The Economic Excuse Industry is Booming

No, we don’t need an economic “detox”

First, we got big promises. Now we’re getting lame excuses. However, one thing has been consistent about Donald Trump’s economic rhetoric: rank dishonesty.

Trump made a lot of extravagant economic promises during the campaign, without any plans or even concepts of plans to deliver on those promises. Remember how he was going to bring grocery prices down on Day One? Now his agriculture secretary is suggesting that people save money on eggs by raising their own chickens.

So things aren’t going well, although I’d warn everyone not to get too excited by talk of a “Trumpcession.” That may happen, but it’s not yet visible in the data.

You may have seen people citing the Atlanta Fed’s “nowcast” that attempts to infer GDP far in advance of the official numbers, and which is currently showing a sharp decline in the first quarter. But that’s almost certainly a statistical red herring: It’s mostly about a surge of gold imports in anticipation of Trump’s tariffs, which is screwing up the usually helpful Atlanta model.

But while talk of recession is premature, there’s already a palpable sense of disappointment in the Trump economy. The New York Fed’s consumer survey is the latest to find a serious deterioration in consumer confidence:

Consumers’ year-ahead expectations about their households’ financial situations deteriorated considerably in February. The share of households expecting a worse financial situation one year from now rose to 27.4 percent, its highest level since November 2023.

And then there’s that plunging stock market.

So the Trumpers are responding in their usual fashion: blaming other people. Yesterday I wrote about the proliferation of conspiracy theories, with a special focus on “globalists,” which, let’s face it, usually ends up meaning Jews.

The Trump economic team seems, however, to be pushing a different kind of excuse: The claim that Biden left behind a terrible economy, and that we’ll need to go through a painful period of “detox.”

Now, you may wonder how anyone could characterize the economy when Trump took office, with 2.5 percent growth, low unemployment and inflation only slightly above the Fed’s 2 percent target, as terrible. But the Trumpist position, coming from multiple officials, seems to be that the prosperity was fake, that the numbers were exaggerated by bloated government spending and employment. Hence the need for a costly transition to an economy where workers are doing useful things.

As usual, one has to ask: Are they ignorant or are they lying? And as usual, the answer is: Why not both?

Someone like Elon Musk, who gets what he imagines to be information from random posts on X, may actually believe that useless government spending has been the only thing driving economic growth. But Scott Bessent, the Treasury secretary, has to have people working for him who both understand how GDP is measured and know how to look up data on FRED. So when Bessent says

Look, there's going to be a natural adjustment as we move away from public spending to private spending. The market and the economy have just become hooked, and we've become addicted to this government spending, and there's going to be a detox period.

I actually hope that he’s deliberately trying to bamboozle his audience. For the alternative is that the nation’s top economic official doesn’t understand basic economics, which will be a problem when — not if — something goes wrong.

People may imagine that government is a bigger part of the economy than it is because of all the money we spend supporting retired Americans, covering their health bills, and so on. But that kind of spending isn’t counted as part of GDP — the total value of goods and services produced in America — because Social Security and other benefits are simply transfers of income between Americans. Only spending by Social Security recipients counts toward GDP. The only government spending that directly affects GDP — the spending Bessent says needs to fall — is spending that directly buys goods and services.

So here’s the share of that kind of government spending in GDP over time:

See the big surge under Biden? Neither do I. Government purchases are a smaller share of GDP now than they were under Reagan, mainly because we spend less on defense. Government transfers, mainly for retirement and health care, are up, but they aren’t part of GDP.

What about government jobs? Did public employment surge under Biden? No:

Oh, and are large numbers of those government workers useless? Most government workers are employed by state and local governments, among whom the biggest categories are education and law enforcement. Do you consider schoolteachers and police officers unnecessary?

Back to Bessent: Basically, he’s making excuses in advance for poor economic performance under Trump by saying that the U.S. economy needs to recover from an addiction to government that only exists in his mind.

And the addiction to government isn’t the only thing that only exists in his imagination — so are the big cuts to government spending he claims are taking place. Musk’s DOGE claims to have found $105 billion in savings, but the “receipts” it has offered are riddled with errors and account for only a fraction of that total. And even if DOGE’s claims were true, which there is no reason to believe, they would amount to less than half a percent of GDP — hardly the massive “detox” Bessent claims justifies poor economic performance.

While Musk hasn’t saved a significant amount of money, however, he has done a lot of damage to government operations, crippling crucial agencies, firing crucial workers and undermining morale and confidence. This is a detox? It looks more like a poisoning.

The thing is, the kind of economic problem Bessent is falsely claiming we face — adjusting to a rapid change in the mix of spending — can happen. In fact, it did happen … under Biden. In the aftermath of Covid there was a big shift of spending away from services, many of which must be delivered face-to-face, toward physical goods:

This created temporary problems with supply chains, which weren’t prepared to handle that many goods in transit. Remember all those container ships sailing back and forth off the coast of California, waiting for a chance to unload? And these supply chain problems were the main reason for the inflationary surge of 2021-22.

But nothing like that is happening now. The whole “detox” thing is just a cover story for policy failure.

MUSICAL CODA

To be fated / To telling only lies