There are plenty of people who could theoretically step in. The Federal Reserve, for instance, could lower interest rates again. It might be hesitant to do so—when the Fed lowered rates last month, Fed Chairman Jerome Powell hinted that it could be a one-off event. But at this point, it’s not clear what the downside of reducing them further would be. Powell has admitted that inflation has been too low. The chances that it would suddenly rise and spiral out of control are effectively nil. Sure, keeping borrowing costs down might encourage some bad lending or investment bubbles that could lead to problems down the line, but that concern should probably be outweighed by the near and present danger of an actual recession. Some people might also worry that if the Fed cuts now, it won’t be able to cut later should a recession actually arrive—but that concern doesn’t make a whole lot of sense either. We’re better off trying to prevent the economy from veering off into a ditch in the first place, rather than trying to push it back onto the road once we’ve already crashed.
This, for what it’s worth, is what Donald Trump would like to see. On Twitter today, he lambasted the Fed for keeping rates too high and vented about the “CRAZY INVERTED YIELD CURVE.” He’s not wrong.
Of course, Congress could also consider jumping into action. Sure, infrastructure week has become a running joke in America, but seriously, this would be a fabulous time for the United States to stimulate its economy by borrowing a whole boatload of cash and spending it on upgrading our rotting transportation networks. Thirty-year Treasury bonds are trading at around 2 percent right now, and threatening to drop lower—meaning the government can borrow for practically nothing for three decades at a time. Maybe we should take advantage of that? Fix some subways? Repair some roads? Make good on one of Donald Trump’s central campaign promises, even if it mildly hurts the Democrats’ chances in 2020?