What to Know in Washington: Trump at Mercy of a Slowing Economy

The growing odds of a recession before the 2020 election threaten to crush Trump’s hopes of a second term.

Though still uncertain, such a scenario would be a political gift to Democrats, who have avoided talking about the nearly full employment, record stocks and low inflation so far in the Trump presidency. Instead, the candidates have highlighted rising income inequality and untenable costs of health care and college to argue that the working class isn’t feeling the boom.

But this week, fears of a broader downturn arose. The S&P 500 sank almost 3% yesterday and the Dow Jones Industrial Average plunged 800 points in its worst rout of the year, sparked when the 10-year Treasury rate slid below the two-year for the first time since 2007, a harbinger of a possible downturn.

With a global factory slowdown and Trump’s trade war already weighing on growth, the chances that the U.S. will tip into a recession within the next year have risen to 35%, according to an August survey of economists by Bloomberg News.

“Short of Justices Gorsuch and Kavanaugh disclosing membership in the Communist Party, it is hard to think of any development that could undercut Trump more than a recession,” said Jack Pitney, a professor of government at Claremont McKenna College.

“He promised the religious right that he would give them judges and he promised the rest of his base that he would give them prosperity. Take away prosperity, and he won’t have a prayer,” he said.

At least one 2020 Democrat took notice of the signs.

Sen. Elizabeth Warren (D-Mass.), who posted a Medium blog in July about the economic slowdown, tweeted yesterday that “the warning signs for another recession are flashing. We need to pay attention and act now, while we still have time to avert a downturn.” Read more from Sahil Kapur and Reade Pickert.

Photographer: Justin Merriman/Bloomberg
Trump at a rally in Pennsylvania on Tuesday.

Trump to Nominate White House Aide for N.Y.-Based Appeals Court

Trump plans to nominate a White House legal aide to the federal appeals court based in New York where he’s two seats shy of flipping it to a majority of judges appointed by Republican chief executives.

The administration announced yesterday Trump plans to tap Steven Menashi to the New York-based U.S. Court of Appeals for the Second Circuit. Menashi is a special assistant to the president and senior associate White House counsel.

Trump also intends to nominate a batch of district court nominees for seats in Oklahoma, Pennsylvania, Florida, North Carolina, and Missouri. The circuit and district court line-up includes attorneys with Big Law pedigrees, key judicial clerkships, and one dedicated to anti-abortion and religious freedom causes backed by conservatives.

Menashi clerked for U.S. Supreme Court Justice Samuel Alito and is a former Kirkland & Ellis partner in New York where his practice focused on civil and regulatory litigation. He also worked as acting general counsel at the Department of Education before transitioning to the White House.

He would fill one of two Second Circuit vacancies, if confirmed by the Senate. The duty stations for those judges have been in Hartford and New York.

The planned district court nominees include:

• Jodi Dishman, who worked at Akin Gump Strauss Hauer & Feld in San Antonio. Dishman is up for a seat in the Western District of Oklahoma, and is a shareholder at McAfee & Taft in Oklahoma City. She clerked for the Fifth Circuit.
• Richard Myers, a former attorney at O’Melveny & Myers, for a seat in the Eastern District of North Carolina. He is a professor at the University of North Carolina School of Law and a former federal prosecutor. He clerked for the D.C. circuit.
• Sarah Pitlyk, a former attorney at Covington & Burling in Washington, to the Eastern District of Missouri. She clerked for Justice Brett Kavanaugh while he was on the D.C. Circuit.
• Anuraag ‘Raag’ Singhal for the Southern District of Florida. Singhal currently serves as Circuit Judge for the 17th Judicial Circuit in Broward County, Fla.
• Karen Marston for the Eastern District of Pennsylvania. Marson currently serves as Assistant U.S. Attorney in the Eastern District of Pennsylvania.

Although a majority of appointments by a president of one party or another doesn’t guarantee case outcomes, Trump has made good on his pledge to stock the courts with conservatives. With the help of the Republican Senate, he has appointed more than 40 judges to appeals courts, which sit one rung below the Supreme Court. Only a few vacancies remain nationally, including the New York spots. Read more from Jake Holland.

Elections & Politics

Hickenlooper Expected to End Presidential Bid: Former Colorado Gov. John Hickenlooper is expected to end his 2020 presidential bid today, the Associated Press reports, citing an unidentified person close to him. Hickenlooper has been widely urged by Democrats to drop his presidential bid and run for the Senate instead against incumbent Cory Gardner (R-Colo.). The AP says it’s unclear if Hickenlooper will run for Senate.

Trump Donors Tweet Prompts Legal Complaint: A tweet from a San Antonio congressman naming prominent Trump donors in the aftermath of the El Paso shootings has sparked a legal complaint from one of the president’s supporters. Dan Backer, who represents the nonprofit Coolidge-Reagan Foundation, filed a complaint with the Federal Election Commission about Rep. Joaquin Castro’s (D-Texas) tweet calling out Trump’s top donors by name for “fueling a campaign on hate” against Hispanics.

The tweet has caused an uproar among Republicans who say it would lead to harassment of the donors and a debate about the use of donor information for shaming purposes. Castro’s naming of Trump’s donors in San Antonio “fanned the flames of public hatred” and subjected the donors to possible “repeated solicitations, public harassment, reprisals, intimidation, and potentially even violence,” Backer’s complaint said. Read more from Kenneth P. Doyle.

Warren Matches Sanders in N.H. Turnout: Sen. Warren drew almost as many supporters as Sen. Bernie Sanders (I-Vt.) in half as many campaign events in New Hampshire this week, as the two made their pitch to Granite State voters. About 700 people gathered at a Warren town hall in Franconia and another 400 at a house party in Wolfeboro yesterday, according to her campaign. Sanders, who held four events in the state Monday and Tuesday—double that of Warren—hit a crowd of 460 at his largest in North Conway, his campaign said. Some 146 of his backers attended a breakfast in Berlin, and about 600 attended gatherings in Littleton and Wolfeboro. Read more from Misyrlena Egkolfopoulou.

2020 Democrats Say Steve King Should Resign: Rep. Steve King (R-Iowa) has given Democratic presidential candidates more fodder to bash him and direct support to his Democratic challenger. King, who has been stripped of his committee assignments for his history of offensive comments, expressed his opposition to exceptions for rape and incest in anti-abortion bills by saying that humanity might not exist if rape and incest did not occur, according to the Des Moines Register. Read more from Tyler Pager.

On Lawmakers’ Radars

Tech Pressured as Devices Capture Audio: Lawmakers of both parties called out Facebook yesterday for paying contractors to transcribe audio clips from its users and urged new statutes to tackle the drumbeat of such revelations from across the tech industry. The calls, which followed a Bloomberg report that the company was using the transcriptions to test its artificial intelligence speech-recognition, come as smartphones and other microphone-enabled devices are becoming ever-more ubiquitous in homes, offices and schools.

“Congress needs to pass tough rules that ensure that Americans don’t have our privacy repeatedly violated by unaccountable corporations,” Sen. Ron Wyden (D-Ore.) said in a statement. Wyden, who last year circulated a draft bill that would impose steep fines and even jail time for executives at corporations that fail to adequately safeguard Americans’ personal data, said that CEO Mark Zuckerberg “must be held personally responsible for Facebook’s serial privacy offenses.”

Wyden also slammed the company’s recent $5 billion settlement with the Federal Trade Commission over privacy violations. Sen. Josh Hawley (R-Mo.), one of tech’s foremost Republican critics, asked in a series of tweets whether Facebook’s audio collection violated the agreement with the FTC and whether there “was a crime committed?” Ben Brody and Matt Day have more.

8chan Owner Subpoenaed on Extremist Content: James Watkins, the owner of message website 8chan, was subpoenaed by the House Homeland Security Committee to testify as the committee works on countering extremist content on social media sites. “At least three acts of deadly white supremacist extremist violence have been linked to 8chan in the last six months. We have questions on what is being done to counter this trend,” Chairman Bennie Thompson (D-Miss.) and ranking member Mike Rogers (R-Ala.) said in a statement, Ana Monteiro reports.

Defense & Foreign Affairs

Israel May Bar Two Muslim Lawmakers: Israel is weighing whether to prevent freshmen Reps. Ilhan Omar (D-Minn.) and Rashida Tlaib (D-Mich.) from visiting during a trip scheduled to start this weekend, according to people familiar with the matter. At issue is the pair’s support for boycotting the country, which they voiced during congressional debates. Israel has prevented activists from the Boycott, Divestment and Sanctions movement from entering the country, turning some away after they landed at the airport. Read more from Gwen Ackerman.

Trump Links Hong Kong Protests to Trade War: Trump made what seemed to be an overture to the Chinese leader Xi Jinping in a series of tweets yesterday that linked the protests in Hong Kong to the continuing trade conflict between the U.S. and China. Trump praised Xi as “a great leader” who wants to “quickly and humanely solve the Hong Kong problem.” The president ended that post with “Personal meeting?” without clarifying if he was suggesting a summit with Xi. In a tweet sent shortly before it, Trump wrote that “of course China wants to ma ke a trade deal. Let them work humanely with Hong Kong first!” Read more from John Harney.

Also yesterday, the Commerce Department added several Chinese nuclear companies to a blacklist that prevents them from doing business with U.S. suppliers, according to a Federal Register notice. Read more from Chelsea Mes and Ben Livesey.

• In Huawei developments, the tech giant told a federal judge in Texas that Congress improperly decided without any judicial review that the company was a pawn of the Chinese government, depriving it of due process that other Chinese companies get. China’s largest tech company sued the U.S. in May seeking to overturn a ban on federal agencies and contractors from buying its gear. Huawei made the claim about Congress in a court filing yesterday in its latest response to a U.S. request to have the lawsuit thrown out, Erik Larson reports

Contractors Return $200 Million in Waste: Defense contractors have returned more than $200 million to the U.S. in the decade since it became mandatory to self-report potential fraud, waste or abuse, according to a new tally by the DOD inspector general. Until late 2008 the Pentagon had a voluntary program for its contractors to disclose any violations. Then lawmakers made timely disclosure mandatory at risk of potential suspension or disbarment when there’s credible evidence of a criminal violation. Read more from Tony Capaccio.

What Else to Know

Two Presidents, Ten Years and One NIH Chief: NIH director for life? Francis Collins doesn’t think so, but he’s also not ready to leave yet. “It has been a great privilege to continue to do this, but I’m 69 years old,” he said. “It’s probably good for organizations that need to innovate—and to be challenging—to have a turnover in leadership on some sort of regular basis.” Collins is in the unique position of having been appointed by President Barack Obama and then reappointed under Trump to lead the National Institutes of Health.

Saturday marks Collins’ 10-year anniversary as head of the world’s largest biomedical research agency. He is the longest-serving NIH director since that position became a presidential appointment in 1971. James A. Shannon served as director from 1955 to 1968, when the U.S. surgeon general made that appointment. Read more on Collins’ thoughts on his tenure from Jeannie Baumann.

States Sue Trump Over ‘Public Charge’ Plan: More than a dozen states sued the White House over a new rule aimed at denying legal status to documented immigrants if they receive any kind of public assistance—echoing a suit filed on Tuesday by San Francisco. The suit filed yesterday in Washington state alleges the rule is inconsistent with the Immigration and Nationality Act, which allows officials to deny admission to the U.S. to someone who is likely to become a “public charge.” Read more from Erik Larson.

Quick Relief Urged From Abortion ‘Gag’ Rule: Planned Parenthood family planning facilities that receive taxpayer money will have to withdraw from a federal grant program unless new abortion-related restrictions are stopped, the group told a federal appeals court yesterday. The group wants the U.S. Court of Appeals for the Ninth Circuit to grant an emergency order that would allow direct grantees to remain in the Title X program, but not use Title X funds, while seeking to overturn the rule restricting what grantees can tell clients about abortion. Read more from Mary Anne Pazanowski.

Epstein Judge Asks About Suicide Attempt: The federal judge overseeing the criminal sex-trafficking case against Jeffrey Epstein asked the former warden of a New York jail whether an investigation of the financier’s death will also include details about an incident last month, when he was found unconscious in his cell with marks on his neck. Lamine N’Diaye, who was in charge of the Metropolitan Correctional Center at the time of Epstein’s death, told the judge this week that investigations by both the Federal Bureau of Investigation and the Department of Justice’s Inspector General will include the July 23 incident. Read more from Bob Van Voris and Chris Strohm.

Avenatti Seeks White House Emails: Michael Avenatti said federal prosecutors in New York falsely accused him of trying to extort millions of dollars from Nike as payback for his outspoken criticism of Trump. Describing himself as “the foil for President Trump,“ Avenatti yesterday asked a judge in New York to dismiss the case on grounds that it’s a “vindictive prosecution” by Trump’s allies in the Justice Department. Read more from Erik Larson.

‘Back-Loaded’ Hurricane Season: Don’t be lulled by a quiet June and July, the real Atlantic hurricane season is about to kick off. The season generally runs from June 1 to the end of November. But the next six weeks, “the season within a season,” is regularly the most dangerous and active time for storms to develop in the Atlantic, Dennis Feltgen, spokesman for the National Hurricane Center in Miami, said. Only two named storms have developed in the Atlantic so far this summer. Dry air from Africa’s Sahara robbed potential storms of moisture, and wind shear from the El Nino climate systems ripped apart budding storms. Now, those brakes on hurricane creation are gone. Read more from Brian K. Sullivan.

To contact the reporter on this story: Brandon Lee in Washington at blee@bgov.com

To contact the editors responsible for this story: Zachary Sherwood at zsherwood@bgov.com; Loren Duggan at lduggan@bgov.com