A Second Bush Recession?

For a President, having one recession might be unfortunate. But to have two? That must be considered careless. Yet Sterling Newbury, a private equity analyst who writes over at TPM, thinks carelessness has been the order of the day. Since last week's slower than expected GDP figures there has been much discussion the extent of the upcoming slowdown. Newbury is more bearish than most:

"The reason, ultimately, that the "doom and gloom" caucus is predicting recession, is that the economy is tearing through the net of housing and federal stimulus that has held growth up, and there is very little but the cold, cold ground to break the fall. With inflation here, people are pulling out of short bonds, expecting more rate increases, this is forcing up short term rates."

The chances of slowdown are greatly hastened by any number of grim possibilities: the possibility that foreign central banks will stop buying American assets leading to a declining dollar, a further (unexpected) oil shock, a decline in the housing market or an economic shock caused by a security event. Even without these, Newbury says thinks that 2007 will see a signifcant GDP slowdown, with certain areas of the country in recession. If he's right, it will turn conventional wisdom on its head. Economists traditionally worry that Politicians will cynically engineer economic pre-election booms. The idea that they might be able to bring about a bust the year before an election..... well that would take a President of extraordinary economic vision, wouldn't it?