Trump thinks that destroying the economy will somehow save it
(Originally published Oct. 7 in “What in the World“) The U.S. government shutdown is costing the U.S. economy $15 billion a week.
That estimate comes from White House National Economic Council Director Kevin Hassett, who cited it from a Council of Economic Advisers memo during an interview Monday on CNBC. That memo, according to Politico, also said a monthlong shutdown would put an additional 43,000 Americans out of work.
Hassett cited the memo as a veiled threat at Democrats, who are demanding the extension of healthcare subsidies and a reversal in cuts to Medicaid funds as part of any funding bill that would allow the government to reopen. Trump and the Republicans are demanding the Democrats pass a stopgap funding bill without the healthcare concessions first before they’ll negotiate on them.
The same Kevin Hassett said the day before on CNN that the White House was advancing plans for mass layoffs of federal workers if the shutdown continues. Hassett warned that Trump and his budget director Russ Vought were “lining things up” for layoffs. Asked later that day by reporters whether there would be layoffs, Trump said “It’s taking place right now.”
Trump is also reportedly considering using $10 billion in tariff revenue to help farmers hit by falling exports of U.S. soybeans and other crops. Treasury Secretary Scott Bessent said late last week to expect “substantial support” for farmers this week. So, the big tax increase on U.S. consumers Trump said would revive American factories is instead being shoveled to its farms.
The rub is that this is almost exactly what happened in Trump’s first term. Trump imposed tariffs on imports from China; China retaliated by curbing its imports of U.S. crops; Trump handed $23 billion of the $89 billion paid in tariffs by U.S. consumers to American farmers.
Trump’s tariffs this time around, assuming the Supreme Court upholds them in the hearing on their legality next month, represent the largest U.S. tax hike since 1993, according to new calculations by the Tax Foundation. All told, the tariffs will raise taxes on the average U.S. household by $1,300 this year and $1,600 in 2026, reducing long-run U.S. GDP by roughly 1%. And with most homeowners sitting mortgages with rates well below the 6.38% rate on refinancing, interest rate cuts by the Fed may not translate into additional income for U.S. consumers to spend on absorbing those tariffs.
But Trump isn’t done yet. On Monday, he confirmed that his new, 25% tariff on imported trucks would go into effect Nov. 1.