Updated Aug 21, 2019

Trump backtracks on payroll tax cut

Photo: Mandel Ngan/AFP/Getty Images

President Trump abandoned his stance on considering a payroll tax cut Wednesday, just 1 day after telling reporters that he had been "thinking about" whether to pursue the move.

The big picture: Discussions over cutting the payroll tax, which currently sits at 6.2% and is used to fund Social Security and Medicare, are part of a broader White House effort to stem fears of a coming recession — though Trump insisted to reporters that "whether or not we do it now, it's not being done because of recession." Sources tell Axios' Jonathan Swan that Trump is "running out of tools" to juice the economy, with an economic slowdown looking increasingly likely ahead of the 2020 election.

Context:

  • On Monday, Trump tweeted that the Federal Reserve should cut interest rates by "at least 100 basis points" — a drastic measure that the Fed normally uses to stimulate the economy in a recession.
  • The inversion of the yield curve, a warning sign that has preceded every recession for the past 70 years, caused a major sell-off in the stock market last week. The market has since recovered completely, but prolonged trade tensions between the U.S. and China have caused many investors to remain skittish.
  • The White House previously denied an Aug. 19 Washington Post report that cutting payroll taxes was under consideration, before Trump stated in an Oval Office pool spray that he was, in fact, "thinking about it."

Go deeper: Trump economic advisers look to do damage control amid fears of recession

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Only a few states are at serious risk of recession

Data: LendingTree; Chart: Naema Ahmed/Axios

There are growing worries about a global recession or a U.S. recession, but individual states are also at risk. While states generally move in concert with the country, not every state started and ended its last recession in line with the broader U.S. recession of 2007–2009.

Case in point: There have been 5 states where recessions have occurred between that recession and now. The most recent is Alaska, which was in recession from Q2 2016–Q2 2017, Lending Tree chief economist Tendayi Kapfidze notes in a recent post.

Go deeperArrowSep 13, 2019

The media overcorrects for its past flubs

Illustration: Sarah Grillo/Axios

Most business reporters didn't see the Great Recession of 2008 coming, and political media knew Hillary Clinton would win.

Why it matters: As recession signals flash once again and the 2020 election looms, they're both over-correcting — afraid of missing the world's biggest story — again.

Go deeperArrowSep 4, 2019

Markets provide an unambiguous signal that investors expect recession

Data: Federal Reserve Bank of St. Louis; Chart: Chris Canipe/Axios

There had been debate among economists and fund managers about the importance of previous yield curve inversions, but Tuesday’s market action provided an unambiguous signal that investors are expecting a recession.

Driving the news: The U.S. Treasury yield curve completely inverted Tuesday, with 1-, 2- and 3-month Treasury bills all paying higher interest rates than 30-year Treasury bonds.

Go deeperArrowAug 28, 2019