeypox. Dr. McCarrie, thanks so much for coming on. Good to be with you, Georgia. That was John Hopkins, Dr. Marty McCarrie.

Other stories we're tracking this week. On Monday, President Biden signaled that he would be open to responding with military force if China invaded Taiwan. Are you willing to get involved militarily to defend Taiwan if it comes to that? Yes. You are? That's the commitment we made. we agree with a one China policy. We signed on to it, and all the attendant agreements made from there. But the idea that it could be taken by force, just taken by force, is just not appropriate. It'll dislocate the entire region and be another action similar to what happened in Ukraine.

The White House downplayed the president's statement saying, quote, our policy has not changed in that America would provide Taiwan with the military means to defend itself if attacked. A Russian soldier was given life in prison on Monday in the first war crimes trial for Ukraine since Russia's invasion. The soldier pleaded guilty to killing a civilian who was not armed. And Tennessee is set to make homeless camping on local public property like Parks a felony. The new policy follows a 2020 law in the state that made it illegal to camp on most state-owned

property. Thanks for listening to Morning Wire. We created this show to bring more balance to the national conversation. If you love our show and you stand with our mission, please consider subscribing, leaving us a five-star rating, and most importantly, sharing our podcast with a friend. That's all the time we've got this morning. Thanks for waking up with us.

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