| | |  | BY BEN WHITE | HEY SIRI, DEFINE RECESSION — Set multiple alarms on your phone tonight. Load your coffee maker with the strongest brew you’ve got. And prepare at least six browser windows to feverishly refresh this Bureau of Economic Affairs website at precisely 8:30 a.m. Thursday morning to have your mind absolutely blown by the … first, possibly inaccurate and certain to be revised reading of U.S. economic performance in the second quarter of this deeply weird economic year. We tease. But just a bit. Because it is actually a big deal whether the reading shows the economy, as measured by gross domestic product, grew by a touch or declined by a hair in the second quarter. If it’s the latter, which many but certainly not all economists expect, it would be the second straight quarter of shrinking GDP. That’s one, though not the only definition of, (cue scary music) RECESSION! It’s certainly an obsession at the White House these days, where senior officials from President Joe Biden on down have been feverishly telling anyone who will listen, in public and private, that even two quarters of negative growth would not mean recession. This is where it gets a bit confusing for the non-econ-obsessed, so hang with me until we get to the politics. Because technically the White House would be correct. Two declines in a row is one classic hallmark of recession. But as I’ve noted in this space before, there is no official definition of recession in the U.S. beyond a broad decline in economic activity spread over time. The official arbiters at the National Bureau of Economic Research won’t make a call either way for a while. And by many other measures, including job creation, final consumer demand and gross domestic income (among other things), this does not look like any kind of recession we’ve had before. Strip out a quirky decline in inventory-building and an increase in imports driven by pandemic-related domestic shortages of goods and first-quarter GDP likely would have been positive. I will take you no further into the weeds, but while the trade deficit reduces GDP, it doesn’t actually indicate a shrinking economy. Anyway, the number itself on Thursday will only give us one early glimpse at the last three months. It could show a more concerning decline in consumption or throw up other red flags. Or it could be surprisingly decent. But it’s likely to be a very mixed bag in either direction. Still, it’s a huge deal politically. Republicans are salivating at the opportunity to take a negative number, cast aside any of the wonky nuances, and declare the “Biden Recession” well underway. Plenty of news outlets may treat it that way as well.
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| That would be horrible news for the White House and Democratic candidates up and down the midterm ballot. They already face brutal headwinds given Biden’s dismal overall numbers and his historically low approval rating on the economy. Having to go on the stump and explain why this isn’t technically a recession is the kind of defensive crouch no candidate wants to take. If you are explaining, as the saying goes, you are losing. But frankly, the much bigger issue for Democrats is not GDP. The first, second and third biggest problems are all the same thing: inflation. The issue obliterates all others from Covid to guns and the Ukraine war in polling of people’s top concerns. The Federal Reserve’s aggressive campaign to bring prices down by slowing demand with the blunt tool of interest rate hikes could very well work. But it could also cause at least a short recession itself, as often happens when the Fed is in tightening mode. As my observant colleague Victoria Guida noted here , the Fed’s moves are already biting into the economy by making it significantly more expensive to borrow for stuff like cars, homes and big-ticket appliances. The central bank’s rate-setting committee, in a unanimous vote, hiked rates by another hefty three quarters of a point today with the promise of more to come until inflation — currently running at 6 to 9 percent annually (depending which measure you use) — drops closer to the bank’s target of around 2 percent. That’s gonna take some time, though Fed Chair Jerome Powell eased Wall Street concerns today by saying both that he doesn’t think the U.S. is in recession and at some point it will become appropriate to slow the pace of hikes. The White House and Democratic candidates can take some solace in recent gas price declines. But those are not a lock to remain given the volatility of the Ukraine war situation and sanctions on Russia set to hit late this year. And prices for most other stuff remain stubbornly high, easily wiping away wage gains and making people feel poorer and deeply upset about the economy overall. The bottom line: A negative GDP number Thursday morning would be a political nightmare for Democrats — though not necessarily an economic disaster, unless it’s much worse than expected. A positive number would make the whole debate seem ridiculous. Democrats — and frankly all of us — should be more concerned with fresh inflation numbers out Friday morning. Set your alarms for that one as well. And maybe switch from coffee to double espresso. 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 @morningmoneyben.
| | — Manchin says he and Schumer have a deal that includes energy, taxes: Sen. Joe Manchin says he and Senate Majority leader Chuck Schumer have reached a deal on a bill that includes energy and tax policy, a turnaround after the two deadlocked earlier this month in talks on Democrats’ marquee party-line agenda. Manchin said in a press release that his agreement with Schumer “would dedicate hundreds of billions of dollars to deficit reduction by adopting a tax policy that protects small businesses and working-class Americans while ensuring that large corporations and the ultra-wealthy pay their fair share in taxes.” — A guide to Trump’s legal threats: While at least two former top White House officials have appeared before a grand jury recently, it’s not yet clear whether former President Donald Trump is, or will become, the target of a federal criminal probe. Yet the federal inquiry is just one of the probes edging closer to the former president , including an Atlanta-area grand jury investigation by a local prosecutor and a civil inquiry by the New York attorney general. DOJ is seeking information about a host of well-known allies in Trump’s effort to disrupt the transfer of power, and federal prosecutors revealed today they had obtained a new search warrant to access the phone of one of those allies, attorney John Eastman.
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| — Blinken to meet with Russian foreign minister and discuss Griner, Whelan: The United States has “put a substantial proposal on the table” to facilitate the release of WNBA star Brittney Griner and Paul Whelan , two Americans detained in Russia, Secretary of State Antony Blinken said today. Blinken plans to meet with Russian Foreign Minister Sergey Lavrov in the coming days to personally follow up on the proposal, as well as hold other conversations with Russian officials. — Justice Thomas no longer listed as GWU faculty after Roe backlash: Supreme Court Justice Clarence Thomas is not listed as an instructor for any courses on the website for George Washington University’s law school , where he’s taught since 2011, a removal that follows the high court’s controversial decision undoing decades of precedent protecting a nationwide right to abortion access. Thomas’ role in the decision prompted a GWU student to launch a petition signed by 11,300 people calling for Thomas to be removed from his teaching post at the university. — Biden admin expected to soon declare monkeypox a health emergency: Two people with knowledge of the matter said the declaration by the Department of Health and Human Services is expected as soon as the end of the week . The move would follow a similar decision made last weekend by the World Health Organization. HHS could then take a slew of actions, including accessing new money and appointing new personnel.
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Saudi Crown Prince Mohammed bin Salman greets French President Emmanuel Macron in December of 2021. | Bandar Aljaloud/Saudi Royal Palace via AP | TRICKY TALKS — Saudi Crown Prince Mohammed bin Salman will meet French President Emmanuel Macron in Paris on Thursday, writes Giorgio Leali . The French president and the Saudi prince will meet for a working dinner at the Elysée palace , Macron’s office said, without providing further details on the goal of the visit. The official trip comes as France and Europe are trying to find alternative energy suppliers amid Russia’s war in Ukraine. Earlier this month, Macron met with UAE President Mohammed bin Zayed Al Nahyan and announced a diesel supply agreement. At a G-7 meeting last month, Macron called for a mechanism to bring down oil prices by asking OPEC countries such as Saudi Arabia to increase production — a solution that didn’t convince other G-7 leaders. The visit also comes shortly after Biden met with Mohammed bin Salman, a move that sparked controversy in the United States.
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3 years The amount of prison time former Minneapolis police officer J. Alexander Kueng was sentenced to in federal court today for violating George Floyd’s civil rights during the May 2020 killing. Kueng’s co-defendant, Tou Thao, was sentenced to 3.5 years shortly after. Both terms were lighter than sentencing guidelines recommended. |
| | | RISE OF THE FAR-RIGHT — A network of young neo-Nazis is setting up terrorist cells across Europe and the U.S. for the purpose of carrying out armed attacks, a joint investigation has revealed . Using fake identities, reporters from Welt Am Sonntag, POLITICO and Insider gained access to about two dozen of this far-right cell’s chat groups, spoke with insiders and secured more than 98,000 messages, including photographs and videos. In the process, they also uncovered death lists, death threats against politicians and journalists and instructions on how to make bombs and use 3D printers to produce weapons parts. Alexander Nabert , Christina Brause , Bryan Bender and Nick Robins-Early spent over a year on the investigation and found the real names and stories of some of these young, radicalized neo-Nazis. Read the stunning report . Did someone forward this email to you? Sign up here . | |
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