Is the Iran War Raising the Risk of a Recession?

As war continues to rage in the Middle East, President Trump is pushing other countries to send warships to help reopen and restore the flow of oil through the Strait of Hormuz. None has publicly committed to doing so thus far. At home, the price of gasoline continues to rise, reaching a national average of $3.72, up from $2.93 a month ago, according to AAA. The Department of Homeland Security remains partially shut down, airport security delays are getting longer, and another winter storm is sweeping across much of the country.

With all that going on, the Senate this week will focus on ... a lengthy, complicated and potentially messy debate about the SAVE America Act, the election reform package that Trump has said is his top legislative priority.

Here's what else is going on.

Jeffries Wants to Force Vote on Partial DHS Funding

House Minority Leader Hakeem Jeffries plans to release a discharge petition this week in an effort to force a vote on a bill that would fund much of the Department of Homeland Security while leaving immigration enforcement agencies unfunded.

Now in its second month, the DHS shutdown is starting to affect travelers throughout the country as they encounter airport disruptions caused by a shortage of security agents, thousands of whom missed their first paychecks last week.

House Democrats want to fund most of DHS - including the Transportation Security Administration, the Federal Emergency Management Agency and the Coast Guard - while leaving Immigration and Customs Enforcement and Customs and Border Protection unfunded as they press for major reforms at those agencies in response to deadly violence during the Trump administration's immigration crackdown.

"The Department of Homeland Security has been shut down for more than 30 days because Donald Trump and Republican extremists refuse to get ICE under control," Jeffries wrote in a letter to fellow Democrats. "Meanwhile, hardworking employees of the TSA, CISA, Coast Guard and FEMA have been forced to work without pay."

A discharge petition forces legislation onto the floor for a vote once a majority of the House signs it. Democrats would need to find support from a handful of Republicans to get to the 218 votes they need to move forward.

The House passed a comprehensive funding bill for DHS earlier this month with mostly Republican support, but Democrats in the Senate have rejected it as they call for major reforms at the nation's immigration agencies.

Chart of the Day: Recession Jitters Rising

Oil prices have soared following Iran's closure of the Strait of Hormuz, and some economists are worried that higher energy costs could be the straw that breaks the camel's back. Mark Zandi, chief economist at Moody's Analytics, said Monday that his firm's "machine learning based leading economic indicator model" now shows a 49% chance of a recession in the next 12 months.

While a weak U.S. labor market is a prime factor in the deteriorating outlook, energy costs also play a key role. "Oil prices are an important variable in the model, and with good reason: every recession since WWII, save the pandemic recession, has been preceded by a spike in oil prices," Zandi said. "Higher oil prices don't do the same economic damage as in years past, as we produce as much as we consume, but consumers still get hit hard and fast, and they were already increasingly nervous spenders. ... if oil prices remain elevated for much longer (weeks and not months), a recession will be difficult to avoid."

Quote of the Day

"This is not our war; we did not start it."

− Boris Pistorius, Germany's defense minister, rejecting President Trump's push for NATO allies and other countries to send their navies to help police the Strait of Hormuz. Pistorius's statement, made at a morning news conference in Berlin, is emblematic of the responses Trump has gotten, as U.S. allies including Australia, Italy and Japan have reportedly declined or expressed reluctance to get involved in the U.S.-Israeli war effort. Pistorius told reporters that Germany prefers a diplomatic solution and "sending more warships to the region will likely not help achieve that."

Kaja Kallas, the European Union's foreign policy chief, said Monday that EU foreign ministers have "no appetite" to expand an ongoing naval operation in the Middle East to help protect ships in the Strait of Hormuz. "This is not Europe's war, but Europe's interests are directly at stake," she said.

Trump on Monday said that "numerous" unnamed countries are on the way, but also insisted that the United States doesn't need help. "We don't need anybody; we're the strongest nation in the world," he said, adding that he nonetheless was looking to see who responds to his coalition-building effort: "I'm almost doing it in some cases not because we need them but because I want to find out how they react," he said.

Trump on Sunday told reporters aboard Air Force One that other countries should be helping to secure the strait because they rely on the oil shipments coming through there more than the U.S. does.

"I'm demanding that these countries come in and protect their own territory, because it is their territory. It's the place from which they get their energy. And they should come and they should help us protect it," Trump said.

He added a less-than-friendly note: "Whether we get support or not, I can say this, and I said it to them: We will remember."

In a separate interview with the Financial Times on Sunday, Trump warned that "it will be very bad for the future of NATO" if European allies don't help reopen the strait.

Fiscal News Roundup

• 'Not Our War': U.S. Allies Balk at Trump's Strait of Hormuz Demands – NBC News
• Trump Signals Coalition to Force Open Strait of Hormuz Is Not Ready Yet: 'Some Are Less Than Enthusiastic' – CNBC
• Republicans Resist Calls for Iran War Hearings, Creating a New Standoff With Democrats – Associated Press
• Jeffries Seeks to Force Vote on DHS Funding Without ICE and CBP – The Hill
• TSA Callout Rate Surged Over the Weekend as Partial Shutdown Continues – NBC News
• U.S. Reaper Drones Take the Fight to Iran, but at a Cost – Wall Street Journal
• Trump Allies Plan Senate Floor Takeover to Pass SAVE America Act – The Hill
• House Republicans Ramp Up Pressure on Senate to Pass SAVE America Act – The Hill
• The Trump Health Care Policy Red and Blue States Are Embracing – Politico
• Red and Blue States Are Growing Further Apart on Income Tax – Wall Street Journal
• US Judge Blocks Kennedy's Efforts to Overhaul US Vaccine Policy – CNN
• Kennedy Center Board Approves Two-Year Closure for $250 Million Renovation – NBC News
• Ric Grenell Took a 'Sledgehammer' to the Kennedy Center. Trump Still Soured on Him – CNN
• White House Chief of Staff Susie Wiles Has Early Stage Breast Cancer – Axios

Views and Analysis

• With Iran War, Trump Risks Stepping on Gains From His Own Tax Cuts – Andrew Duehren, New York Times
• The US Is Flirting With Stagflation. What Kind? – Jonathan Levin, Bloomberg
• 'This Is Not Our War': Europe and U.K. Push Back Against Trump's Demands – Michael D. Shear, New York Times
• Allies Can Do What Trump Would: Put a High Price on Hormuz Aid – Marc Champion, Bloomberg
• In Choosing 'Epic Fury,' Trump Names a War and Defines His Presidency – Peter Baker, New York Times
• Game Theory Is Pointing to More Escalation – John Authers, Bloomberg
• Democratic Presidential Contenders Have a New Idea: Tax Cuts – David Dayen and Ryan Cooper, American Prospect
• The Laffer Curve Is No Longer a Punch Line – Allison Schrager, Bloomberg
• A Health Care Plan for the Midterms – Merrill Goozner, Washington Monthly
• Time Is Running Out on the Fed, Trump Administration's Game of Chicken – Neil Irwin, Axios
• Did Trump's Cuts Slow Access to Public Records? We Found 26 Cases That Say Yes – Nate Jones, Washington Post
• I Predicted the 2008 Financial Crisis. What Is Coming May Be Worse – Richard Bookstaber, New York Times