Doom is Coming

UPDATED at 8:53am — late last night, the Biden Administration made progress to avert the railroad strike. As noted below, even without the strike happening, the economic headwinds against the Biden Administration and the economy are showing strains. In light of the strike, however, I have revised the article from what was emailed. The original will be below in italics. The revision is above.

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A railroad strike appears to have been averted.  Railroad employees I have talked to who insisted they will go on strike tell me they are fine with their pay.  They are not fine with limited days off on which they must remain on call.  They are tired.  A strike would cost our economy $2 billion a day.  The Biden Administration worked through the night Thursday to avert a strike.

The stress levels on the economy, even with no railroad strike, are hurting our economic systems.  Just the other day, as the market plunged more than 1,200 points over inflation news — the worst loss since 2020 — as Democrats celebrated the Inflation Reduction Act at the White House.  In the next week, the Federal Reserve could raise interest rates three-quarters 0f a percent, bringing rates to their highest levels since 2007.

In anticipation of the railroad strike, major railroads had already stopped shipping ammonia to fertilizer manufacturers and chlorine to municipal water treatment facilities.  They did not want those hazardous chemicals in unattended train cars in case the strike happened.  Now, they will have to ramp back up deliver.

Former Treasury Secretary Larry Summers recently noted that even raising rates to four percent may not be enough to get inflation down to two percent.  Even presuming inflation gets to two percent, that just means inflation’s growth has slowed.  It does not mean that we had deflation.  Prices will still be up far higher than wage increases.  High interest rates will dip the economy into a recession.  Unemployment will go up with people laid off, unable to buy groceries or gas with high prices.

In less than two months, Americans will head to the polls.  Early voting will be dominated by Democrats.  Every day closer to Election Day will probably bring worse economic news.  We could see a massive divergence between the people who vote the earliest and those who vote later or on election day as the economic winds blow.

Things seemingly are getting worse.  Even without railroad workers striking, nurses are striking in Minnesota.  UPS workers are set to strike in a few months.  Stores are trying to stock up their Black Friday and holiday shopping.  We are entering the peak period for supply chain operations.  A single ripple can cause a hurricane in the economic system.

The Biden Administration has no more cards to play.  A dysfunctional Congress will have to act.  If railroad workers wind up going on strike, Congress can delay the strike, but would progressives really want to stand up to labor unions?  Would Republicans really want to help Democrats avoid an economic catastrophe?  These questions do not have easy answers.

Progressives are beholden to labor unions and the labor unions feel emboldened to strike.  Public support for private sector unions has gone up.  Unions feel like they are driving the conversation.  Republicans in Congress feel betrayed by Democrats on the Inflation Reduction Act.  Democrats themselves have called it a climate change bill and have largely ignored its its impact on inflation.

Both sides are hurtling towards midterm elections as polling shifts back in the Republican direction.  The Economist/YouGov poll had the Democrats with an eight point lead in the generic ballot two weeks ago.  Last week, it was a six point lead.  This week, it is a four point lead.  In Georgia, the Quinnipiac poll had Raphael Warnock with a ten point lead in June.  This month, he has a six point lead.  Democrats in Georgia say the Q poll undercounts the GOP by about 5 points.  That means the GOP could pick up the Senate. 

It’s not just the Senate poll. In June, Quinnipiac had Brian Kemp and Stacey Abrams tied. Now, Kemp is ahead two points. Again, Democrats in Georgia said in June that the Q poll undercounts the GOP vote in Georgia by five points. This current polling is brutal for Democrats. Doom is coming.

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A railroad strike may be coming.  Railroad employees I have talked to who insist they will go on strike tell me they are fine with their pay.  They are not fine with limited days off on which they must remain on call.  They are tired.  If they strike, it will cost our economy $2 billion a day.

The $2 billion a day estimate comes from the American Association of Railroads.  Our economy depends on trains.  Without them, ammonia for fertilize and chlorine for water treatment do not get to farmers and municipalities.  Without them, coal does not get to power plants.  We need our railroads operational.  But we need our rail operators functioning and not burned out.  This is not an easy situation.

Had President Biden dragged his feet on imposing a cooling off period, he could have allowed the strike to begin and then cooled it off to return the situation to normal before the midterm election.  By imposing a cooling off period in the summer, time ran out and September 16, 2022, became the date for a strike.

The stress levels on the economy, even if no strike transpires, are hurting our economic systems.  Just the other day, as the market plunged more than 1,200 points over inflation news — the worst loss since 2020 — as Democrats celebrated the Inflation Reduction Act at the White House.  In the next week, the Federal Reserve could raise interest rates three-quarters 0f a percent, bringing rates to their highest levels since 2007.

Former Treasury Secretary Larry Summers recently noted that even raising rates to four percent may not be enough to get inflation down to two percent.  Even presuming inflation gets to two percent, that just means inflation’s growth has slowed.  It does not mean that we had deflation.  Prices will still be up far higher than wage increases.  High interest rates will dip the economy into a recession.  Unemployment will go up with people laid off, unable to buy groceries or gas with high prices.

In less than two months, Americans will head to the polls.  Early voting will be dominated by Democrats.  Every day closer to Election Day will probably bring worse economic news.  We could see a massive divergence between the people who vote the earliest and those who vote later or on election day as the economic winds blow.

Things seemingly are getting worse. 

Even if the railroad workers do not strike, nurses are striking in Minnesota.  UPS workers are set to strike in a few months.  Stores are trying to stock up their Black Friday and holiday shopping.  We are entering the peak period for supply chain operations.  A single ripple can cause a hurricane in the economic system.

The Biden Administration has no more cards to play.  A dysfunctional Congress will have to act.  If railroads strike, Congress can delay the strike, but would progressives really want to stand up to labor unions?  Would Republicans really want to help Democrats avoid an economic catastrophe?  These questions do not have easy answers.

Progressives are beholden to labor unions and the labor unions feel emboldened to strike.  Public support for private sector unions has gone up.  Unions feel like they are driving the conversation.  Republicans in Congress feel betrayed by Democrats on the Inflation Reduction Act.  Democrats themselves have called it a climate change bill and have largely ignored its its impact on inflation.

Both sides are hurtling towards midterm elections as polling shifts back in the Republican direction.  The Economist/YouGov poll had the Democrats with an eight point lead in the generic ballot two weeks ago.  Last week, it was a six point lead.  This week, it is a four point lead.  In Georgia, the Quinnipiac poll had Raphael Warnock with a ten point lead in June.  This month, he has a six point lead.  Democrats in Georgia say the Q poll undercounts the GOP by about 5 points.  That means the GOP could pick up the Senate. 

It’s not just the Senate poll. In June, Quinnipiac had Brian Kemp and Stacey Abrams tied. Now, Kemp is ahead two points. Again, Democrats in Georgia said in June that the Q poll undercounts the GOP vote in Georgia by five points. This current polling is brutal for Democrats.

Democrats need something to help them.  The light at the end of the tunnel for Democrats may, instead be a fast approaching rail road strike.  Doom is coming.