“I don’t see any kind of well-thought-out, comprehensive strategy coming out of the White House,” said Bernard Baumohl, chief global economist at the Economic Outlook Group, a nonpartisan forecasting firm.
What is the White House strategy? Is it based on the campaign promises to bring down inflation on “Day 1”, eliminate waste and fraud, and cut regulations that impede new investments, such as in AI?
The White House to date is attempting to explain why it hasn’t developed a strategy. Treasury Secretary Scott Bessent opined that,
“The market and the economy have just become hooked, and we’ve become addicted to this government spending, and there’s going to be a detox period. There’s going to be a detox,” Bessent, a former hedge-fund manager, said during a CNBC interview.
This description of a “detox” period is alarming, because the term has nothing to do with an economic plan, or anything else, but in fact means the Trump administration is hinting that a recession may be required to wean US off what they deem as too many government services that benefit ordinary Americans rather than the Oligarchs that have jumped onto the Trump/Musk bandwagon.
The wet dream of Republicans and conservatives has historically been to downsize government to little more than military defense. That’s why Trump has targeted USAID and the Department of Education, as well as cuts to social security, Medicare, and Medicaid.
Douglas Holtz-Eakin, a former (Republican) director of the Congressional Budget Office, said it was a fine sentiment for a Treasury secretary to want to reduce government spending but noted that there was no GOP plan in sight to accomplish this goal in any sustainable way, according to MarketWatch.
Part of the problem in downsizing government is that it’s extremely difficult to bring federal government spending below 20 percent of Gross Domestic Product as portrayed in the above FRED historical graph dating from 2010. Spending surged above that level only twice to aid recoveries from the Great Recession and COVID pandemic.
Part of that surge was the Biden administration’s new, New Deal legislation that has already brought 700,000 manufacturing jobs home in the CHIPS, Infrastructure and Inflation Reduction Acts.
These were public/private investments that resulted in the US having the fastest economic recovery from COVID-19 in the developed world.
Trumps says he also wants to bring manufacturing jobs home with the trade tariffs. But his single-minded emphasis on tariffs against friend or foe without negotiating up front will increase inflation, largely because it will be reciprocated, launching a trade war.
And rather than eliminating waste and fraud, the DOGE firings are downsizing or eliminating departments and agencies that make it work—such as the FAA, Energy Department, VA and even social security—which will do exactly the opposite—make us less safe.
“It all seems to be very capricious,” continued Baumohl, “and I think this has been of great concern, not just to U.S. and foreign investors, but certainly to consumers, and we’ve seen that in the abrupt decline in confidence, which is now showing up in in their spending patterns. Once consumers start to cut back, there is nothing that the government can do to make sure that the economy keeps out of recession, because we’re talking about 70% of all economic activity.”
Will such a strategy, or lack of it, work? American consumers are already starting to give the final word. The University of Michigan’s consumer sentiment survey showed consumers becoming even more pessimistic about their future.
“Consumer sentiment slid another 11% this month, with declines seen consistently across all groups by age, education, income, wealth, political affiliations, and geographic regions. Sentiment has now fallen for three consecutive months and is currently down 22% from December 2024.” said Survey Director Joanne Hsu.
It looks like the Trump/Musk administration doesn’t want Americans to know what they are really up to, and it is leading to the wholesale destruction of the U.S. economy.
It will take more than picketing Tesla factories and dealerships for Americans to prevent what is sure to become a recession from happening.
Harlan Green © 2025
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
No comments:
Post a Comment