IdeaLog
Trump is pushing us toward a Republican recession
Posted on March 5, 2025
“It seems almost unavoidable that we are headed for a deep, deep recession,” says Jesse Rothstein, former Chief Economist at the U.S. Department of Labor. Whether or not the situation is that bad, it’s time to talk about it. Trump will blame Democrats. We should start talking about a “Republican recession” now.
The Atlanta Federal Reserve has twice lowered its projection for first quarter 2025 GDP. It had been predicting growth of 2.3 percent. At the end of last week that was revised to a 1.5 percent contraction. Monday morning this was revised down to a projected 2.8 percent contraction, that is, negative GDP growth of 2.8 percent. If this negative trend lasts to April 1, it probably signals the beginning of a recession. Unless, of course, the recession begins with a government shutdown on March 14.
Similarly, the U.S. Department of Commerce released data last Friday showing a sharp drop in consumer sentiment and purchasing. U.S. manufacturers reported steep declines in new orders and employment in February, indicating that the economy is losing momentum as growth expectations also fell sharply, according to the Financial Times.
This is unprecedented. Donald Trump inherited a strong and stable economy with very low unemployment and fairly low inflation. Trump has managed to wreck the U.S. economy in just six weeks!
There are a number of reasons why the economy is tanking:
1) Trump and Musk have fired thousands and are promising to fire hundreds of thousands of federal workers. That alone severely damages the American economy. It’s not just that all these workers will be unemployed, it means they will cut their purchases of goods and services, delivering an economic shock to stores, restaurants, entertainment businesses and, ultimately, manufacturers. Jobless claims were already up last week because of cuts by DOGE.
2) Trump and Musk are cancelling federal contracts and even refusing to pay for contracts already completed. Obviously, there are few businesses that can last long without getting paid. Many companies will be damaged or destroyed, which will lead to even more job losses and fewer purchases. Also, because of the uncertainty created by Trump and Musk, pending home sales have hit a record low.
3) The Republicans are planning to cut $2 trillion from the federal budget, and more than one-third of that from Medicaid alone. Federal spending overwhelmingly goes to individuals or businesses that use the money almost immediately for goods and services. Therefore, such spending has a large multiplier effect in the American economy and cutting that much spending would be catastrophic. Medicaid cuts will cause individual misery, of course, but it will also put many hospitals and health centers out of business.
4) Trump is implementing across-the-board tariffs. The Wall Street Journal recently called Trump’s tariffs the “dumbest in history.” This will directly increase the cost of imported goods, supercharging inflation. Excessive inflation is always a problem, but it’s especially dangerous during a recession because it limits the ability of the Federal Reserve to lower interest rates. Also, because other countries are certain to retaliate with their own tariffs, it hurts America’s ability to sell products by export, especially farmers.
5) Businesses need economic stability to plan for the future, and in times of chaos they stop investing and simply wait. That has already started. “Increased uncertainty surrounding trade, fiscal and regulatory policy is casting a shadow over the outlook,” Lydia Boussour, a senior economist at accounting and consulting firm EY, told the Associated Press. The Economic Policy Uncertainty Index is now higher than at any time during the great recession.
6) Trump is even attacking Social Security. The Trump administration announced plans to cut Social Security staffing by some 7,000 workers, or twelve percent of its workforce, and close six regional offices. This will, and is intended to, disrupt the Social Security system that average Americans (but not billionaires) depend on. It’s no surprise that Elon Musk thinks “Social Security is the biggest Ponzi scheme of all time,” according to the New York Times. There is no doubt that the entire Social Security system is in danger from the Trump Administration.
Of the eleven recessions that have occurred in the modern (post-World War II) era, ten of them have occurred under Republican presidents. Traditionally, this is how Democrats make their comeback. Remember the Democratic sweep in the election of 2008?