The Trump Recession Watch

The Trump Recession Watch Update - March 6, 2025

Suspending the tariffs for a month is a sign that corporate America remains in charge of the economy and does not want, or expect to benefit from, a recession. Every single thing Trump proposes will set off a recession, or worse, and so it cannot be at all certain recession/depression is not what is intended.

The Trump Recession Watch Update - March 5, 2025

The tariffs alone should be enough to set off a recession. If the federal share of Medicaid is slashed as threatened there will be a grimy and nasty recession. It is impossible to pull that much money out of the spending stream and keep the economy going. Employment will be falling; unemployment rising. We might wonder why corporate America with its reported 12,000 lobbyists would sit by wringing their hands, when it was their money bags that bought the Republicans and Congress. Either corporate America intends what is going on or they are cringing cowards.

The Trump Recession Watch – February 25, 2025

Before predicting a Trump recession, it is useful to remember the George W. Bush recession that began in the fall of 2008 and did not recover until early 2010. Recall it was W’s Crony’s that depressed the economy looting the banking system with speculative gambling in home mortgage innovations. By the third quarter of 2009 the Gross Domestic Product was down $450.1 billion dollars seasonally adjusted at annual rates. For an economy approaching $15 trillion of GDP in 2009 that was only a 3.4 percent decline. However, the quarterly average of seasonally adjusted employment was down 6,692,000 jobs. Jobs just melted away in a 3.4 percent GDP downturn.

Since an economy is nothing but a flow of transactions measured over time, Trump might take a hint from the Bush debacle and avoid depressing the economy. As February 2025 ends Trump has allowed Musk to dismiss probationary federal employees, but news reports put the number losing their jobs at 200,000, significant, but small compared to 6.692 million. So far Trump is all talk but no serious action toward a recession.

However, that could change given the talk of draconian cuts to health care programs like Medicare and Medicaid. The Bureau of Economic Analysis that produces the National Income and Product Accounts (NIPA) reports in their Table 3.12 an annual Medicaid budget of $878 billion dollars for 2023. Table 3.12 reports a Medicare budget of $1.009 trillion. From the beginning of Trump’s first term to eight years later at the end of Biden’s term health care provided 3.163 million new jobs or 27 percent of all new jobs, more than any other sub sector.

Some of the worthies in Congress have discussed eliminating the $878 billion Medicaid budget, a good way to start a recession. While the amount remains to be negotiated, it is worth remembering the beneficiaries of Medicaid do not receive a dime of that budget. All of the Medicaid budget goes directly to corporate health care venders in what is only the first round of a spending decline. Payroll cuts to doctors and nurses and revenue cuts to medical suppliers bring a second round of decline to the spending stream. The initial cuts reduce production, income and employment by three to four times the initial amount; economists call it a multiplier effect.

Managing the economy requires making sure the flow of transactions remains steady and increases with the growth of population and our productive capacity. That is an important point because recessions in the modern economy are strictly optional and can be readily avoided with cooperation of the Federal Reserve Bank and the United States Treasury.

Back in the 19th and early 20th century recessions were a regular occurrence like the recessions and depressions of 1873-1878, 1881-1884, 1893-1897, 1907, 1913-14, 1920-1921. In those days it was tough to manage the economy without a central bank and corporate America determined to hang onto the gold standard. Once the Great Depression of 1929 got under way the Franklin Roosevelt administration threw out the gold standard and with the Banking Act of 1935 introduced the modern tools of monetary and economic policy.

Today’s monetary management makes recessions optional like the George W. Bush recession where rogues and scoundrels had enough concentrated power to pursue their own agenda. It is easy to notice Trump and Musk have their own agenda and any economic decline will be caused as their option. Trump threatened many depressing economic policies before his inauguration and his policy pronouncements since January 20 have been universally depressing. Corporate America has pursued lower tariffs for at least 60 years because they learned, slowly but surely, that tariffs bring retaliation. A 25% tariff on Canada, our biggest trading partner, will bring retaliation and depress both economies. Mass deportation, as opposed to slowing immigration, will be economically depressing as will draconian cuts in Medicaid and Medicare or in food stamp aid or AID with its food for peace program.

Since corporate America has been the primary force making economic policy in the United States since the 19th century, we might wonder who is in charge here? Corporate America made all economic decisions during Trump’s first term, which is why tariffs remained low and immigrant labor, documented or not, remained cheap and plentiful and the economy did well. Corporate America has been restrained and somewhat subdued so far, but going along with DEI pronouncements, beating up on the federal workforce or taking over the Kennedy Center does not threaten the larger economy.

Corporate America has always expected Presidents to serve corporate power, not the other way around. Since WWII corporate America has preferred a stable economy, but never assume as economists like to do that corporate America can be counted on to just maximize profits. America’s labor history proves a segment of corporate America and the wealthy like class warfare. In 2025, Musk represents the warfare segment of the wealthy who know a depressed economy generates inequality as a perk of the upper class. If Trump wants his second term economy to go as well as his first, he will opt out of recession. The upcoming budget debate will tell the story. Watch the policy fight coming up, but expect corporate America still has the unity to neutralize the budget ax, tariffs, deportations and Musk. Updates!