Officals affiliated with Trump defend possible economic contraction, acknowledging potential personal impact as well.
Down and Dirty with the Trump Economy
These days, the economic chatter is louder than ever, and the Trump administration is right in the thick of it. With talk of recession being tossed around, the president's team seems ready to accept some pain for their cause.
Investors are beginning to understand the reality of Donald Trump's tariff policy. The job market looks wobbly, consumer confidence is on the decline, and there's a renewed fear of inflation. But will all this chaos lead to a full-blown recession? Most economists still think the chances are low, but the question remains.
Trump and his advisers are pushing forward with their aggressive tariff policies and a nationalist, combative stance towards foreign countries, even if it triggers an economic downturn. They believe the pain of a recession is a fair price to pay for an economy less dependent on government aid and stronger in domestic manufacturing.
Detox Time
Treasury Secretary Steve Mnuchin called the economy an addiction in need of a kick. According to him, the market and economy have become hooked on government spending, and we're about to go through withdrawal—even without a full-blown recession.
Trump himself talked about a possible "transition period", but he hasn't predicted a recession yet. Commerce Secretary Wilbur Ross expressed a willingness to suffer through a recession to enact Trump's policies, although he thinks one isn't coming.
If a recession does happen, the Trump administration will take ownership of it.
Hitting the Recession Recap Button
Each recent recession has been associated with a specific crisis.
Pandemic Recession in 2020: The brief economic dip we experienced due to Covid-19 was severe but was short-lived, thanks to massive government spending. This recession fell during Trump's election loss.
Great Recession from 2007 to 2009: Sparked by the housing bubble and subprime mortgage crisis, the Great Recession saw a protracted rise in unemployment. This recession kickstarted the Obama era.
The Dotcom Bust: This recession was linked to 2001, but the bursting of the dotcom bubble that precipitated the recession might have contributed to a general sour mood during the 2000 presidential election, which saw Al Gore narrowly lose to George W. Bush.
If you're seeing a pattern here, it's that recessions can lead to political discontent. However, the past few years have arguably been tumultuous for the entire Trump era.
Trump can't seek reelection in 2028, but a recession, even a brief one, could still hurt him and the Republicans. More significantly, a recession would mean higher unemployment rates and economic pain for most Americans.
Recessions from the more distant past have shown that voters often punish presidents during a recession. A 1990 recession caused by the savings and loan crisis likely hurt President George H.W. Bush, contributing to his loss in 1992. A 1980 recession clearly contributed to President Jimmy Carter's loss during his reelection bid.
Democrats See an Opportunity
Former White House Chief of Staff Rahm Emanuel, now a CNN political commentator, notes that he's never seen an administration push for a recession before. Economists like Mark Zandi of Moody's Analytics argue that Trump's policies, particularly the tariffs, are actively courting an economic downturn.
Fear Stagflation
Although the likelihood of a recession is still considered low by many economists, it's on the rise. Economists across the spectrum worry that a downturn could result in stagflation, an economic condition characterized by stagnant economic growth and rising prices due to inflation.
Former Treasury Secretary Larry Summers hopes Trump will be convinced to moderate his policies to avoid such an outcome, but if he doesn't, we could be heading back towards stagflation with both recession and increased prices—more severe than what we're experiencing now.
Federal Reserve Chairman Jerome Powell acknowledges these concerns, stating that the likelihood of a recession has increased but is not high.
Recession concerns don't always lead to recessions. Despite Americans being pessimistic about the economy for much of President Joe Biden's term and rising inflation soured the national mood, a recession didn't materialize, at least not technically. However, Democrats still lost the election in 2024.
- Treasury Secretary Steve Mnuchin has compared the economy to an addiction, suggesting a forthcoming detox period without government spending.
- Despite Commerce Secretary Wilbur Ross's belief that a recession isn't coming, the Trump administration appears willing to accept one if it helps enact their economic policies.
- Economists, like Mark Zandi of Moody's Analytics, fear that Trump's tariff policies could lead to a recession and even stagflation, a combination of stagnant growth and increased prices.
