As President Donald Trump’s economic policies push stocks toward a bear market and the economy into a likely recession, you may find yourself wondering: Why would anyone do this?
The simple answer is that Trump wants to replace the progressive income tax with regressive tariffs. We know this because he said so before the election and repeated it in his inaugural address. The business press downplays this rationale because it’s so transparently stupid. The numbers don’t add up. As the financial services company First Trust explains, the total dollar amount that Treasury collected last year in individual and corporate income taxes, $3.29 trillion, exceeds the total dollar amount of all goods imported last year, $3.23 trillion. Ergo, replacing the income tax with tariff revenue would require imposing tariffs in excess of 100 percent on all foreign goods. That would eliminate most imports, depriving the Treasury of anything close to $3.29 trillion in tariff fees. It would also destroy what’s left of the United States manufacturing sector as foreign nations retaliated with tariffs of their own.
But today let’s focus not on the actual rationale for Trump’s tariff binge but rather on the make-believe rationale that Trump’s aides find themselves inventing on the fly, as articulated most completely by Treasury Secretary Scott Bessent. Its essence is that prosperity is bad for you, a message we’ve not heard from Republicans since the 2000 election.
What is this make-believe rationale that’s rapidly evolving into what we’ll be bound to call Trumponomics? Here are its major precepts.
Trump inherited a weak economy from President Joe Biden. As I explained last month, to make this argument you have to ignore virtually every economic indicator. Under Biden, unemployment fell from 6.3 percent to 4 percent; gross domestic product grew from minus 3.5 percent to 2.8 percent; etc. True, inflation spiked from 1.4 percent to 9.1 percent in June 2022, but Biden brought that back down to 3 percent by the time he left office.
Bessent concedes that the Biden economy “exhibited some reasonable metrics” but argues that it was “brittle underneath” because it was too reliant on government spending and that if you factor out “government and government-adjacent sectors,” the private economy was in recession the day Trump entered office. Bessent puts his thumb on the scale by counting as a “government-adjacent sector” the health care industry, which happens to be the largest single industry in the United States.
The practical problem with blaming Biden is that under Trump the economy is getting not better but worse as Trump’s incipient trade war tanks the stock market and consumer confidence. That brings us to our next Trump talking point:
The economy is in detox. “The market and the economy have just become hooked,” says Bessent, “and we’ve become addicted to this government spending, and there’s gonna be a detox period.” Reality check: Government spending was 30.6 percent of GDP during Trump’s last year in office and 23.1 percent during Biden’s last year in office. If we were addicted to government spending, that percentage would have gone up under Biden rather than down.
In truth, neither Trump’s 30.6 percent of GDP nor Biden’s 23.1 percent posed much problem in our mixed economy. To the extent there was (and remains) a problem, it’s that the federal budget deficit is too high—a continual worry to the bond market. So how can the Trump administration be talking about cutting taxes, not only by extending the 2017 tax cut but also by ending taxation of Social Security benefits and overtime pay and, most recently, according to Commerce Secretary Howard Lutnick, by eliminating all income tax for anybody earning less than $150,000 per year? Because:
Tax cuts increase revenues. No serious person believes this, but Republicans are obliged periodically to pretend that they believe it, and Bessent has quietly fallen in line. “Once we get this tax bill done,” Bessent says, “we can change the trajectory, up revenues, up economic growth.…” He looks a little embarrassed when he says it.
But about those tariffs. Aren’t they inflationary? Well, sure, but:
Inflation doesn’t matter. “Access to cheap goods is not the essence of the American dream,” says Bessent. Tell that to the 76 percent of Trump voters who on Election Day said inflation was a source of “severe hardship” (as opposed to only 23 percent who saw inflation as “severe hardship” and voted for Kamala Harris). It’s interesting to compare Trump to Bessent on inflation. “Tariffs don’t cause inflation, they cause success,” says Trump, in his signature up-is-down, black-is-white fashion. A treasury secretary can’t get away with denying reality quite so nakedly, so instead Bessent says tariffs are inflationary and that he’s OK with that. “We could get a one-time price adjustment, he says,” but “across a continuum, I’m not worried about inflation.”
Bessent also isn’t worried about the stock market (which rallied a bit Monday in a sign not of optimism but volatility). Why not? Because:
Stock market dips are good for you. “I’ve been in the investment business for 35 years,” says Bessent, “and I can tell you that corrections are healthy. They’re normal. What’s not healthy is straight up. You get these euphoric markets. That’s how you get a financial crisis.”
Interestingly, Trump last week re-tweeted supply-side guru Arthur Laffer saying the precise opposite. In the clip, Rob Schmitt of Newsmax told Laffer that “a lot of people … believe that this market has been over-cooked for a very long time” and that “this needed to cool down.” Laffer replied: “I don’t think you’re right at all on that.… Cooling down the economy, lowering it down, getting at this down, does not help anyone, anywhere, at any time.… The faster we grow, the better off we are.” Laffer is loyal to Trump (the reason Trump re-tweeted the clip is probably that it begins with Laffer praising Trump shamelessly), but Laffer is even more loyal to supply-side economics, and according to supply-side economics boosting supply is never, ever, bad; the words “bubble” and “glut” have no place in its lexicon.
In sum: Trumponomics dictates that economic growth based on government spending is evil, that cutting taxes reduces government deficits, that what Bessent sneeringly calls “cheap baubles from China” corrupt the soul; and so does a rising stock market.
There’s a very distant echo here of Burkean conservatism’s mistrust of capitalism as a disrupter of Christian and other traditional values. That strain, which I have elsewhere dubbed “Prosperity Sucks Conservatism,” hasn’t been heard from much since the GOP went all in on the money culture in the 1980s. President George W. Bush tried to revive it during the 2000 election by condemning the tech boom of the late 1990s as “dulling our sense of urgency, of empathy, of duty.” But I seriously doubt gibberish like that helped him win. It was too obviously partisan sour grapes. People were glad the economy was booming, and you couldn’t persuade them otherwise.
Now Bessent is trying 25 years later to revive Prosperity Sucks Conservatism. Like Bush’s version, it’s vulgarized and partisan, holding that prosperity is good but that Democratic prosperity is cheap and tawdry. Bush used Prosperity Sucks Conservatism to attack the prosperity overseen by President Bill Clinton and his opponent, Vice President Al Gore. Bessent is similarly using it to disparage Biden, but he’s also and more urgently using it to justify prosperity’s imminent destruction under Trump. That’s a new wrinkle, and I don’t expect Republican voters to lend it much credence. After all, they have 401ks too.
