Recession, not a depression
What is our reward for all this risk?
Here’s how I know I’m not ready for our impending AI-dominated world.
My family has lived in our current house for three years with a Nest thermostat. This week, for the first time, I figured out how to manually adjust the temperature schedule.
Yes, that means what you think it does. Until this week, our temperature schedule has been determined 100% by algorithm. Every day. Spring, summer, winter, fall. For three years.
I wish I was joking.
1. Off ramp to nowhere
The chaos of this week is summed up in one paragraph of a Wall Street Journal story:
Trump played his cards close to his vest. He told advisers that he was willing to take “pain,” a person who spoke to him on Monday said. He privately acknowledged that his trade policy could trigger a recession but said he wanted to be sure it didn’t cause a depression, according to people familiar with the conversations.
President Trump is willing to subject Americans to crashing markets, layoffs, stalled wages, price increases and supply chain shortages — but not all-out economic collapse.
We might already be in a recession. If we’re not, the best-case scenario seems to be a coin flip’s odds of entering one. The worst-case scenario is anyone’s guess.
Trump on Wednesday scrapped his nonsensical tariff formula in favor of 10% tariffs on most countries, while also raising tariffs on China to 145%. China, in turn, has slapped (the verb of choice in tariff news) a 125% tax on U.S. goods.
While many, if not most, media reports emphasized Trump’s backpedal, that’s somewhat misleading.
"Consumers face an overall average effective tariff rate of 25.3%, the highest since 1909," the Yale Budget Lab wrote, per Reuters. "This is only slightly different from where the effective rate was before the late-April 9 announcement. Even after consumption shifts, the average tariff rate will be 18.1%, the highest since 1934."
In other words: Trump’s backpedal still amounts to a massive shock capable of wrecking the U.S. economy.
In some ways, our situation is more uncertain now than it was a week ago. My assumption was that Trump would stick with his beloved tariffs until, or unless, Congress took control of the wheel — and, even then, only after months of severe damage. That was wrong. I have no idea what happens now.
We’ve learned that Trump has a pain threshold (he reportedly reached it after watching bond markets convulse early Wednesday and then seeing JPMorgan CEO Jamie Dimon predict a recession on Fox Business).
Here’s what we don’t know: Trump’s objective or end game.
Trump is not as committed to tariffs as he said he was.
His administration repeatedly said this is not about negotiating, and it is acting like that’s true. Trump has alienated allies (now choking down 10% tariffs) who might otherwise help the U.S. isolate China in this new phase of the trade war.
Businesses are not going to expand or onshore operations amid a likely recession and a 90-day “pause” in massive global tariffs. What happens in July? What happens 90 days after that? What happens 90 days after that?
Trump told everyone to “BE COOL!” while he clearly was not feeling cool himself.
Trump’s Wednesday announcement was an off ramp to nowhere. His administration is exhibiting gross incompetence across the board. His economic policies are unequivocally terrible. We are captive to his senseless whims.
Our pain is a risk Trump is willing to take.
There’s one question neither Trump nor any of his superfans have answered: What is the potential reward that justifies our risk? What measurable outcome would make this chaos worthwhile?
The answer, to the extent there is one, exists only in one person’s mind and it changes as he watches bond markets, TV and anything else that captures his attention.
2. People notice when government fails
If you’re old enough to have paid attention to the Obamacare rollout in 2013, then you probably remember this: It was an utter debacle.
Here’s how CBS News described the much-anticipated launch:
Americans began shopping online Tuesday for health insurance on the new state exchanges created by the Affordable Care Act.
There were major problems all over the country. Websites were slow or crashed altogether, leaving a lot of folks angry and frustrated. The president noted that by 7 a.m., more than a million people had visited the main website: www.healthcare.gov.
The millions of people flooding the system on healthcare.gov caused the website to briefly break under the strain, causing it to go from "apply now" to "please wait" to "please try again later.”
Signing up for health insurance was basically impossible because the Obama administration failed to build a functional website. It was a huge, long-running scandal, and rightfully so.
This is what DOGE is doing to the federal government now, but with existing programs. Indiscriminate budget cuts and firings are making important government products as inaccessible as Obamacare was in its early days.
Here’s what’s going on at Social Security, per The Washington Post:
The Social Security Administration — already reeling from plunging customer service following a rapid downsizing under the Trump administration — is drafting plans to begin layoffs of potentially thousands more employees as soon as next week.
The cuts have been ordered by leaders of Elon Musk’s cost-cutting team, the U.S. DOGE Service, which reviewed the agency’s plans to shrink its workforce last week, according to four agency officials familiar with the conversations, who spoke on the condition of anonymity because they were not authorized to discuss the plans. DOGE determined that the 7,000 jobs eliminated since February under acting commissioner Leland Dudek through early retirements, buyouts, resignations and firings were not enough, the officials said.
Why do I mention this?
Also on the list is the information technology department of about 4,000 employees, which is confronting a flurry of website crashes that has shut out customers from accessing their benefit information. Up to 800 people could be laid off in that department, according to one senior official.
DOGE is creating Obamacare rollout-level problems in almost every agency it’s touching.
When you combine the economic destruction, incompetence and malevolent cuts we’re seeing now, it’s likely that almost every person in America will be negatively affected by Trump in a tangible way over the next four years.
3. What I wrote
I published one column this week for IndyStar:
4. What I read
Not gonna lie, I was not being cool and I wasted most my week on doomscrolling.
But I also spent a lot of time reading smart analysis on the week’s insane economic news. Here are a few of my favorite resources to cut through the noise:
To offer a taste, here’s how Axios Macro sums up the week that was:
Treasury bonds and other U.S. dollar assets have acted as a global safe haven for generations. This week, global investors woke up to the possibility that they are not particularly safe, and not at all a haven.
The big picture: The last nine days will reverberate through economic history, as the kind of shifts in the global trade order and financial markets that usually play out over years were compressed into each news cycle.
More:
Here is another uncomfortable combination policymakers don't like to see: Consumer sentiment fell off a cliff in April while inflation expectations skyrocketed, according to early data from the University of Michigan.
Why it matters: Trump's tariff policies crushed the economic optimism that prevailed after the presidential election. Now consumers, including Republicans, see weakening economic prospects and higher prices — expectations economists say could be self-fulfilling.
What a time to be alive.
5. I have a beard
I did a podcast this week and got a bit animated talking about the chicanery of Indiana’s statewide elected officials.
More importantly, I’m trying out a beard. It’s very gray. I’m kind of horrified. But people keep telling me to keep it. What do you think?
James, you are the epitome of “the dude abides” - thanks for your research. The beard? Oh hell, yeah.