A central task right now for the Trump administration ought to be figuring out how to avoid a widely predicted economic downturn. Instead, the Trump administration is blaming it in advance on former President Joe Biden. That was the theme of Scott Bessent’s first major address as Treasury secretary.
Bessent has been dealt a difficult hand. The nonprofit Conference Board, which is nobody’s idea of a resistance cell, reported earlier this month: “The unpredictability of the current administration’s policies looms large over the outlook. While the US economy is set to start 2025 on strong footing after a year of surprisingly robust growth, a combination of proposed policies will likely weigh on growth and leave inflation elevated as the year progresses.”
Those “proposed policies” are Trump’s unpredictable tariffs, his impoundment of federal appropriations, and the prospect of significantly higher budget deficits due to planned tax cuts. Output in goods and services is at a 17-month low, consumer confidence is dropping like a stone, and long-term inflation expectations are higher than they’ve been in 30 years. The bond market, meanwhile, is calling bullshit on Elon Musk’s promised debt reduction, and Warren Buffett is hoarding cash in anticipation of a bear market. Except for dissatisfaction in the bond market, none of these problems existed before Biden left office, and while the benchmark 10-year Treasury rate has been falling these past few days, which is good, the reason is that investors are fleeing the stock market, which is bad.
There are things the Trump administration could do to fix this. Trump could abandon his dream of creating an External Revenue Department and stop trying to replace taxes with tariffs. That ambition explains why Trump’s threatened tariffs are so terrifyingly arbitrary; he just wants the revenue. Alternatively, Trump could stop his similarly arbitrary impoundment schemes. Or, he could cancel his planned tax increase of somewhere between $5 trillion and $11 trillion over the next decade.
Trump could do these things, but he won’t, which leaves Bessent the unhappy task of explaining away the coming bad economy rather than creating a good one. Bessent’s pitch in Tuesday’s address, which he gave at the Australian embassy in Washington, was that we’re already in a recession, that Biden put us there, and the reason we didn’t notice was that it’s been what Bessent calls “a private sector recession.”
Like Odysseus sailing past the Island of the Sirens as they sing enchantments, Bessent has some formidable economic indicators to steer around. Inflation dropped from 9.1 percent in 2022 to 3 percent in January 2025. Unemployment fell from 6.3 percent the month Trump ended his first term to 4 percent the month Biden ended his only term. And GDP growth, factoring in inflation, rose from negative 3.5 percent in 2020 (Trump’s last year) to 2.8 percent in 2024 (Biden’s last year).
But those are just metrics, and metrics lie! Here’s how Bessent put it: “The previous administration’s over-reliance on excessive government spending and overbearing regulation left us with an economy that may have exhibited some reasonable metrics but ultimately was brittle underneath, and heading for an unstable equilibrium.”
Oh, please. The economy doesn’t care—and neither should you—whether it’s Joe Biden or General Motors or the Man in the Moon that boosts GDP, creates jobs, and lowers inflation. And for Bessent to conjure a “private sector recession” requires accounting tricks that would make Allen Weisselberg blush.
You can’t concoct a recession just by removing government, so instead Bessent objects that job growth is concentrated in “government and government-adjacent sectors” (emphasis mine). That little bit of number-fudging allows Bessent to discard the entire health care sector, which is a problem because health care happens to be the single largest industry in the United States. As I’ve argued elsewhere, “health care kind of is the economy.” It employs 20 million people, more than any other industry sector, and it constitutes nearly 18 percent of GDP.
Does the United States spend too much of its GDP on health care? Probably. Our peer nations typically spend half as much per person. But that’s mainly because too much health spending in the United States (about 30 percent) is private. Government is much better than the private sector at controlling medical costs, and if the government’s share of health expenditures grew from its current 45 percent to more like 80 percent, health spending’s slice of GDP would shrink, making room in Bessent’s GDP pie chart for more economic growth that isn’t government-adjacent. Conservatives like Bessent pretend not to believe that government-funded health care is more cost-effective than privately-funded health care, but this is well known among health economists, and it’s why Republicans fought tooth and nail to prevent Obamacare from creating a public option. They knew private insurers couldn’t compete with a government insurer on price.
To model a private economy that’s in recession, Bessent limits it mainly to manufacturing, metals, mining, and information technology. Employment in these sectors either shrank or failed to grow over the past year, Bessent said. But even that jerry-rigged calculation is misleading. Manufacturing employment, the component in this mix that’s of greatest public concern, dipped a little last year, but more saliently it grew under Biden from about 12 million to about 13 million. (Manufacturing employment fell by 188,000 under Trump.) Overall, Axios points out, the private sector (as defined by the Bureau of Labor Statistics, not Bessent) created a monthly average last year of 130,000 jobs, which doesn’t sound like a recession to me.
Can Trump end Bessent’s “private-sector recession?” Don’t bet on it. The trade war Trump’s determined to start will devastate United States manufacturing, and any strengthening of the dollar that Bessent predicts will result from higher tariffs will serve to reduce United States exports (because a stronger dollar makes United States goods more expensive abroad).
“This is about more than just reducing the fiscal deficit,” Bessent said. That comment can’t have pleased the bond market. The bond market is the economy’s most deficit-hating neighborhood, and when it hears glib phrases like “just reducing the fiscal deficit” it reaches for its wallet. “Government overspending,” Bessent continued, “brings distortions in the economy that inhibit dynamism and limit growth to a designated subset of favorite sectors.” That’s just ideology-driven gibberish, and an insult to Elon Musk, who took $38 billion in government investments and turned it into $358 billion. Bessent’s remark about inhibiting dynamism also sounds to me like an opening salvo against the Inflation Reduction Act’s $400 billion investment in green manufacturing, most of it headed to red states, that Trump is trying to claw back.
Bessent got the Treasury job because he was the only clubbable Wall Streeter Trump could find who would drink the Kool-Aid on tariffs. “Tariffs can increase U.S. industrial capacity, create and protect U.S. jobs, and improve our national security,” Bessent said. When narrowly targeted, that might be true, but as I write Trump is threatening a 25 percent tariff on the European Union (which, I bet you didn’t know, was “formed to screw the United States”). One way or another, Trump is determined to start a trade war that will reduce industrial capacity, eliminate jobs, and (because the target is America’s strongest allies) weaken our national security.
Bessent further said tariffs “can be an important source of government revenue, which can help fund investments that benefit American families and companies.” Anybody who talks about tariffs as an important source of government revenue is bent on imposing an economy-wrecking level of trade protection (or, perhaps in Bessent’s case, is pretending to be). Also, what are these “investments that benefit American families and companies”? Didn’t Bessent just tell us that an economy grown dependent on government spending is “brittle underneath, and heading for an unstable equilibrium”? Only when built by Democrats, I guess.
Jared Bernstein, who was Biden’s chairman of the Council of Economic Advisers, recently noted that every time Trump or someone in his government suggests that tariffs are a marvelous source of government revenue, that person is admitting what Trump denied throughout the 2024 campaign—that tariffs are a sales tax. Kamala Harris was right; they are a sales tax. They are a means to displace progressive taxation with regressive taxation. Viva William McKinley!
If an economic downturn is coming, the only good thing likely to come from it is reduced income inequality (albeit temporary), because recessions hit rich people harder than the rest of us (also temporarily; the rich recover faster). But Bessent won’t even give up that crumb. The Trump economy is shaping up to be a turd, and Bessent’s inaugural speech bids fair to make him turd-polisher-in-chief. God knows why he’d want the job.
