Incompetence = Recession

Posted on March 19, 2025 by Popular Economics Weekly

Popular Economics Weekly

“Trumpian Incompetence will provoke a counterreaction, which will prove to be an opportunity and rebirth. When that happens people will be ready to hear the truth that Trump will never understand—that when you turn America into a vast extortion machine, you will get some short-term wins as weaker powers bend to your gangsterism, but you will burn the relationships, at and abroad, that are actually the source of American’s long-term might.” David Brooks NY Times

Reuters

I quoted David Brooks last week because people will be ready to hear the truth when they realize that Trump’s “vast extortion machine” won’t lower inflation but raise it, won’t eliminate waste and fraud but slash essential governmental services instead (such as social security), and cut regulations that actually prevent financial markets from crashing.

Treasury Secretary Scott Bessent must therefore find excuses why inflation is still rising and the Trump/Musk administration isn’t finding much fraud, but tearing out the guts of government that make it work.

This is why Treasury Secretary Bessent is hinting at a recession in making excuses for their incompetence, because “The market and the economy have just become hooked, and we’ve become addicted to this government spending, and there’s going to be a detox period. There’s going to be a detox,”

It will take time for people to hear the truth because Trump’s executive orders are an attempt to stay ahead of the law and public media he reviles as they are uncovering his administration’s lawlessness and incompetence.

Trump believes such tactics will make him the autocrat and law unto himself he has always wanted to be; but only if the tariffs cause other countries cave in to his demands without retaliating for which the US will protect them militarily and favor them economically.

It is why Trump keeps repeating that he wants to corral Greenland, the Panama Canal, Canada and even Mexico into his new “extortion machine”.

The craziness of his intentions shows tremendous ignorance of economics and history. We haven’t done very well in protecting anyone militarily since World War Two. Even the Korean War was a stalemate after our strategic withdrawal from the Yalu River when China entered the war.

Vietnam ended with a complete withdrawal. The Afghanistan exit may have been the most humiliating retreat after our 20-year occupation, and the Iraq war ended up strengthening Iran’s influence by eliminating Saddam Hussein, its arch enemy.

Trump’s history also reveals that he has never cared about most of those that voted for him. History Professor Timothy Snyder has said his real constituents that he wants to please are fellow autocrats and dictators like Russia’s Putin and China’s Xi Jinping.

Musk’s incompetence is also damaging our national security. Heather Cox Richardson reports “Sharon LaFraniere, Minho Kim, and Julie Tate of the New York Times reported that cuts to the top secret National Nuclear Security Administration have meant the loss of critical employees—from scientists and engineers through accountants and lawyers—at the agency that manages the nation’s 3,748 nuclear bombs and warheads.”

Musk is damaging our financial security as well. Judd Legum of Popular Information has reported in various interviews that an internal memo from the Social Security Administration, written by acting deputy commissioner Doris Diaz, called for requiring beneficiaries to visit a field office to provide identification if they cannot access the internet to complete verification there.

This is while they are closing Social Security offices. Diaz predicted “service disruption,” “operational strain,” and “budget shortfalls” that would create increased “challenges for vulnerable populations.”

Tariffs won’t balance the budget and take away the need for other taxes (like income taxes) either, because the targeted nations are already retaliating. The modern world is far more complex. President Mckinley’s first Gilded Age that Trump so admires used tariffs because we needed them to protect our young steel and manufacturing industries.

The first Gilded Age ended because massive corruption was unearthed during Teddy Roosevelt’s trust-busting progressive era, which led to creation of the Federal Reserve, income taxes and eventually FDR’s New Deal to protect us from future Robber Barons.

Karl Rove as GW Bush’s campaign manager and Republicans also openly yearned for a return to the McKinley’s Gilded Age. Tariffs have worked in developing new or better industries, which is why the Biden administration used them to protect our computer chip industry, which is a national security priority.

The president’s tariff authority is based on the need to protect our national security, whereas Trump wants to use it to protect his own grandiose ideas.

David Brooks is right. The American public will eventually see the harm his extortion machine will cause Americans as well as our friends and allies. And that by leaving the alliances that protect US—not only NATO, but the World Health Organization that protects against more pandemics, the Paris Accord where nations have agreed to bring down greenhouse gasses—we will be less secure.

Please to God this happens before we must go through another recession, or pandemic, or both.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

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It’s the Law of the Jungle

Posted on March 16, 2025 by Popular Economics Weekly

Financial FAQs

“Trumpian Incompetence will provoke a counterreaction, which will prove to be an opportunity and rebirth. When that happens people will be ready to hear the truth that Trump will never understand—that when you turn America into a vast extortion machine, you will get some short-term wins as weaker powers bend to your gangsterism, but you will burn the relationships, at and abroad, that are actually the source of American’s long-term might.” David Brooks NY Times

I wonder what Republicans expected when they allowed Donald Trump to choose the least-qualified candidates to run his government and carry out their agenda of deregulation, tax cuts and tariffs?

Republicans made the same mistake with GW Bush when his tax cuts and deregulation push led to the first $1 trillion budget deficit, liar loans, the housing bubble and Great Recession.

Why has the stock market fallen 10 percent from its post-Biden high, in what is called a “correction”, and in danger of falling further into recession territory? Because it is becoming obvious to Wall Street that the Trump 2.0 administration, once again, doesn’t know what it is doing.

Only this time they are doing it on steroids by adding Elon Musk with his chainsaw into the mix. The result has been the destruction of whole agencies that protect us against diseases and pandemics, climate disasters, and health of the economy, since Trump’s tariffs are making no economic sense.

It is the natural consequence of President Trump wanting to destroy our closest alliances with a trade war and allying himself with the Putins and Kim Jong Un’s of the world that kill their citizens with impunity, where the only law is might makes right.

He is attempting to bring back the Law of the Jungle in installing a government with those that will only obey him, an impossible situation in the modern world that can only precipitate another Great Recession, or even Depression.

President Biden did the right thing with his New, New Deal legislation by working with congress to modernize our infrastructure and manufacturing that has brought back 700,000 manufacturing jobs.

Foreign governments are already retaliating against Trump’s tariffs, creating a trade war that no one can win. The aluminum and steel tariffs will drive a hole in the US auto industry, say their CEOs, when the Great Recession had once before bankrupted them so that President Obama and congress agreed to bail them out.

Trump was able to fool a majority of American voters into a second term because of their wholesale ignorance of the US economy and its position in the world. The US is still the world’s wealthiest country that recovered most quickly from the COVID-19 pandemic yet has also the most unequal wealth and income disparities in the developed world.

The Last Tech Age

When I last wrote about our wealth gap in 2017, the U.S. was in 106th place of the 149 countries in income inequality as ranked by the Gini Index of the CIA’s World Factbook. It is an idex that measures the income indisparities of existing countries.

The U.S. had a Gini inequality index on the level of Peru and Cameroon. Whereas Finland and the Scandinavian countries are at the top of equality rankings, Germany and France are 12th and 20th, respectively. The higher the index, the greater the income gap between the wealthy and poor citizens of a country.

It is why we have such a partisan divide between Democrat-led blue states and Republican-led red states that Republican tax cuts and record budget deficits most harmed.

Donald Trump has always wanted tax cuts because he has barely paid any taxes himself. But this is only because he has extorted, stiffed and lied to so many people and institutions when running the Trump Organization. Why would he behave differently as president?

We are already “hearing the truth” about the havoc his “extortion machine” is wreaking. When will we be ready for “a counterreaction, which will prove to be an opportunity and rebirth ?“

When the damage is so great that Americans become “as mad as hell and are not going to take it anymore.”

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

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Does Tariff War = Recession?

Posted on March 14, 2025 by Popular Economics Weekly

Popular Economics Weekly

“I don’t see any kind of well-thought-out, comprehensive strategy coming out of the White House,” said Bernard Baumohl, chief global economist at the Economic Outlook Group, a nonpartisan forecasting firm.

What is the White House strategy? Is it based on the campaign promises to bring down inflation on “Day 1”, eliminate waste and fraud, and cut regulations that impede new investments, such as in AI?

The White House to date is attempting to explain why it hasn’t developed a strategy. Treasury Secretary Scott Bessent opined that,

“The market and the economy have just become hooked, and we’ve become addicted to this government spending, and there’s going to be a detox period. There’s going to be a detox,” Bessent, a former hedge-fund manager, said during a CNBC interview.

This description of a “detox” period is alarming, because the term has nothing to do with an economic plan, or anything else, but in fact means the Trump administration is hinting that a recession may be required to wean US off what they deem as too many government services that benefit ordinary Americans rather than the Oligarchs that have jumped onto the Trump/Musk bandwagon.

The wet dream of Republicans and conservatives has historically been to downsize government to little more than military defense. That’s why Trump has targeted USAID and the Department of Education, as well as cuts to social security, Medicare, and Medicaid.

Douglas Holtz-Eakin, a former (Republican) director of the Congressional Budget Office, said it was a fine sentiment for a Treasury secretary to want to reduce government spending but noted that there was no GOP plan in sight to accomplish this goal in any sustainable way, according to MarketWatch.

FREDfederalspending%GDP

Part of the problem in downsizing government is that it’s extremely difficult to bring federal government spending below 20 percent of Gross Domestic Product as portrayed in the above FRED historical graph dating from 2010. Spending surged above that level only twice to aid recoveries from the Great Recession and COVID pandemic.

Part of that surge was the Biden administration’s new, New Deal legislation that has already brought 700,000 manufacturing jobs home in the CHIPS, Infrastructure and Inflation Reduction Acts.

These were public/private investments that resulted in the US having the fastest economic recovery from COVID-19 in the developed world.

Trumps says he also wants to bring manufacturing jobs home with the trade tariffs. But his single-minded emphasis on tariffs against friend or foe without negotiating up front will increase inflation, largely because it will be reciprocated, launching a trade war.

And rather than eliminating waste and fraud, the DOGE firings are downsizing or eliminating departments and agencies that make it work—such as the FAA, Energy Department, VA and even social security—which will do exactly the opposite—make us less safe.

“It all seems to be very capricious,” continued Baumohl, “and I think this has been of great concern, not just to U.S. and foreign investors, but certainly to consumers, and we’ve seen that in the abrupt decline in confidence, which is now showing up in in their spending patterns. Once consumers start to cut back, there is nothing that the government can do to make sure that the economy keeps out of recession, because we’re talking about 70% of all economic activity.”

Will such a strategy, or lack of it, work? American consumers are already starting to give the final word. The University of Michigan’s consumer sentiment survey showed consumers becoming even more pessimistic about their future.

“Consumer sentiment slid another 11% this month, with declines seen consistently across all groups by age, education, income, wealth, political affiliations, and geographic regions. Sentiment has now fallen for three consecutive months and is currently down 22% from December 2024.” said Survey Director Joanne Hsu.

It looks like the Trump/Musk administration doesn’t want Americans to know what they are really up to, and it is leading to the wholesale destruction of the U.S. economy.

It will take more than picketing Tesla factories and dealerships for Americans to prevent what is sure to become a recession from happening.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

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What Happened to Animal Spirits?

Posted on March 12, 2025 by Popular Economics Weekly

Financial FAQs

“We’re seeing a strong divergence between animal spirits of the stock market and what we’re actually seeing unfold from businesses and business leaders,” a White House official told reporters Monday, CNBC reported, adding, “The latter is obviously more meaningful than the former on what’s in store for the economy in the medium to long term.”

FREDconsumersentiment

The White House is now admitting that the rise in “animal spirits” over Trump’s reelection had waned and business leaders were now guiding the financial markets lower “in the medium to long term” because of Trump’s on again, off again tariff announcements. They are saying in effect that the Republican campaign promises of lower taxes and fewer regulations won’t matter.

Such market enthusiasm couldn’t last when it became obvious that Trump’s contradictory messaging and his lack of knowledge about foreign trade could lead to tariff wars, which in the words of a growing number of business leaders, showed “he does’t know what he is doing”.

Consumers are beginning to catch on as well, which is resulting in the decline of their own “animal spirits”. The above chart of declining consumer confidence as measured by the University of Michigan last peaked in January 2024 with Donald Trump’s re-election, when consumers believed in Trump’s promises to bring down inflation on “Day 1” of his second term.

But that hasn’t yet happened, and consumers are not happy about it. In the words of the U. of Michigan’s survey director Joanne Hsu:

“Consumer sentiment fell for the second straight month, dropping about 5% to reach its lowest reading since July 2024. This decrease was pervasive, with Republicans, Independents, and Democrats all posting sentiment declines from January, along with consumers across age and wealth groups.”

The term, “Animal Spirits”, was first coined during the Great Depression to explain why consumer behaved the way they did. Roosevelt’s New Deal that gave workers more benefits, such as the 8-hour work day, workers compensation, and social security, was created to boost their animal spirits and led to the recovery from the Great Depression.

Nobel Laureates George Akerlof and Robert Shiller even wrote a book about it that was entitled, Animal Spirits; How Human Psychology Drives the Economy and Why It Matters for Global Capitalism.

It was an important book because it refuted the long-held theory that so-called free market, or Laissez Faire, economic theories created more growth with less regulations.

But Republicans’ touting of the benefits of free markets and less regulations was a giant lie that led to President Reagan’s trickle-down economic theories, because with little or no oversight of their trades, the wealthiest always prospered the most because they had the time and money to research the markets.

Therefore conservatives that favored less regulation had to create a myth that some of that wealth was bound to “trickle down” to Main Street and benefit ordinary wage-earners to placate voters.

Professors Akerlof and Shiller showed it was a lie. Most consumers in fact do not have the resources or knowledge to adequately research what they buy or invest in. They discovered in their research that most consumers act on hearsay, or word of mouth, in making purchase decisions, including when to buy real estate.

And because consumers didn’t or wouldn’t do the necessary historical research in early 2000 when buying homes, but believed that housing prices could never decline, they pushed up housing prices so much that builders built too many homes, which was a major reason for the busted housing bubble and resultant Great Recession.

History has shown that the tax cuts and market regulations the Trump campaign promised will make the wealthy even wealthier, and 80 percent of Americans that are wage earners, less wealthy.

It’s the real reason Trump has unleashed “Chainsaw Musk”—to terrorize federal workers into quitting their jobs and destroy as much as possible of Roosevelt’s New Deal, as well as the laws and regulations that have benefited most Americans since then.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

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What Happens Next?

Posted on March 10, 2025 by Popular Economics Weekly

Financial FAQs

“In an interview with Fox News on Sunday, Trump refused to rule out a recession for the U.S. this year, implying his tariff strategy and attempts to cut government spending were part of a necessary transition that in the short term could cause problems for the world’s biggest economy.” MarketWatch

AtlantaFedGDPNow

I find it laughable that President Trump is now saying the ‘R’ word on a Sunday talk show, when one of his most famous campaign promises was that “Starting on day one, we will end inflation and make America affordable again, to bring down the prices of all goods.”

So the question to ask is, what happens next when and if he succeeds in enacting his agenda? We should know by now it isn’t words but his administration’s actions that will determine (or hinder) how much the economy and prices will grow (or shrink) this year.

In fact, Trump has inherited a fully employed and still growing economy. Prices and inflation can’t come down in such a situation because there is more demand (i.e., money in circulation) than goods available. It’s good old Economics 101 that is taught in business classes.

But economists do agree on what would bring prices down, a recession. Many economists and pundits have been looking at the Atlanta Fed’s estimates of first quarter GDP growth, and been seeing the possibility of the ‘R’ word.

Why? It’s mainly because consumers have been spending less since the holidays, in part because they are losing confidence that they may even have a job, or the ability to change jobs in the future. Why wouldn’t they lose confidence when “chainsaw Musk” cuts federal jobs with abandon and the newly jobless federal workers start competing in the private sector?

That’s why first quarter growth estimates, such as the Atlanta Fed’s GDPNow estimate have fallen.

“The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2025 is -2.4 percent on March 6, up from -2.8 percent on March 3,” is their latest

That’s also why the stubbornly high inflation and interest rates are making creation of a new fiscal budget so difficult. Republicans want the tax cuts they promised to spark more spending, which is inflationary, but need Democrats to agree. Yet Democrats don’t want the cuts to social security, Medicare, and Medicaid that Trump said would never happen, but must happen for any preservation of the tax cuts enacted during Trump’s first term.

Hence there will probably be a so-called continuing resolution to keep the existing budget until end of the fiscal year in September. This will avoid a possible government shutdown, but what then?

This week’s news will be mostly about inflation, since February’s Consumer Price Index and wholesale Producer Price Index will come out that may paint a clearer inflation picture, and whether the Fed might resume cutting interest rates.

And we need not only to be talking about the prospects for higher prices from tariffs, but also the trade disruptions that tariff wars cause, because President Trump will antagonize both friend and foe in his flailing (and counterproductive) attempts to decree rather than negotiate a new foreign trade policy.

There is something seductive to many voters about a new foreign trade policy that promises to bring more jobs home. But firstly, it’s more expensive to make things in the U.S., which is why we import more than we export. And with Trump making enemies of our friends and closest allies, they will be sure to reciprocate with higher tariffs.

Trump has to know that is no way to do business from his history of bankruptcies and lawsuits. He has always chosen confrontation over cooperation to get what he wants, and the financial markets as well as consumers will soon figure this out. The only question is when, and what happens next?

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

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Job Growth vs. Job Cuts

Posted on March 9, 2025 by Popular Economics Weekly

Popular Economics Weekly

“Total nonfarm payroll employment rose by 151,000 in February, and the unemployment rate changed little at 4.1 percent, the U.S. Bureau of Labor Statistics reported today. Employment trended up in health care, financial activities, transportation and warehousing, and social assistance. Federal government employment declined.” BLS

FREDpayrolls

The February payroll numbers were somehow comforting because of the looming ‘R’ (recession) fears. There was not the sudden halt in hiring that many economists feared because of Trump’s on and off tariff announcements and ‘chainsaw Musk’s” indiscriminate (and mostly illegal) firings of government workers.

Fewer new jobs have been added to payrolls even before Musk’s machinations, as can be seen from the decline in FRED’s payroll formation graph through February before his firings took effect. It’s partly because companies don’t know what to expect. But I will make a prediction that things won’t get better unless Republicans better understand the budget making process.

We know this because the five recessions and record budget deficits since 1980 have all occurred during Republican administrations. That is why most of the Republican-controlled red states are the poorest states, many with no minimum wage of their own.

And there are also real signs that consumers that make up 60 percent of economic growth have exhausted their savings and become more pessimistic.

The real tragedy is that Republicans don’t have to act so callously. The Trump/Musk induced chaos is intentional, since they aren’t bothering to negotiate with anyone—such as congress that created most of the agencies being affected, the employee unions, or even checking with the courts beforehand to see if it is legal.

The Clinton administration did it the right way by negotiating with the parties affected and stringing out the job cuts over years, as I’ve said before, thereby handing off four years of budget surpluses to GW Bush, who promptly wasted them with unpaid tax cuts and the wars on terror.

We also know that Americans have been very lucky with the unemployment rate at or below 4 percent for more than two years. What is confusing consumers and small businesses in particular is why Trump and Musk are so acting so unnecessarily unpredictable with the growing public blowback, confusing everyone as to their motives.

One clue is that both Trump and Musk are autocrats who don’t like to consult with anyone but themselves, hence the yes-men and women they surround themselves with.

But why do Republicans follow so docilely when Musk is cutting spending or eliminating programs in their districts and states? Part of it is an almost complete ignorance of economic principles. For instance, tax cuts only boost the wealthiest incomes if they aren’t paid for—or paid by cutting the social safety net of Medicare and Medicaid that service the poorest.

The unemployment rate crept up to 4.1% in February from 4.0% in the prior month, largely because some 588,000 fewer people said they were employed in February, the U.S. Bureau of Labor Statistics said. That’s the biggest one-month decline in 14 months, per MarketWatch’s Jeffry Bartash.

We are nearing the end of this post-pandemic business cycle as well. Morningstar, the rating agency, attributed the hiring slowdown to lower economic growth in general.

“At the industry level, the slowdown in hiring in the past three months has been driven by government (payrolls slowing from 3.4% to 1.6% growth) as well as construction and real estate (payrolls slowing from 3.5% to 1.4%).”

We are now in fact seeing a drop in job formation that is sure to continue—January added just 146,000 jobs, and there is a federal government hiring freeze that will affect state hiring as well.

It’s also not surprising that construction job growth is slowing, as high interest rates are causing a renewed slowdown in housing and as well as nonresidential construction, which shows up in the GDP.

Interest rates are falling again with the growing signs of economic weakness, such as the big drop in first quarter 2025 growth expectations—now down to -2.8 percent, when earlier estimates were as high as + 4 percent GDP growth in Q1.

What’s more, data released Wednesday from the Mortgage Bankers Association showed that mortgage rates hit their lowest levels since early December 2024 when the FHA rate dipped to 6.42%, which in turn led to a 20.4% increase in mortgage applications.

Lower interest rates are really the only event that would continue economic growth this year, and encourage more Federal Reserve rate cutting, but only if Trump’s tariffs don’t give a big bump to import prices and inflation.

Fed Chair Powell wouldn’t hint at the Fed’s future actions in a speech for the U.S. Monetary Policy Forum. “The White House is in the process of implementing significant policy changes in four distinct areas; trade, immigrations, fiscal policy, and regulations…It is the net effect of these policy changes that will matter for the economy and for the path of monetary policy.”

However, the Trump administration is showing woeful ignorance in the four areas Powell spoke about, as well not knowing how to balance or pay down the federal budget.

So, it looks like we could probably muddle through the next four years, as we did during President Trump’s first term; without a discernable economic plan other than more tax cuts. And, whether Musk’s chain saw doesn’t wreak too much havoc on the government bureaucracy that makes everything work.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

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What Happened to the Budget?

Posted on March 7, 2025 by Popular Economics Weekly

Popular Economics Weekly

“The House Republican budget passed today calls for massive cuts in health coverage, food assistance, and help paying for college, among some other areas, to pay for huge tax giveaways for wealthy households and businesses.” CBPP.org

CBPP.org

President Trump had to know that devoting a large part of his State of the Union speech insulting Democrats would make it much more difficult to forge a budget for the fiscal year that ends September 30, when they will need Democrats’ support because of their thin majorities.

It will make it all but impossible to ratify an annual budget that significantly reduces the budget deficit. It’s not a great way to negotiate, in other words, unless Republicans don’t believe they need Democrats to fund their tax cuts.

House Republicans have passed a purely Republican budget resolution that relies on massive cuts to federal programs that the Center For Budget and Policy Priorities (CBPP), a nonpartisan research and policy organization, recently analyzed.

“The House budget would require the Energy and Commerce Committee to cut at least $880 billion; the Agriculture Committee to cut at least $230 billion; the Education and Workforce Committee to cut at least $330 billion; and other committees to also cut programs to reach a cumulative target of at least $1.5 trillion in cuts through 2034. The magnitude of these reductions would force congressional committees to make enormous cuts in Medicaid, SNAP, student loan assistance and other vital sources of support when they develop the “reconciliation” spending and tax bill that follows the budget resolution.” CBPP

Yet Republicans must compromise with Democrats to pass the annual budget that keeps the federal government open for business because of their paper-thin majorities in both the House and Senate, as I said. And the Democrats’ cooperation will require that some of their own budget priorities be included.

Trump must know by insulting Democrats he won’t get much of what he wants. He must believe there is a better way to narrow the budget deficit. Of course, he and Elon Musk have said so out loud—find some $2 billion in savings in the current budget that totals more than $4.2 trillion at last count.

Instead, Trump/Musk are firing federal employees and closing whole agencies with abandon to make their case that it will eliminate enough fraud and waste to bring down the deficit to justify their tax cuts. But it can’t happen without cuts to the sacred third rails as well—social security, Medicare and Medicaid.

But they will be slowed down in their haste to downsize government because most of the DOGE work to date seems to be illegal, according to the many lawsuits that have been filed to stop the DOGE efficiency drive.

It will end up being a failed “Shock and Awe” campaign, according to Thomas Friedman, since their real intent is to cut government “down to the size where one could drag it into the bathroom and drown it in the bathtub,” to quote Grover Norquist, a Republican  strategist.

AtlantaFed

And we might already be seeing evidence of the damage; such as predictions of negative first quarter economic growth for the first time since the COVID-19 pandemic. The Atlanta Fed’s GDPNow model of real GDP growth (seasonally adjusted annual rate) in the first quarter of 2025 is -2.4 percent on March 6, up from -2.8 percent on March 3.

Tariff fears are part of the problem, as importers are ordering as much as possible before tariffs kick in that will raise prices, and subtracts from GDP growth. But consumer spending in the new year that powers 60 percent of economic growth has declined because of consumers’ exhausted savings.

Consumer spending could shrink even further as the federal job firings and layoffs accelerate. MarketWatch reports some 172,017 job cuts were unveiled in February by U.S.-based employers, according to the monthly report by the outplacement firm Challenger Gray & Christmas. That’s the highest total since July 2020.

“It was chiefly because of a large reduction in government employees from actions by Elon Musk and his so-called Department of Government Efficiency, or ”DOGE,” purportedly to reduce bureaucracy,” said MarketWatch’s Jeffry Bartash.

Challenger put the federal job cuts at 62,242 last month, up from just 151 in January and February combined in 2024. Historically, very few federal employees lose their jobs annually. Retail and tech companies also announced sizable layoffs in February.

Economist Claudia Sahm said in a CNBC interview that such a massive number of workers losing their jobs at once has never happened before and will be flooding the job market.

I can’t imagine what such a large loss of jobs will do to our economy this year, even though federal jobs are a small part of the US workforce.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

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What Is Burning?

Posted on March 5, 2025 by Popular Economics Weekly

Answering Kennedy’s Call

“Yet another tragic story of people being trapped inside a burning Tesla, this time in Toronto. Four dead; one rescued when a bystander smashed a window. Phil Koopman, cited by Paul Krugman in Substack

Carscoops.com

Paul Krugman in a recent Substack column made a horrific analogy with the damage that Trump/Musk is doing to the American economy that I agree with.

Trump/Musk are blindly rushing ahead with Musk’s so-called DOGE efficiency drive and Trump’s tariff wars raising the risks of a downturn to our economy, when there are much better ways to accomplish their stated goals of decreasing the budget deficit and national debt.

Such haste is causing irreparable damage to lives and livelihoods; just as Musk’s failure to correct Tesla’s design flaws have killed people. There are better ways, and maybe the SCOTUS 5-4 ruling that the Trump administration can’t withhold $2 billion in USAID funds owed to its contractors will cause him to slow down enough to prevent a very large economic conflagration, such as stagflation,that happened in the 1970s, or even a recession.

There is a lesson to be learned. Tesla’s sometimes fatal design flaws seem to happen because of his lack of attention to details in his single-minded drive to invent new and better technologies. At least half of the automated-driver deaths (46 cars without a driver at last count) are Tesla’s, and now there is news that a defect in its electric door opening mechanism won’t unlock the door in the event of a power failure, as ahappened in some of Tesla’s car fires.

“This has been going on for years,” said Koopman. “At least some of the victims were definitely alive and trying to escape a burning Tesla when door lock power was lost. Some escaped. Some did not. Below is a writeup I posted on a blog in 2022. Nothing has really changed. The Tesla door release situation is a fatality-via-burning-alive waiting to happen. As it has multiple times at this point.”

And why is Trump rushing to start a trade war with our closest allies in the name of national security? He is promoting a blatant lie, that our closest neighbors pose a national security threat. Yet Mexico and Canada as border neighbors are in the best position to protect Americans, hence pose the least danger to our national security. But this is if we would pass an immigration bill, such as the bipartisan border bill Biden negotiated that Trump nixed because it would make Democrats look better.

Instead, we are now making an enemy of those nations that are in a position of protecting our borders.

What has become clear is Trump/Musk are good at wrecking everyone else’s economies but their own; at a time when more government oversight is needed because of the greater frequency of natural disasters (NOAA, US Geological Survey), increasing cyber-attacks, new and deadly (African) viruses, bird flu, on top of a potential measles epidemic in Texas.

And, even more sadly, there are signs that Trump will want to make some of Biden’s new, New Deal legislation his own, by canceling contracts and reopening them under his own administration, just as Musk is doing with the FAA.

Musk as already starting to replace Verizon’s contract to upgrade and modernize the FAA’s telecommunication networks ‘that oversee 29 million square miles of US airspace and ensure the orderly and safe movement of 45,000 flights daily’ with his own Starlink Satellite network.

They are selling more snake oil, instead of working with congress on a bipartisan agreement. Trump is rushing to downsize government and instigate tariff wars because he wants Americans to believe there is danger from all sides that only he can prevent, before something horrendous happens and we discover we might need our allies.

It doesn’t have to be this way, but if Trump won’t change his ways, there will be larger fires that will be much more difficult to put out.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

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Why Weaken U.S. Economy?

Posted on March 4, 2025 by Popular Economics Weekly

Answering Kennedy’s Call

“On February 28, the same day that President Donald Trump and Vice President J.D. Vance took the side of Russian president Vladimir Putin against Ukraine president Volodymyr Zelensky in the Oval Office, Martin Matishak of The Record, a cybersecurity news publication, broke the story that Defense Secretary Pete Hegseth has ordered U.S. Cyber Command to stop all planning against Russia, including offensive digital actions.”@heathercoxrichardson, Historian, Letters from An American

Reuters

What became clear in last week’s disastrous Oval Office meet with Vladimir Zelenskyy, and Trump’s abrupt switch to Putin’s side of the peace negotiations, is that Trump and Putin are engaging in a very consequential protection racket that could bring down the U.S. economy as well.

They have come to rely on each other to stay in power. Russia’s huge cyber-attack machine helped Trump eke out his two election victories, and Putin wants Trump to hand him Ukraine to justify to the Russian people their horrific losses, and his hold on power.

Outrageous as that may seem, there is no other explanation for Trump’s actions in weakening the major federal agencies that protect our national security and growing isolation from our econmic alliances, and persisting in a tariff war that is alienating our closest allies.

Trump has jumped into their extortion racket with both feet. It’s a quid pro quo between two thugs, as happens between mafia bosses. Trump can hand Ukraine to Putin by withdrawing America’s support, and Putin will continue his unrelenting attacks on our national security infrastructure, weakening U.S. power and influence.

We can now see how they are doing it. Musk’s DOGE cuts are gutting the watchdogs that would uncover their protection racket, whether it’s by downsizing the FBI, CIA, NEC, CISA and other watchdogs (e.g., illegally firing 11 agency Inspector Generals), or reorganizing agencies in such a way that they function much more poorly.

The CISA, Cybersecurity & Infrastructure Security Agency, is especially important for our national defense. Former FBI Director Christopher Hays warned in pre-election congressional testimony to be especially concerned with the penetration of our cyber networks.

Wray noted that hostile nation-states, such as China, Russia, Iran, and the Democratic People’s Republic of Korea, are increasingly using “cyber operations” to meet their strategic goals and undermine the United States. These adversaries are “growing stealthier,” he said, and are always devising fresh methods to make their cyber operations more far-reaching and impactful.

“We’re seeing hostile nation states become more aggressive in their efforts to steal our secrets and our innovation, target our critical infrastructure, export their aggression to our shores and front and center is China,” Wray said at last year’s Boston Cyber Security Conference.

And why would Trump and his loyal followers want to take away our protections from such attacks? The answer is even more frightening. So that we align our priorities with Putin’s Russia, of all countries.

Professor Richardson reports, “Shortly after the election, a newspaper reporter asked Nikolai Patrushev, who is close to Putin, if Trump’s election would mean “positive changes from Russia’s point of view.” Patrushev answered: “To achieve success in the elections, Donald Trump relied on certain forces to which he has corresponding obligations. And as a responsible person, he will be obliged to fulfill them.”

It’s becoming obvious that President Trump wants the USA to be run under the same one-man rules as Putin’s Russia, where the only laws are Putin’s laws, enforced by terror. He can murder his dissenters, whereas Trump will attempt to silence his opposition by weakening our election laws as well.

Professor Richardson reported that “On February 20, Steven Lee Myers, Julian E. Barnes, and Sheera Frenkel of the New York Times reported that the Trump administration is firing or reassigning officials at the FBI and CISA who had worked on protecting elections. That includes those trying to stop foreign propaganda and disinformation and those combating cyberattacks and attempts to disrupt voting systems.’

In fact, Putin may not need to hack Democratic Party emails, as he did in past elections. Musk’s DOGE hackers can do it for him in the upcoming 2026 midterm elections as they continue to penetrate the federal government’s closely guarded personnel networks.

We could see a WikiLeaks scandal all over again, if state elections officials aren’t careful. Trump/Musk have already attempted to remove Ellen Weintraub, the Democrat head of the Federal Election Commission that rules on election finance laws, without nominating a successor who must be confirmed by the Senate before she can step down.

But there is an even more immediate worry, the direction of our economy. Trump’s announcements of tariffs on Mexico, Canada, and Mexico caused the DOW to drop 800 points once again, and their immediate retaliation. He is also threatening the EU. It is an almost kneejerk reaction as happened one week ago. Markets don’t like tariffs levied with no other reason than to collect import taxes to fill the gaping hole of our budget deficit and ballooning national debt.

Reuters just reported that a private survey showed American factory activity last month edged closer to stagnation—slowing growth combined with higher inflation—as new orders and employment contracted. A gauge of prices paid for materials jumped to the highest since June 2022. So how should investors react to all this smoke on the horizon?

It looks like Trump wants to ally with a country and economy that is one-ninth the size of the European Union when economic growth is more dependent on allies we can trust than ever before.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

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Economic Growth Slowing…Because?

Posted on March 2, 2025 by Popular Economics Weekly

Popular Economics Weekly

“The U.S. government is currently under the control of a deeply ignorant, vengeful megalomaniac with zero impulse control. And it’s not just Elon Musk: Trump shares the same characteristics.” Nobel Laureate Paul Krugman

AtlantaFed

“The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2025 is -1.5 percent on February 28, down from +2.3 percent on February 19.” Atlanta Federal Reserve 

Watch out below, as economic growth looks to contract (-1.5 percent) in the first quarter of 2025! Trump’s abrupt announcement of tariffs on Mexico, Canada, and China, as well as Elon Musk’s indiscriminate slashing of payrolls and elimination of whole government agencies created a shock to economic growth that we have not seen in a long time.

How do we know? For starters, Trump’s tariff announcement caused a sudden plunge in predictions by Fed officials and economists of first quarter 2025 economic growth. The Atlanta Fed’s GDPNow estimate (graph above) dropped almost 4 percentage points from earlier predictions in part because of Trump’s just announced tariffs; that is a record plunge, I might add. They will be levied on Mexico, Canada, and China, which will mean higher import prices ahead for consumers when Trump had promised to lower inflation from ‘Day 1’.

And the just released U.S. Personal Consumption Expenditure (PCE) read on inflation for January (see below graph) is another reason first quarter economic growth is worsening. Consumer spending declined for the first time in two years, and consumer expenditures make up the largest component of Gross Domestic Product growth.

BEA.gov

I said consumer spending should weaken after the holiday shopping splurge in an earlier report, Are Consumers In Danger?, and it’s happened. U.S. first-quarter consumer spending growth was just 1.6% annualized—the weakest since the second quarter of 2023. Much of the spending slowdown was due to the horrendous Los Angeles wildfires, unseasonably cold winter temperatures, and consumers having to replenish their depleted savings. The personal savings rate jumped from 3.8 percent to 4.6 percent (black line in above graph).

Some good may come out of the PCE report because its inflation index declined from 2.6 to 2.5 percent, which increases the likelihood that the Fed may cut interest rates further, especially if the labor market continues to soften.

Elon Musk’s mass layoffs and complete elimination of whole federal agencies without plan or regard for the consequences will have a disastrous effect on the job market as well.

Well-regarded Chief Economist Torsten Slok of Apollo Global Management estimates there could be 300,000 federal job cuts, but when private-sector contractors that work for them are included, a total of one million jobs could be at risk, in a Barron’s article by Randall Forsythe.

And this is just the beginning. The uncertainty and craziness of Trump and Musk’s actions are already showing up in the alarming drop in consumer confidence surveys as well.

There is a better way to trim government excesses. Even Musk has acknowledged that “What @DOGE is doing is similar to Clinton/Gore Dem policies of the 1990s.”

Not really. President Clinton’s “Reinventing Government” initiative headed by VP Gore was only initiated after an initial year of planning and cooperation with congress that resulted in four years of budget surpluses. 

This is a far different approach than Trump/Musk’s  blatantly illegal attempts to usurp the power of congress and the constitution, which can only lead to more court fights and budget deficits.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

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