Trump's Address to Congress

Tuesday, 4 March 2025

I wanted to watch Trump's address to Congress because I cannot tell from the fragments I see on CNN if Trump has a plan for the economy.

He does appear to have a plan. And he did say that fixing the economy is "among my very highest priorities" (to fix it, to improve it, something like that. I missed the word). But after that, the next thing I have in my notes is Trump calling the post-pandemic inflation "the worst inflation, perhaps ever, in the history of our country" which is a crock of shit. Trump does not have enough respect for our economy to tell the truth about it. As you know, I think the Employment Level data for the first month of Trump's second term was fake news. And as you can imagine, I am not happy that Trump wants to change the way GDP is measured.

Hey, the data for GDP excluding the government component is already available. If you want to take government spending out of GDP you can do it in seconds. At FRED, grab the GDP series and subtract from it the GCE series. Done. 

Oh, and at Vox, a good read: Economic growth is slowing — so Trump wants to redefine “economic growth”. The NY Times has Commerce Secretary's Comments Raise Fears of Interference in Federal Data.

Next, Trump blamed Biden for the price of eggs. Then he described his plan to fight inflation: "Reducing the cost of energy and ending the flagrant waste of taxpayer dollars."  How, sir, how are you gonna do that? Fire everyone you can fire, and drill-baby-drill? That's it, I guess. Nothing esoteric in that. But how does it fix the bird flu problem?

My note-taking was rushed, and my handwriting is illegible at best. My notes have Trump saying "by getting rid of fraud in social security we will cut grocery prices." I gagged on that line when he said it. Prices and costs are related. If not, then prices and profits are related. It shouldn't be hard to figure out the problem even if it is something other than bird flu.

And then, Trump promised to balance the federal budget. Note that he did not promise to avoid creating a Greater Depression in the process. That's my concern, the worst-case bad ending. And Trump is already messing with the GDP data, so you know he is worried also about the worst case. Trump doesn't want to be Herbert Hoover, and all that.

At one point Trump said he wants to make interest payments on car loans tax-deductible, "but only if the cars are made in America." That was interesting. However, by making loans less costly, deductible interest encourages people to go deeper into debt. And the problem with our economy, the biggest of all the problems with our economy, is that the private sector is already so deep in debt that we can no longer borrow enough to offset the cost of debt service and have enough left to boost the economy by spending it. This is the problem that needs to be solved. Making interest on car loans tax-deductible will not solve the problem. It will make the problem worse.

To be clear, federal debt is not the problem. It is a problem, yes; but the federal debt is not the cause of the private-sector problem. Federal debt, really, is a measure of the size of the economic problem of the private sector. Excessive private-sector debt is the cause of the private-sector problem. If we rely less on borrowed money and more on income -- if policy creates this change -- then a reduction of business interest cost can offset an increase in labor cost, with something left over to boost business profits.

I may regret saying this, but I think Trump is modeling himself to be our Caesar, ending the Republic and creating an Empire. He would be far better off, as would we all, if he modeled himself after Solon, the forgiver of debt.

In the Tuesday night speech, Trump mentioned a lot of new investment. In my notes I have him saying "$1.7 trillion of new investment in just the last few weeks." A sentence or two later, that new investment spending turned into announcements of plans for investment "in the US instead of in China". Not sure I got that last quote right, but I got the gist of it. 

If Trump wasn't lying about that investment, good. I could probably set aside my concern about a Greater Depression, and I would be happy to do that. But he lies all the time, so I can't trust him on the big new dollars of investment. I will look into it, after I finish these remarks. I wish I could do better. But he's the one that lies all the time, so it's on him.

In my notes, just before my note about the new investment, Trump called his first term the "most successful economy in the history of our country." Bullshit.

 

The next thing in my notes, after the grandiosity of taking credit for the most successful economy in the history of our country, is Trump saying

reciprocal tariffs begin April second.

Whatever tariffs other nations set on our products, we'll set matching tariffs on their products. That's kinda cute, in a way. More complicated than it sounds, I think, because we don't buy the same products from them that they buy from us. But it is cute. And it might be a way for Trump to negotiate the tariff rates to lower and lower levels over time. I think that might be what he has in mind.

Well, the speech went on for a while longer. He started introducing people from the audience and I started losing interest. But I waited it out to the end. And while I did, I wrote this in my notes:

Trump's plan for the economy seems to be tariffs, tariffs, and tariffs.

I didn't hear him say anything about finishing his first-term project, the wall between the US and Mexico to keep foreigners out. His second-term focus is evidently on another wall, a different wall, a wall of tariffs intended to keep foreign output out. 

I oppose globalization, but I don't think tariffs are a good idea. I think the good idea would be to figure out why US economic growth is in long term decline, and solve that problem, the problem of excessive private-sector debt.

GAIO and Units, again

 

The January jump in employment looks suspicious

The Employment Level increased far more in January 2025 than in any month since January 2021 -- far more than in any month of the Biden administration, we might say:

https://fred.stlouisfed.org/graph/?g=1E8kq

Despite all the sudden change in the first weeks of the Trump administration, despite all of the unknowns arising from the threat of 25 percent tariffs, despite the decline of employment due to the federal workforce reductions of Musk and DOGE, despite the warning from the CEO of Alcoa that

the tariffs could cost about 20,000 US aluminum industry jobs and a further 80,000 jobs in sectors that support it.
"This is bad for the aluminum industry in the US, it's bad for American workers," he said.

In addition, according to Google's AI Overview,

Ford CEO Jim Farley has warned that tariffs on Mexico and Canada would be devastating for the U.S. auto industry.

Reuters adds

"What we're seeing is a lot of cost, a lot of chaos," Farley said on Tuesday at a Wolfe Research conference. 

None of this news, none of these views, are good for the economy. Furthermore, I don't see it in the data, but CBS News reports that "Consumer confidence plunged in February amid rising economic concerns". Expectations, when they are falling, can undermine even a good economy.

And even Trump supporters see a rough spot in the road ahead. According to VOX (November 1, 2024):

If elected, Trump has vowed to put Musk in charge of a “government efficiency commission,” which would identify supposedly wasteful programs that should be eliminated or slashed. During a telephone town hall last Friday, Musk said his commission’s work would “necessarily involve some temporary hardship.”

"Temporary hardship."

Days later, Musk suggested that this budget cutting — combined with Trump’s mass deportation plan — would cause a market-crashing economic “storm.”

"A market-crashing economic storm."

On his social media platform, X (a.k.a. Twitter), an anonymous user posted Tuesday that, “If Trump succeeds in forcing through mass deportations, combined with Elon hacking away at the government, firing people and reducing the deficit - there will be an initial severe overreaction in the economy…Market will tumble. But when the storm passes and everyone realizes we are on sounder footing, there will be a rapid recovery to a healthier, sustainable economy.”

A severe overreaction downward -- but one that I say will not be an over-reaction. The anonymous user's references to sounder footing, rapid recovery, and a healthier, sustainable economy are conclusions that I, for one, am unable to reach. Optimism these days is a dangerous thing.

Musk replied, “Sounds about right.”

Musk is excessively optimistic.

Many people seem to think that you can do whatever you want, set whatever economic policy you want to set, and run with it no problem. I don't think like that. I think persistent bad policy will always lead to a crisis and severe recession like we had in 2008-09 and for some time after. And I think a severe recession can become a depression, and a severe depression can become a Dark Age.

I think this is serious business, and our policymakers need to think long and hard and clearly and carefully about what they are doing. I understand, that if and when a Dark Age comes, it will be the wealthy few who are left owning everything. I understand that these owners of "provinces" will become the leaders of the new governments that arise in those provinces. I even understand that the wealthy few may look forward to such developments, though I do not. Most people seem not to think about such things. 

Most people seem not to realize that it is possible to prevent such developments by correctly understanding the problems of our economy -- that is to say, not the surface problems that people have with the economy, but the deeper imbalances that disturb our economy and are never addressed -- and by correctly addressing those imbalances.

It should be clear that the policymakers who allowed the troubles of 2008-09 to develop and come to fruition were not able to understand the imbalances that disturbed our economy, nor properly address them. Far as I can tell, the Trump team is even further than that from the economic thinking they need. The Trump team seems to have a "set whatever economic policy you want" mindset, and is nowhere near correctly understanding the imbalances that disturb our economy.

 

Musk said we should expect some "temporary" hardship. Yeah, and the last guy to use the word "temporary" in a context like that was Federal Reserve Chairman Jerome Powell in March 2021, when he said we should expect some "temporary" inflation.

The pandemic recovery aside, the employment level increased more in January 2025 than at any time since January 2000. I don't believe the January 2025 number. I think Trump went with the fake news.

Federal employment as percent of US population

I googled federal employment as percent of US population.

The AI Overview says "The federal workforce makes up about 0.6% of the U.S. population. This percentage has remained stable over the past decade..."

Pew Research says "In November 2024, the federal government employed just over 3 million people, or 1.87% of the entire civilian workforce, according to BLS data."

Then I went to FRED to see the big picture:

"All Employees, Federal" as a percent of US "Total Population"
https://fred.stlouisfed.org/graph/?g=1E6Gp

 I do not understand the urgent need to cut the federal workforce. I think we'd be better off getting rid of the policies that promote Excessive Reliance On Credit (EROC) in the private sector, and letting our economy grow. We could then watch as federal deficits turn into surpluses as they did in the 1990s.

By the way, the thing that killed off the good economy of the 1990s was our rapid return to EROC. But getting rid of those EROC-promoting policies would allow the good growth & the budget surpluses to continue.

9-to-1 Against

Wrote myself a note this morning, 3:34 in the morning:

I have to look at the chances of Depression, the chances of Trump creating a depression with his cut-cut-cut.

So I googled Trump and the risk of depression.  I looked at the first page of results, and I was seriously disappointed. Of the 10 results on the first page, nine were about mental health -- either Trump's own, or ours being put at risk by his decisions.

Only one of the 10 results on the first page was about the kind of depression that could put our economy in the toilet for a lifetime. Only one of the 10 could look past the insanity of the moment and see a bigger problem. One out of ten, plus two related links for the Quora result. 

At East Asia Forum we have "Trump’s trade madness risks global depression if retaliation’s not measured". The article is focused on Trump's tariff policy. I've been studying the economy since 1977, but I never studied tariffs because the topic never came up. I couldn't even spell "tariff" until Trump made the topic relevant again. Google's AI Overview, Gaio, says

The Smoot-Hawley Tariff Act of 1930 was a law that raised tariffs on imported goods in the United States during the Great Depression. The law was intended to protect American businesses and farmers from foreign competition.

How it impacted the economy:

• The law raised tariffs on agricultural imports and more than 20,000 imported goods 
• It led to global trade declining by 65% 
• It is widely blamed for worsening the severity of the Great Depression

The bullet points agree with what I think I know -- tariffs aggravated the decline of trade and made the Great Depression worse.

Hey, I think our massive trade deficits are a big problem, but I wouldn't go with tariffs. Other things are wrong, that need to be fixed. Applying the wrong solution is always, always, always  a bad thing to do.

The East Asia Forum article ties economic depression to tariffs. (Funny thing is, the word "depression" occurs only in the article's title.) My concern links economic depression to the Trump/Musk cuts in federal spending. I think both concerns are important, the tariffs and the spending cuts. And I think our concern, yours and mine, about the possibility of depression, economic depression, is strengthened by having two or more reasons to be concerned.

At Quora, "What is the likelihood of another Great Depression occurring due to President Trump's trade wars with China and other countries?" The question is about "trade war", about tariffs. Dan Cougherty expresses concern about a wide range of troubles pointing to recession or worse, including: deficit spending; income inequality; "systemic risk in the lending markets" around the time of the Great Recession; and the "lack of oversight" that created it. Comparable problems in finance are still with us. It was finance that made our 2009 recession "great". And excessive, unjustified confidence could easily do it to us again.

Again, at Quora: "Is there a chance of another Great Depression because of Trump?" Here, the answer focuses on tariffs and trade even though the question does not. Baba Vickram Aditya Bedi offers some good insights:

"Any manufacturing returning to the U.S. would take years well beyond the scope of the Trump presidency to even begin to matter to the macro American economy. However, the tariffs and loss of relationships with U.S. Allies and trading partners will have a relatively faster impact. The forced expulsion of migrant workers will have an even greater immediate impact."

The policies that boost US growth will take a long time to develop. The policies that undermine growth will will have their effects sooner. This combination of outcomes tends away from growth, and toward recession or depression.

As for the rest of these Google Search results, you and your mental health are on your own.

 

I would probably find better links if I kept looking. And I will. But it troubles me that almost no one seems to see the real disaster that threatens us: the Greater Depression. I know Trump said he "doesn't want to be another Hoover". And I even believe that he meant it. But his economics is not even close to understanding what must be understood, nor to doing what must be done.

WFA Rants Over Time

 

Honorable Men: What the Democrats learned from the November elections

From Third Way:

Third Way's Lanae Erickson and Jon Cowan call on Democrats to reconnect to regular people by cutting the cord with the far-left interest groups that dominate many Democratic spaces.

 

In other words: "Abandon everyone who has not abandoned us." 

Sounds like a plan. Or, you know, you could focus on the economy. 

But it's too late for that now, isn't it.

 

I quoted the last sentence of the first parag on the Third Way home page. It probably won't be there long. Here's a screen capture, just in case.

 

Or maybe you can find similar blazin', brazen bullshit in the MSNBC article that comes up when you click the title below the home page photo. (Look below the Hakeem Jeffries photo on the MSNBC page.)

I have only one thing to say: Symone, how could you let this happen?