The warning lights of a coming recession are blinking faster, and you can almost feel the panic from the White House. Even President Donald Trump, who has built a career on projecting unearned confidence, is showing cracks. During a Fox News interview this weekend, host Maria Bartiromo asked him whether he expects a recession this year. Trump paused, taking an uncharacteristic level of care with his words. “I hate to predict things like that,” he said. “There is a period of transition, because what we’re doing is very big.”
Other administration officials are blaming Joe Biden for economic trouble. “We’ve got a Biden economy,” National Economic Council Director Kevin Hassett said. Any troubling economic data, Commerce Secretary Howard Lutnick said, is “Biden data,” since “Biden left [Trump] a pile of poop.” What Biden actually left was tamed inflation, steady economic expansion and an unprecedented period of job growth, with a record 16 million jobs created in just one presidential term.
While no one can predict the economic future with certainty, there is plenty of cause for concern.
While Trump and his allies alternately deflect blame and insist that everything will be fine, there’s one thing they will never admit: Almost everything the administration and congressional Republicans are doing to the economy is making a collapse more likely. They seem to know it, but either they don’t care or they’re hoping that the damage will be limited while they go about gutting the federal government.
For the last 35 years, over six presidencies, the U.S. economy has followed a cycle: A Republican president presides over a recession, a Democratic president gets elected and cleans up the mess, then a Republican gets elected and screws everything up all over again. It was a good bet the cycle would continue with the second Trump presidency; the only surprise is that it’s happening so quickly.
While no one can predict the economic future with certainty, there is plenty of cause for concern. Trump’s constant toggling on tariffs has left businesses uncertain about whether to invest and consumers nervous about renewed inflation, since tariffs are essentially a sales tax on imported goods. If they go into force in full, the effects could be widespread, including pushing up the price of houses and cars. Probably in anticipation, consumer confidence is down, and consumer spending recently dropped for the first time in almost two years. The stock market has been tumbling, with Monday the worst day on Wall Street this year.
Meanwhile, most of the effects of Elon Musk’s rampage through the federal government have yet to show up in job and growth data — but they will soon. The administration’s planned layoffs of hundreds of thousands of government workers are in and of themselves a substantial hit to the economy. What hasn’t gotten as much attention is the likely effects of Musk’s canceling federal contracts and programs willy-nilly.
Most Americans probably don’t realize that while there are about 3 million federal employees (including postal workers), even more private-sector jobs depend on federal contracts and grants. They include everything from airplane machinists to medical researchers to child care specialists to food service workers. As economist Jesse Rothstein recently told me, “[T]hose companies can’t keep workers on for very long if they’re not getting paid. And so there’ll be enormous layoffs there that won’t show up on the federal ledger, but are effectively federal policy.”
Besides the tariffs that supposedly make us all rich, what else do the administration and Congress have on offer to boost the economy?
When, for instance, the administration shuts down the U.S. Agency for International Development, it isn’t just condemning foreigners who depend on that aid for food and medicine. USAID buys billions of dollars’ worth of agricultural products from American farmers; they most likely will lose that income. Cuts to the National Oceanic and Atmospheric Administration will hurt businesses that rely on its detailed weather forecasting data. When national parks are forced to limit parks’ hours because their staffing has been devastated, it damages the economies surrounding these tourist destinations.
Besides the tariffs that supposedly make us all rich, what else do the administration and Congress have on offer to boost the economy?
The primary answer, unsurprisingly, is the extension of the 2017 tax cuts, which were heavily tilted toward the wealthy. Yes, Trump wants to eliminate taxes on tips, overtime and Social Security, but even if those end up in the final tax package, they are a drop in the bucket compared to the benefits for the wealthy. The Penn Wharton budget model forecasts a tiny positive effect on gross domestic product growth (0.2%) from the extension; the trouble is that most of the benefits would accrue to the people who would simply save their gains rather than spend them.
And to pay for the tax breaks, Republicans are planning huge budget cuts, including to Medicaid, which now covers 72 million people. What would the economic impact of throwing a few million of them off their health coverage be? If that weren’t bad enough, congressional Republicans could also engineer a government shutdown, which would deal its own economic blow.
With so many threats to the economy, then, it’s not surprising that even on Fox, there are hints of nervousness. “We are sliding towards a recession. And that’s just a fact,” former House Speaker Newt Gingrich told Bartiromo on Fox Business last week. Even as she tried to blame Biden, Bartiromo couldn’t help but wonder: “Now with DOGE cutting jobs and slimming down the government, people are asking the question, ‘Does that induce a recession?’”
It just might. In a better world, more Americans would judge Trump harshly for the way he is dismantling the American system of government even if the economy was doing fine; they wouldn’t need spiking unemployment or inflation to convince them that Trump is a dangerous president with an authoritarian program. But if that’s what it takes for them to realize he’s been lying all along, at least they’ll understand.
