President Biden may have a recession to contend with

Yahoo Finance senior columnist Rick Newman details how GDP growth declines are signaling a recession and the need for President Biden and Congress to react.

Video Transcript

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SEANA SMITH: Recession talk is picking up after a key Fed GDP tracker turns negative, signaling a recession is here. at Yahoo Finance's Rick Newman is here with this week's Bidenomics Report. And Rick, it was just last week, I think, that we are joking that we were talking so much about a recession, we might as well get it over with. It looks like you might actually have been onto something.

RICK NEWMAN: I think, everybody, listen to me, because suddenly, the economic news is so bad. Incomes are down. Spending is down. In the report we got this week, manufacturing activity is down. Private investment is down. Everything is down.

And the Atlanta Fed GDP Now forecaster just a few days ago was predicting small growth in GDP in the second quarter. Now it says we could have more than a 2% decline in GDP growth in the second quarter.

Now, if that's true, think about this. We did have 1.6% decline in GDP growth in the first quarter. So that would mean back-to-back quarters of a shrinking economy. And that is what you might call the old, popular definition of a recession, back-to-back declines in GDP.

Now, that is not the operable definition of a recession today. But this is getting a lot of economists' attention who are saying, holy cow, we did not really see this coming. And it's possible that we might actually be in this recession that we've been talking about for the last two or three months.

RACHELLE AKUFFO: And so Rick, I want to ask you, because President Biden also dealt another blow in terms of his climate change agenda from the Supreme Court's EPA rollback. What do we need to know there? And what are the broader implications?

RICK NEWMAN: So what the Supreme Court has basically said is you cannot address climate change in any meaningful way through regulatory action or executive action. Biden, like President Obama before him, has been trying to tighten up on climate rules through executive action because Congress won't pass the laws that it takes to do this. Obama had the same problem.

And the Supreme Court has basically said, nope, that's not good enough. So what this tells us is it seems like a setback for climate activism. But this also makes it very clear now that for us to start to make progress on this, Congress needs to take action. Congress cannot keep punting. And if we're going to do anything meaningful on climate action, which, come on, we do have to do, Congress is going to have to pass laws.

It doesn't mean that's going to happen imminently. But it's not out of the question. We could see some bipartisan agreement on at least starter legislation to address climate change.

DAVE BRIGGS: Rick, aren't we seeing some of that come from the private sector, as in the automobile industry? Isn't the private sector ultimately going to have to make this push with or without government regulation?

RICK NEWMAN: Dave, good question, man. That's already happening. So I mean, what's happening with the response to global warming so far is industry is ahead of government. And that's because industry thinks there's money to be made here. I mean, Tesla is the best example of that.

Industry also thinks and looks around the world and sees regulations tightening up and moving in the direction of green energy and thinks that's where the opportunity is. So that's why industry's ahead.

And interestingly, it's also why oil and gas companies don't really want to drill any more oil or add any new refineries because they don't think that's where the future lies. So we're moving in the direction of addressing climate change. But the government action that we need to really start to turn the corner on this is missing. And it's up to Congress to do it. There's no other way to put it at this point.

RACHELLE AKUFFO: And we know that President Biden was really looking at the clean energy push to be a way to sort of bring in new jobs as they try and wean off fossil fuel. What does that mean then once this now goes back to the states in terms of perhaps job growth in the clean energy sector?

RICK NEWMAN: I think there's been too much happy talk about what the benefits of adopting green energy might be without addressing the tradeoffs as well. And we talk about phasing in green energy and phasing out fossil fuels. Well, guess what, because we are phasing out fossil fuels, that's why we're in the energy crunch we're in right now.

And one of the things that is just missing from the whole idea about how to move over to a green energy economy is a transition plan. How do we phase out fossil fuels and phase in green energy without these huge gaps developing where we don't have enough fossil fuels, but we haven't yet replaced that with green energy?

And I think that's what this-- you could call it an energy shortage right now, with $5 gasoline. I think that is what this is telling us is we need a plan to try to manage this transition so we don't end up getting rid of the one thing we need before the replacement is here. And that is, I think, going to be very, very tricky for the next-- who knows-- decade or two.