The Stock Market Doesn't Love Trumponomics

During his campaign, Donald Trump promised to lower the price of groceries. He didn't promise a recession. Now he is not even promising there won't be a recession, and admitting it is a real possibility. The S&P index is down 9% in a month, businesses are being whipsawed by Trump's on-again, off-again tariff policies, the government is being dismembered by Elon and the Muskrats, and more. Uncertainty is not good for the economy and this amount of uncertainly is unusually high and mostly self-inflicted by the President.

Here is the S&P 500 since Oct. March has not been kind to it:

Some voters notice stock market fluctuations when they get their 401(k) statements. If their portfolios are worth less than they were a month ago, the president tends to get the blame.

The stock market is not a perfect indicator of an upcoming recession, but a bear market is generally not a good sign. We are not there yet—a bear market is a 20% decline from the previous high—but the uncertainty is growing, rather than diminishing. This on-again, off-again tariff policy can go on only so long before it spooks everyone. Trump loves being unpredictable, but the economy does not share that sentiment. Companies do not want to invest and hire people when their business situation may be radically different tomorrow, so the uncertainty can lead to less investment, fewer hires, and ultimately a bear market and a recession.

At some point, a downward market becomes self perpetuating and there is nothing anyone can do until it plays itself out. When investors see day after day of stocks dropping, some of them get nervous and sell their holdings, in the hope of buying them back later and cheaper. But when many people want to sell and few people want to buy, the price drops, making it worse. We probably haven't reached that point, but we could if the uncertainty keeps up.

Another factor in the trade war—and thus more uncertainty—is how the E.U. will respond to Trump's tariffs. The European Commission has published a list of American products on which it intends to slap tariffs to punish Trump for the tariffs he has imposed on European products. It is a long list, but has been carefully constructed to maximize pain on Trump's supporters, although some of the items chosen for tariffs seem rather eclectic, including chewing gum, communion wafers, nicotine vapes, and women's negligees. No doubt the people making up the list know which states and districts these products come from and where the pain will be.

If a recession comes, Trump will have to make a decision: who to blame it on. He could try Joe Biden, but since the economy was humming along pretty well on Jan. 20, that might not work. It looks like his team has already selected the scapegoat: Sec. of Commerce Howard Lutnick. He might end up having the shortest tenure of a Commerce Secretary ever. That might not be so bad for him, since he actually wanted Treasury and didn't get it.

It is possible Lutnick might actually deserve to be canned quickly, though. On television appearances, he has made it clear that he knows little about economics and nothing about how tariffs work. He comes from Wall Street, which doesn't like tariffs, but at least he could know how they work. He has also contradicted Trump on occasion, which is one of those little no-no's. He is also fairly abrasive. In addition, he sometimes tries to be a mini-Trump. He didn't get the memo that D.C. is too small for more than one Trump. (V)

House Republicans Snuck Language into the CR to Protect Trump's Tariff Power

The House has now passed a continuing resolution (CR) and sent it over to the Senate. Since Congress can't even do its most basic task—funding the government—except under the greatest of pressure, these CRs happen regularly. Normally, they just continue funding at the current levels and that's it. They are not supposed to contain new policy, although they are technically just bills, so they can contain anything.

This one is a little different. A few departments, agencies, and programs got extra money. These are the VA, HUD, FAA, TSA, FEMA, and SNAP. There is also a pay raise for wildland firefighters.

But one item snuck in under the radar. Donald Trump has declared a national emergency on account of fentanyl and undocumented immigrants entering the country and has used the resulting powers to justify his tariffs on Canada, Mexico, and China. The law that allows the president to announce national emergencies also allows members of Congress to introduce privileged resolutions to terminate such national emergencies. These resolutions must be voted on by the full House within 15 days.

Republicans do not want any such votes because in some cases, it would force them to choose between what Trump wants and what their district wants. They don't want a public vote on this. This is especially the case for representatives whose constituents are hurting on account of the tariffs and want them to go away. So how did they solve this problem? They sneakily added a provision to the CR that would ban members of Congress from introducing a resolution to end the emergency, which would force a vote on Trump's power and, indirectly, on the tariffs. In other words, the House just passed a bill voluntarily giving up some of its remaining power and codifying this in law. How's that for power politics?

The Constitution, of course, grants the power to levy tariffs only to Congress. By law, Congress has delegated this power to the president under certain conditions, but that is supposed to be only in-case-of-emergency-break-glass situations, not normal politics. It is also noteworthy that delegation of authority might not pass muster with the Supreme Court, which has been increasingly skeptical about federal agencies doing anything without explicit instructions from Congress. In other words, the law that says the FDA can approve drugs that it thinks are good for the public health might be unconstitutional because Congress didn't list all the drugs to be approved. Delegating a core congressional power—levying tariffs—might alarm the Court. That said, it seems unlikely it will be challenged, in part because who might have standing to sue?

But the CR is not a done deal in the Senate. Minority Leader Chuck Schumer (D-NY) said that Democrats could filibuster the bill if changes aren't made. In the end, the Democrats generally cave, but there is still time for a deal. Pumpkin time is midnight tomorrow. (V)

Trump Administration Launches an App to Help People Self-Deport

You said Donald Trump wasn't tuned into the modern digital world? Wrong! His administration just released a new app to help people self-deport. But Trump isn't as sharp as he used to be. The app is free. Surely people interested in self deportation would have gladly paid $9.95 for it. A missed opportunity.

Immigration lawyers are advising clients not to use it. They are afraid that ICE will use the information to come after people using it and arrest them. They say if you are going to leave, better to just go on your own terms and not leave a paper trail.

The app is part of a $200 million campaign to get immigrants to leave the country. Another part is a video starring DHS Sec. Kristi Noem. In it she alternates between threatening immigrants and praising Donald Trump. In the ad, Noem looks stern and unforgiving. Here it is:

DHS used to have an app that helped immigrants file requests for asylum efficiently and legally. That app is gone now, as Trump doesn't want anyone to request asylum, so why make it easy? Nearly 1 million people used the old app to schedule appointments during the Biden administration. Those days are gone and even if an immigrant figures out how to file and request an appointment with an immigration judge, the backlog was years. Trump has fired staff from the immigration courts, resulting in judges retiring. An even-more understaffed court will make the backlog even longer. (V)

Trump Still Loves the Poorly Educated--and Wants More of Them

Donald Trump once famously said: "We love the poorly educated." Watch:

Pursuant to his love of the poorly educated, he is doing what he can to wreck the American educational system. Then there will be more poorly educated people for him to love. He is probably aware by now that when he lies to poorly educated people, they are more likely to believe him than are highly educated people, who are capable of listening to someone and determining that they are full of it.

Specifically, Trump has ordered Secretary of Education Linda McMahon to fire half the people in her department, which will make it unable to function, of course. She seemed enthusiastic about her task and said: "Today's reduction in force reflects the Department of Education's commitment to efficiency, accountability, and ensuring that resources are directed where they matter most: to students, parents, and teachers."

Workers were fired by e-mail sent after 6 p.m. Tuesday. They will remain on the payroll for 90 days and will get some severance pay after that, depending on how long they have been with the DoEd. The building was locked yesterday but is scheduled to be opened today so former employees can collect their belongings and then leave.

McMahon later said that firing half the staff is only the first step. The next step will be firing the other half and closing down the department altogether. She said that would eliminate bureaucratic bloat. One piece of "bloat" that was especially hard hit is the Civil Rights Division, the office that investigates racial discrimination in the educational system. Not specifically targeted (yet) is the office that administers Pell grants and other aid to poor students, but with fewer workers, it will obviously function slower and less well for the rest of its short life. Legally, only Congress can eliminate a department Congress created, but that doesn't seem to bother Trump or McMahon.

It is perhaps worth noting that Project 2025 called for the elimination of the DoEd. During the campaign, Trump claimed not to know what was in its report, but he sure figured it out fast. He is clearly a quick study.

Many people outside the DoEd are worried that with half the staff gone it will not be able to carry out the tasks that Congress has mandated it must carry out. Here are some of the main duties of the Department:

• Manage special programs established by the Individuals with Disabilities Education Act.
• Enforce equal access to education by enforcing civil rights legislation.
• Manage Pell grants and other grants and loans for 12 million students.
• Support states, localities and public and private institutions.
• Promote improvements in education through research, evaluation, and the sharing of information.
• Improve the management and efficiency of federal education activities.
• Increase the accountability of federal education programs to the President, Congress, and the public.
• Encourage the public to be involved in federal education programs.
• Improve the coordination of federal education programs.

These are not easy things to do with full staffing; with half staffing (or less), some of these tasks will have to fall by the wayside. (V)

Judge Orders Trump to Halt Penalties on Law Firm Perkins Coie

Last week, Donald Trump signed an XO that bans the federal government from hiring the elite Perkins Coie (Koo-ee) law firm, bans its employees from entering federal buildings, and bans and strips security clearances from all employees that have one. It also bans the federal government from using contractors represented by Perkins Coie. The firm represented Hillary Clinton's campaign in 2016 and was also involved with the Steele dossier. The XO was thus another move to intimidate all people and companies in the U.S. from doing anything that Trump doesn't like. The firm did what lawyers do: It sued. Interestingly enough, it hired another law firm, Williams & Connolly, to defend it, even though it is one of the top law firms in the country itself, with over 1,000 lawyers and an annual revenue of over $1 billion.

Yesterday, U.S. District Judge Beryl Howell issued a temporary restraining order blocking some of the penalties until she can hold a full hearing on the merits of the case. She said that the order could damage the integrity of the entire legal profession by intimidating lawyers from taking up cases that go against Trump's interests. She commended Williams & Connolly for taking the case, since it is probably now also on Trump's blacklist. She also noted that the XO was written in such a way that there could not possibly be any goal other than retribution. She also noted that it sent chills down her spine.

Howell may or may not have known that Perkins Coie first reached out to the firm of Quinn Emanuel to take the case, but Quinn refused because it was afraid of Trump punishing it for doing so. Several other top law firms also refused to handle the case. No profiles in courage here. Williams & Connolly was formed by famed defense lawyer Edward Bennett Williams, who defended many clients against the government. The firm prides itself on its willingness to take tough cases.

The lawsuit did not ask the judge to restore the firm's security clearances and she did not restore them. The president does have broad powers to grant or withdraw security clearances, even for malevolent reasons. Ordering the president to provide security clearances would probably fail on appeal even though the loss will hurt the firm economically by preventing them from handling national security cases (e.g., defending whistleblowers).

This is not the first time Trump has gone after a big white-shoe law firm. He also yanked all the security clearances from Covington & Burling for the sin of agreeing to defend former special counsel Jack Smith. Covington & Burling was so cowed by Trump that it didn't even fight back, despite the substantial economic loss. Now they know how Russian law firms feel—assuming Russia even has law firms.

Former federal prosecutor and current Duke law professor Samuel Buell said: "This is certainly the biggest affront to the legal profession in my lifetime." Another former federal prosecutor and current law professor (at Columbia) Daniel Richman said: "If you're a political enemy, you really need the best representation when the government comes after you for who you are. Chilling the lawyers who represent those people hurts the rule of law because when the government can't be legally opposed, the law provides no protections to anyone and you start to live in an autocracy." Last week, Acting U.S. Attorney for D.C., Ed Martin, told Georgetown Law School that he would stop hiring its graduates unless the law school abolished its DEI programs. Shakespeare put this a bit more crudely, but the idea is the same: "The first thing we do, let's kill all the lawyers" (spoken by Dick the Butcher in Henry VI, Part II).

Meanwhile, AG Pam Bondi is even taking on the entire legal profession. She sent a letter to the American Bar Association questioning its DEI practices. She also barred a slew of government lawyers from attending the Bar Association's annual conference on white-collar crime, even though they usually go every year. It is clear that Trump and his henchwoman are hell-bent on destroying any law firm, law school, or organization of lawyers that refuses to obey his orders. This does not bode well for the rule of law since, if he succeeds, anyone the DoJ indicts will not be able to hire counsel. (V)

Trump and Musk Are Teeing Up a Plan to Cut Social Security

Donald Trump and Elon Musk are starting to talk about how there are hundreds of billions of dollars of waste, fraud, and abuse in the Social Security system. This is a total lie, but it could well be a precursor of massive cuts down the road. Musk has previously said that there are 20 million people over 100 who are receiving benefits. This is just made-up garbage. But the pace seems to be picking up now.

Musk is now also talking about fake and stolen Social Security numbers. Fake numbers are impossible, as the Social Security Administration knows what numbers it has issued. Chuck Schumer said: "The richest man on Earth repeated again a bevy of lies that entitlement programs tens of millions of people rely on are riddled with fraud and abuse. That's a pretext to slashing them, but it's false." The SSA's inspector general made a study last year and concluded that while there is some fraud, it is less than 1% of all payments. The agency has complete data on payroll taxes paid and calculates benefits based on that data. It is very hard to game the system.

How could Musk cut the SSA budget? One way would be to use AI to evaluate all claims. It could be tuned to reject any claim that wasn't 100% documented or where the documentation did not exactly follow a complex set of rules. Your application form was not filled in using the Calibri 10-point font? We can't read it, so it is hereby rejected. (V)

How Midterms Are Different from Presidential Elections

Midterm elections have historically differed from presidential elections in three ways, as follows:

• Turnout: Not as many people vote in midterms as in presidential elections. In some states, there is neither a race for senator or governor, so many people don't bother to vote. Congresscritter? State senator? Just not worth the trouble. The historical average turnout of eligible voters in presidential years since 1856 is 64%. For the midterms since then it is 49%, a gap of 15 points. Of course, the definition of "eligible voter" has changed since then, since back in 1856 it was only white men, and possibly only property-owning white men at that in some places. Here are the turnout rates since 1972, when the voting age was reduced to 18 nationwide:
  
  
  
  
• Demographics: Turnout in the midterms is not smaller because 15% of people in each demographic fail to show up. Different demographics have different amounts of interest in voting in the midterm years. In particular, white voters are overrepresented in the midterms by about 3 points. Young voters 18-29 are underrepresented by 6 points and seniors are overrepresented by 6 points. College graduates are overrepresented by 4 points. In other words older, white, college-educated voters show up in much larger numbers than younger, non-white, non-college voters.
  
  This cuts both ways. White voters are more Republican than non-white voters but college-educated voters are more Democratic than non-college voters.
  
  
• Partisan divide: But the biggest factor generally seems to be in partisanship. House incumbents from the party not in the White House almost always hold their seats if they run for reelection. Also, the president's party nearly always loses House seats and often Senate seats unless there is something very unusual going on. Here are the midterm results since 1962:
  
  
  
  Only twice since 1962 has the president's party won seats in the House, and each of those elections was special. In 1998, the Republicans were busy impeaching Bill Clinton for lying about his affair with Monica Lewinsky. The voters didn't see that as serious enough to impeach Clinton and the Democrats picked up 5 seats. In 2002, voters had fresh memories of George W. Bush's performance after the 9/11 attacks and rewarded him for it. Senate races in the midterms also tend to favor the opposition party.

On the average since 1972, the out party has improved its share of the two-party vote in the midterms by about 3 points, which means the margin changed by 6 points. Republicans won the House vote by two points in 2024, so if the Democrats improve their share they will win the House vote by 1 point in 2026. That may or may not be enough to swing the chamber. But if the Republicans prove too be incompetent or unpopular during 2025 and 2026, it could be a blowout. (V)

Jeanne Shaheen Is Calling It Quits

Democrats got some very bad news yesterday. Sen. Cynthia Jeanne Shaheen (D-NH) is retiring. She could easily have won another term, but has had enough. She has been in public office for 35 years now, as a state senator, governor and U.S. senator. She was born in Missouri, raised in Pennsylvania, graduated from Ole Miss and taught high school in Mississippi before moving to New Hampshire in 1973. She worked on Jimmy Carter's 1976 campaign and Gary Hart's 1984 campaign.

Democrats are now going to have to fight hard for a seat that should have been easy. The Democrats' best hope is probably Rep. Chris Pappas (D-NH), who has won four times in NH-01, one of the state's two congressional districts. NH-01 has a PVI of EVEN, so he could do well in NH-02, which is D+2 and currently represented by Rep. Maggie Goodlander (D-NH). If Pappas decides against a run, former representative Annie Kuster might come out of retirement to run. Kuster's successor (Goodlander), might try for a speedy promotion if Pappas doesn't run. None of these people have won statewide.

In contrast, the Republicans have a bevy of potential candidates who have won statewide. Gov. Kelly Ayotte (R-NH) is up for reelection and could easily switch to the Senate race. She used to be a senator from 2011 to 2017, until Sen. Maggie Hassan (D-NH) beat her. Former governor Chris Sununu previously said he wouldn't run for the Senate in 2026, but that was on the assumption that Shaheen would run again. Her retirement could change that. He is a potential 2028 presidential candidate and could have a chance if Trumpism is out of fashion then—for example, if Donald Trump wrecks the country. Former senator Scott Brown is another potential candidate who has won statewide—only the state he won was Massachusetts, not New Hampshire. He is unique since he is the only senator to have posed nude for Cosmopolitan magazine. Surely you didn't expect us to run the photo. This is a family blog, after all.

Democrats face open-seat races in three states they now hold—Michigan, Minnesota, and New Hampshire. Sen. Jon Ossoff (D-GA) also faces a tough race, especially if Gov. Brian Kemp (R-GA) jumps in. However, Kemp may be focusing on running for president in 2028 and might skip the Senate race, just as another 2028 potential candidate, Gov. Andy Beshear (D-KY), did. Kemp hasn't said anything yet about his plans. (V)

Greenland Election Has Mixed Results

We do cover foreign elections from time to time, but generally when they are in a major country that interacts with the U.S. a lot, like Canada, the U.K., Germany, and France. Well, Greenland had an election Tuesday and all of a sudden that is big news because Donald Trump wants to buy it. The election gives some feedback from the Greenlanders about how they feel about it.

Greenland is an autonomous region within the Kingdom of Denmark, although technically it is in North America. It is big, but not as big as it appears on Mercator-projection maps. The population is 56,000, about the same as Carson City, NV. It got self-rule in 2009, but Denmark handles its defense.

The biggest election winner was the center-right Democrats Party [sic] with 30% of the vote, triple what it got in 2021. It supports independence for Greenland in due course of time, but not yet. The party's leader, Jens-Frederik Nielson, said Greenland is not for sale. A deal between him and Trump is not in the cards.

In second place, with 25% of the vote, was Naleraq. Its leader, Pele Broberg, also wants independence, but much faster than Nielson. He is willing to work with the U.S. but does not want to join as a state or territory. A coalition of the Democrats and Naleraq is likely, but not certain, as Nielsen could form a government with two smaller parties instead.

Fun fact: Greenland has eight political parties but it doesn't have a Green Party, like most European countries do. Seems like a no-brainer to us. (V)

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