Jul 19, 2022 - Podcasts

Inflation is bad…a recession is worse

We’re struggling at once with high inflation in the U.S. -- and the possibility of a recession. And some economists are arguing that the steps being taken to ease inflation could actually cause a recession. And would that be even worse?

  • Plus: how the end of Roe v. Wade may overwhelm foster care systems.
  • And: a warning that we face “collective suicide” by climate change.

Guests: Axios' Emily Peck and Russell Contreras.

Credits: Axios Today is produced by Niala Boodhoo, Sara Kehaulani Goo, Alexandra Botti, Nuria Marquez Martinez, Lydia McMullen-Laird, Alex Sugiura, and Ben O'Brien. Music is composed by Evan Viola. You can reach us at [email protected]. You can text questions, comments and story ideas to Niala as a text or voice memo to 202-918-4893.

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NIALA: Good morning! Welcome to Axios Today!

It’s Tuesday, July 19th.

I’m Niala Boodhoo.

Here’s what you need to know today: how the end of Roe v. Wade may overwhelm foster care systems. Plus, a warning that we face “collective suicide” by climate change.

First: inflation is bad - but a recession could be worse. That’s today’s One Big Thing.

NIALA: We're struggling with two things right now, high inflation and the possibility of a recession. And some economists are arguing that the steps being taken to ease inflation could actually cause a recession, and would that be even worse? Axios’ Emily Peck joins us now with the big picture. Hey Emily.

EMILY PECK: Hey Niala.

NIALA: Emily, we had Neil on last week and of course the headline was how bad inflation is. So is it too soon to say that we're seeing signs of inflation easing, especially given what we saw last week?

EMILY: So Neil, as he always is, is right. Inflation is terrible and it's bad and the numbers we saw last week were horrible. But yes, there are a few signs that relief could be in sight. The prices that companies pay for commodities like lumber are coming down. If you drive, you know that gas prices have come down quite a bit over the past month. Those changes weren't reflected in the numbers that we saw last week. Those were June numbers. It's July now. These are signs possibly, that inflation will ease a little bit. But of course, as I said before, Neil is correct. Inflation is quite bad.

NIALA: So Emily, the Federal Reserve has been raising interest rates to tamp down inflation. Do economists think we have time for the Fed to take more of a wait and see approach to see if what they've done so far is working?

EMILY: So, I mean, what the Federal Reserve is trying to do, like big picture zoom out, is to cool off demand and slow down the economy, less demand, prices should moderate. You do that too much, you cool off demand too much, and what happens is you trigger a downturn, a slowdown, a recession. And a recession is not good, Niala. So all eyes really are on the Federal Reserve next week when they're expected to announce another rate increase probably of at least 0.75 percentage points.

NIALA: Right, so how much worse is a recession for everyone versus high inflation?

EMILY: I mean, this is the crux of the controversy. The economists that I spoke to who tended to be on the progressive side, they say a recession would be worse. It would throw a lot of people out of work. Even those who didn't lose their jobs would lose a lot of the leverage, you're less likely to get a raise. You, maybe you can't switch jobs as easily anymore. For college graduates and people trying to enter the workforce, you know, there's less opportunity. And that kind of downturn in a recession can have long lasting scarring effects.

NIALA: What are economists and what are businesses thinking now when they are polled about the likelihood of a recession? Has that thinking changed at all over the past couple of weeks?

EMILY: It's really all over the place. I get a lot of notes in my inbox where experts are saying there's a 50% chance of recession, which, I mean, there's not much you can do with that. If someone tells you there's a 50% chance of rain, what do you do? Do you take an umbrella or not? No one really knows what's going to happen is the honest truth. I know you're not supposed to say that as a markets reporter, but the more rate hikes we see, I think the more danger of triggering a recession we're in.

NIALA: Emily Peck co-writes the Axios Markets newsletter. Thanks, Emily.

EMILY: Thank you.

NIALA: Back in a moment with how the end of Roe V. Wade could bring things from bad to worse for foster care systems.

NIALA: Welcome back to Axios Today. I'm Niala Boodhoo. Underfunded, overstressed US foster care systems could be facing more pressure from the overturning of Roe V. Wade. The 400,000 plus kids currently in foster care already face a shortage of placements, low high school graduation rates and disproportionately high rates of incarceration and homelessness. Here to dig deeper is Axios’ justice and race reporter Russell Contreras. Hey Russ.

RUSSELL CONTRERAS: Thanks for having me.

NIALA: Russ, I think we need to start with you explaining how the overturning of Roe could result in more kids in the foster care system.

RUSSELL: In states that have now outlawed abortion in a post-Roe world, you may see women being forced to bring their pregnancy to term. That means that the children could be facing either adoption or foster care. Now we know statistically that if someone is forced to bring a pregnancy to term, they may not give up their child for adoption immediately. However, a state can take away a child if you cannot afford to keep that child. That is, people can come into a situation and see they're struggling with poverty and hunger and the state could take them away. Now you have toddlers and older kids in a system that can barely find homes for them. Also, we have to keep in mind that children that end up in the foster system later have a hard time finding homes, either temporarily or permanently. And what we know, the children that age out of the foster care system, without finding permanent homes, they struggle with getting jobs, less than 5% go to college. And statistically, according to various studies, many of them end up with addiction problems, they end up homeless, or they end up interacting with the criminal justice system.

NIALA: What is the current state of the foster care system across the US?

RUSSELL: Right now because of surges and drug addiction by biological parents, foster care systems have been overwhelmed. They've been struggling with capacity issues, putting children in emergency shelters, hotels, out-of-state institutions and youth prisons. In one system in Virginia, the state is having to force children to sleep in state government offices due to a shortage of foster homes. In places like Illinois, the director of the Illinois Department of Children and Family Services has faced nine contempt charges for failing to comply with court orders around the placement of children. So overwhelmingly across the country, states are struggling with their current foster care systems and finding homes and finding safe environments for children. This is about to get worse, according to some experts.

NIALA: What efforts are we seeing to shore up these systems or better protect these children?

RUSSELL: Right now states are struggling. Some anti-abortion advocates are saying they will set up structures, religious-based structures, to find homes for children's and saying they will, provide care for free. You know, there is a group called the Christian Alliance for Orphans. And there are programs like Jonah's Journey or Together for Good. They provide free volunteer foster care system. And I've seen a number of others pop up here and there. But the reality is, without an influx of new money, of new strategies and new plans, these overwhelmed systems today that can barely survive, they're going to be, see more pressures, they're gonna see a lot of new influx of children and these systems right now are surviving on rusted nails, old rope, warp screws. If you add any more pressures to these systems, they're gonna explode and we may not see the hard effects of this explosion for decades, but we will feel it.

NIALA: Russell Contreras is the justice and race reporter at Axios. Thanks Russell.

RUSSELL: Thanks for having me.

ANTONIO GUTERRES: “We have a choice. Collective action or collective suicide. It is in our hands.”

NIALA: United Nations secretary general António Guterres talking about what he called “the climate emergency” at a conference yesterday – the same day that parts of Europe saw unprecedented heat. Temperatures hovered around 100 degrees fahrenheit in the UK on Monday, shutting down much of the country - even the British Museum. A Met office meteorologist in his report used a new shade of red on his map, saying Britain had never seen temperatures that high. In France some areas also saw record-breaking heat, with at least one town reaching over 108 degrees fahrenheit and today is forecast to be even hotter.

That’s it for us today. Remember you can reach me and the team at podcasts at axios dot com or you can text me at (202) 918-4893.

I’m Niala Boodhoo - thanks for listening - stay safe and we’ll see you back here tomorrow morning.

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