It's hard to believe that some people think Trump wants a recession to happen. In fact, he's been saying the opposite - that a recession is coming, but it's not his fault. Trump's administration has been warning of a potential recession since 2018, citing a slowdown in global economic growth.
Trump's economic advisors have been predicting a recession for years, and it's not just because of the trade wars he's been waging. The US economy has been showing signs of slowing down, with GDP growth declining from 3.2% in 2018 to 2.1% in 2020.
Why Trump Wants a Recession
Trump needs a recession to bring down interest rates, which would save the government $400 billion in interest per year. He desperately needs lower rates to finance and refinance the massive debt coming to the market this year.
A recession would also clear out dead wood and lower asset prices, making them more accessible to the middle class. This would benefit Trump's real estate business, as he is a real estate man.
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According to Larry McDonald, Trump needs a recession to fix the economy. McDonald explains that the economic models with massive stimulus never work and can't work, and that the mass-stimulus approach has to come to an end.
Here are some possible reasons why Trump wants a recession:
- He can blame the previous President, much like Reagan blamed Carter for the recession early in Reagan's term.
- Recessions clear out dead wood and lower asset prices, making them more accessible to the middle class.
- Recessions often tame inflation, helping the middle class.
- We have to stop the endless stimulus train at some point.
Economic Benefits
A recession would allow Trump to slash taxes on the wealthy, as he did in 2017 with the Tax Cuts and Jobs Act, which mainly benefited corporations and the top 1% of earners.
This move would also give Trump a chance to gut the social safety net, as he has long advocated for cutting or eliminating programs like Social Security, Medicaid, and food stamps.
By doing so, Trump would be able to further consolidate power and wealth among the elite, a key goal of his economic agenda.
The wealthy and corporations would be the biggest beneficiaries of a recession, as they would be able to buy up assets at fire-sale prices and increase their control over the economy.
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In a recession, the government would also be forced to borrow more money to fund its operations, which would further enrich the wealthy and corporations by giving them more control over the national debt.
The economic benefits of a recession for Trump and his allies would be significant, but the costs to ordinary Americans would be devastating.
Core Reason for Slowdown
The core reason for the slowdown is to create an environment that benefits the administration's economic vision. This vision involves a nationalist approach to economics, where short-term economic pain is seen as a necessary cleansing mechanism to reset the economy.
A recession would force the Federal Reserve to aggressively cut interest rates, potentially boosting real estate and financial markets after an initial downturn. This is a strategic move to boost the economy, particularly for those with a stake in real estate, like Trump.
The administration wants to justify cutting social programs like Medicaid and SNAP benefits during an economic downturn. This would make it easier to push through $4.5 trillion in tax cuts, which would be framed as "necessary austerity" measures.
The idea of "creative destruction" is also at play here. The administration seems to be pursuing a strategy of deliberately breaking down economic structures to rebuild them according to their preferred vision.
The administration's goal is to "reprivatize the economy" and make Treasury bonds more "desirable." They're reframing economic contraction as something aspirational, rather than a policy failure.
Here are some potential benefits of a recession from the administration's perspective:
- Lower interest rates would save the government $400 billion in interest, as a 1% drop in rates would make a significant difference.
- Recessions clear out dead wood and lower asset prices, making them more accessible to the middle class.
- Recessions often tame inflation, helping the middle class.
- We have to stop the endless stimulus train at some point.
The administration is willing to take a short-term hit to achieve long-term goals. They believe that a recession would be a necessary step towards a more nationalist, privatized economy.
Possible Causes of a Recession
A recession can be caused by a combination of factors, one of which is a housing market bubble bursting. This can lead to a decrease in consumer spending and a subsequent economic downturn.
A sharp decline in international trade can also trigger a recession, as seen in the 2008 global financial crisis. The article notes that a decline in international trade can lead to a decrease in economic growth.
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The US federal budget deficit has been increasing, which can lead to a recession. The article states that a large budget deficit can cause interest rates to rise, making borrowing more expensive and reducing consumer spending.
Investors may lose confidence in the stock market, leading to a recession. This can happen when investors become pessimistic about the economy and sell their stocks, causing stock prices to drop.
A recession can also be caused by a decline in business investment, as companies reduce their spending on new projects and equipment. This can be due to a decline in consumer spending or a decrease in government spending.
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