Abrego Garcia Is Still Not Free (And Neither Are We)

Years ago, when I was deciding where to travel to do my master’s thesis research, I was on the hunt for a developing economy country that was, you know, actually developing. My research topic centered on the effects of foreign direct investment, and I did not want to waste time examining the issue in a country whose economy was skewed by gross mismanagement. (I chose Botswana, by the way.)

At the time, I had also just completed my struggles with econometrics classes — the statistics of economics. As my primary interest was developing country economies, I was annoyed that I had to spend so much time analyzing pristine data models knowing that the countries that interested me the most were definitely not making policy decisions about how to run their economy based on actual facts and data. (There usually wasn’t any reliable data.)

All of which brings us to the US of today. The financial media is wringing their hands over the path of interest rates and equity share prices as if we are operating in a normal country economy, where economic policy is decided by a reasoned analysis of data with the ultimate aim of fostering broad-based economic growth.

As if.

The continued imprisonment of Abrego Garcia (and others) in complete defiance of a unanimous Supreme Court decision is only the latest, and perhaps not even the most egregious, indication that we are not living in a “normal” economy. When the rule of law breaks down, as it surely has, economic policy decisions are driven by whim, self-interest, and corruption. Throw out the models.

I won’t bother articulating the economically contradictory morass that is the Trump tariff policy; enough has been said. The essential point of the tariffs is that they are illegal, every bit as illegal as Mr. Garcia’s banishment to a Salvadorean prison. Our economy — your retirement account, your business, your job — is a mere plaything, an afterthought.

There is a wonderful quote from a 2014 Brookings Institution article that applies rather perfectly:

“In the complex global economy of the twenty-first century, sustained good economic performance requires a panoply of well-functioning institutions that do not fall within a single leader’s purview.”

Re-read that quote in the context of an administration that is pushing out experienced civil servants by the tens of thousands, replaced by inexperienced political appointees.

In the coming weeks or months, there will be a decision on the constitutionality of the Administration’s firing of independent agency boards. While the present case concerns the United States Institute of Peace and others, the implications of a decision in support of the Administration will rebound to the Federal Reserve. Will the bond market feel comfortable with the prospect of a Fed under the thumb of this Administration? Will you, after considering the knock-on effect on your ability to maintain your standard of living?

The chances of a recession, driven by economic mismanagement, are growing. Usually in a recession, an advanced economy such as ours is aided by “stabilizers” (some automatic) to cushion the blow and aid the recovery. Do you find it at all likely that in the present environment these usual stabilizers, such as enhanced unemployment compensation or low and middle-income focused tax cuts, will exist?

Finally, don’t forget that before the end of the year there will be a new tax law. The content of this will be driven by an Administration without regard for due process, inconvenient facts and very much focused on its own personal bank accounts, enabled by a GOP Congress only motivated by their gerrymandered-skewed re-election aspirations. In this context, would you expect a policy that enables broad-based economic growth and protects vulnerable citizens?

No, I do not expect the US economy to completely crash and burn. Rather, it will limp along, underperforming, a shell of its potential. We will not know what it might have been.

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