Steve As Fake Economist: Maybe not as Dumb As the Wannabe Oligarchs?

 I am not an economist, but so much of what is going on these days is due to faulty understandings of basic economics, so even my level of understanding may be sufficent.

I just wanted to highlight a few things that bluesky conversations forced me to think about.

First, there is the discussion of the chances of a recession happening in 2025.  In my humble opinion, the probability is not 25% or 50% but 100%.  That is, it is a certainty because IT IS ALREADY HAPPENING.  A recession is when the economy shrinks as opposed to growing.  The formal definition is when it happens for two quarters.  

Will there be less economic activity this year?  There already is less and it will continue.  That cutting hundreds of thousands of government jobs AND cutting heaps of money from flowing to various actors (cities, states, universities, etc) will reduce the economic activity.  Plus, yes, multiplier effects--those restaurants and other services that benefit from having fully operating universities, states, cities, think tanks, etc will be doing less, buying less, spending less.  

This is before we get to the tariffs, which have already started to hit the economy--that firms are pausing production because they really don't know what their inputs will cost nor will they know what kinds of prices they can charge if they hope to export into markets that are, yes, raising their prices due to retaliatory tariffs.  

The only way to avoid a recession--the technical definition--is if somehow all of this temporary for one quarter and no more than that.  Guess what?  Trump is not going to reverse all of the Musking and DOGE-ing of the government, and no matter what happens with the tariffs, it will have stirred up too much uncertainty to magically erase within one quarter.  This recession is likely to last a long time precisely because this administration does not believe in standard macroeconomics.  But standard macroeconomics believes in it--spend less money, people will buy less, economic activity will slow.  Tax cuts on the very rich may prop up some investments, but they don't actually generate as much economic activity as argued--it does not trickle down.  

Oh, and I haven't even mentioned what Trump is doing to agriculture by keeping out migrant workers or what he is doing to tourism, a very big industry, due to the fear of being disappeared.  

So, that's the first thing I wanted to get off my chest.

The second is this: before the election, business folks had to consider who would be better for them: the guy who promised tax cuts and deregulation or the woman who wasn't going to raise tariffs or create a tremendous amount of uncertainty.  It seems like most of them chose the former and not the latter.

This was, in a word, dumb.  Why?  American businesses already pay very little tax, and rich people pay historically low taxes still.  And they can evade much of it.  Yes, regulation is annoying, but if they want to export to the EU, then they will face regulations there anyway. Plus they can price in penalties and figure out ways to dodge or cheat on the regs.

What they can't finesse are trade wars or uncertainty.  Uncertainty is an absolute killer except for those who can wager on it.  For most businesses, having predictable political and economic situations is basic for making investment decisions and for good operations.  Maybe the Silicon Valley types who have fallen in love with disruption think they don't need either inputs from abroad (or to sell stuff abroad) or stable environments, but pretty much every other actor in the economy relies on foreign inputs, foreign markets, and stable situations.  

So, now, they are fucked.  Unfortunately, so are we.   

Yes, we have short-term-itis among business people--that the focus is on today's market price and not tomorrow's profits. I get that.  But damn, tomorrow turned out to be today, not five years from now.  

Again, what angers me so much is that it didn't have to be this way--just like the Brits stupidly chose Brexit, which was predictably dumb, much of American business chose Trump focusing on tax cuts and deregulation and wishful thinking away the tariffs, the trade wars, the uncertainty, the cheap labor provided by immigrants.  

Will this lead to Trump's undoing?  Maybe eventually, but as long as the GOP fears Musk's money going to primary candidates and Trump siccing his mob on those who disagree with him, I doubt that the GOP will find their backbone.  Maybe the media will stop providing cover for this as people become increasingly outraged.  So, the pain has come quickly, but I don't think it will go away anytime too soon. 

Sorry to be a doomblogger, but at this point, things just suck mightily.  The protests have already made a difference as Democrats are starting to block stuff, and most elections have gone Dem since November.  But the only way out is through--impeachment won't get rid of Trump, and if it did, we'd have Vance.