Trump Will Definitely Go Down In History As A Bigger Economic Failure Than Herbert Hoover

The World's Richest Economy Is Crumbling... On The Whim Of A Moron

John Burn-Murdoch began his essay, Trump Chaos Is Alienating Republicans, idiotically: “Trump’s decisive electoral victory last November…” But Trump’s victory last November was anything but decisive. Trump won 49.8% of the vote and the closeness of the margin indicates a deeply divided electorate.— and not “decisive” win. Trump likes to bray about his overwhelming mandate and apparently he tricked Burn-Murdoch into thinking there was one. He did, however, have one thing right: Trump narrow victory “was won on the back of a diverse group of voters, united in discontent with rising prices. Just weeks into his new administration, however, this coalition is rapidly unravelling as reality proves rather different to expectations.’

Those hoping for prosperity under Trump have had an unpleasant shock. Wednesday’s so-called liberation day was the culmination of a 10-week long bonfire of conservative economic convention in America. The standard fare of growth-seeking deregulation and tax cuts gave way to an act of amateurish economic vandalism that betrays both the “us vs them” ideology at the heart of everything Trump does, and the lack of any clear framework to his actions.

The speed and scale of the American public’s souring on Trump’s economic agenda are stunning. This week, just before the tariff chaos, 63 per cent of Americans had a negative view of the government’s economic policy, comfortably the highest figure since records began almost 50 years ago.

All-time records were also shattered for the share of people who expect the economy to further deteriorate over the next year. Just 25 per cent of US adults said they expect their finances to look better in five years than today— lower even than at the nadir of the Great Recession.

Notably, these sharp deteriorations are being felt across the aisle. Even before “liberation day,” a third of Republicans disapproved of Trump’s actions on the economy, a remarkable feat given levels of partisan polarisation in America. A lot of people who thought they were an “us” have discovered they are a “them.”

To understand how we got here, one has to first acknowledge that Trump is not in any real sense either a conservative or a Republican. No need to take that from me: it’s a well-evidenced characterisation that has been made by multiple prominent figures in the GOP over the years.

Economies abhor uncertainty. Trump feeds off it. Measures of economic policy uncertainty have exploded to all-time highs both in the US and worldwide in recent weeks. Officials and companies alike have been buffeted this way and that by announcements that even those making them seem unable to predict. The administration’s goal seems more about leverage than feeding into a coherent industrial policy.

The economic disconnect between Trump’s MAGA on the one hand and the wider conservative Republican Party on the other is clear in polling data shared with me by YouGov. This shows that the narrow subset of voters who identify as MAGA Republicans continue to approve of the president at astronomically high levels, even after the tangible turmoil of the past 10 weeks.

But the larger group of other voters who backed Trump last November is rapidly souring on his economic policies and overall record. (Interestingly, the same does not yet appear to be true of Trump’s performatively hostile immigration policy, where arrests and deportations have done little to turn off those who backed the president in November.)

Trump, his vice-president JD Vance, Elon Musk and the other senior figures around him operate largely in thrown closed media ecosystem, populated by vocal members of the deeply ideological MAGA community. As such they tend to be detached from both wider public opinion and dissenting voices.

In the real world, this is making elections challenging for Republicans. “For years,” reported CNN Republicans were seen as the party that dominated lower profile elections outside presidential years, while Democratic voters were less consistent. But under Trump, Republicans worry their base has shifted to include low propensity voters who turn out for him but are not as motivated as Democrats to show up when he’s not on the ballot. Democrats have overperformed the top of the 2024 ticket in nearly every special election this year, flipped control of two state Senate seats in Iowa and Pennsylvania, halved the margins for two open US House seats in Florida and won a high-profile Wisconsin state Supreme Court race by a resounding 10 points. While Democrats have said those results are a sign that voters are rejecting the Trump administration’s agenda, some top Republicans have raised alarms about turning out the base. Reuters/Ipsos poll released this week found that Trump had a 43% approval rating, with 52% of Americans saying they agree tariffs on imported goods would do more harm than good and 57% viewing the president’s moves to shake up the economy as too erratic.”

“The Republican Party,” wrote Andrew Duehren yesterday, “embarked this week on a haphazard experiment in economic policymaking, wagering that the United States can weather a monumental tax increase in the form of broad tariffs on imported goods as long as Congress also cuts taxes on income. It’s a mash-up that many investors, economists and even some GOP lawmakers expect to be a failure. ‘I always think that with gambling, at least you have a chance of winning. This is worse than that,’ Douglas Holtz-Eakin, a conservative economist who worked for former President George W. Bush, said. ‘This is betting with the mafia. You’re going to lose.’”

For many Republicans, it wasn’t supposed to look like this. They had expected that their well-worn economic policy strategy— cutting taxes and reducing regulations— would elate corporate America and induce companies to hire more workers and raise wages. The White House on Thursday released rosy projections for how its tax cuts could supercharge growth.

On Friday, after a bruising market rout stemming from the tariffs, Trump took to Truth Social to portray a bright future. “Big business is not worried about the Tariffs, because they know they are here to stay, but they are focused on the BIG, BEAUTIFUL DEAL, which will SUPERCHARGE our Economy. Very important. Going on right now!!!”

But the economic harm created by the tariffs is expected to overwhelm any benefits gleaned from the tax cuts, which many independent economists already saw as minimal. That’s because the tax effort in Congress is primarily aimed at keeping rates where they are now by extending what Republicans put into place in 2017. Trump’s tariffs, meanwhile, have increased the average tax rate on goods imported into the United States by an order of magnitude.

“The tariffs will strangle foreign investment, and the uncertainty and inefficiencies that these trade dislocations create are already freezing business investment,” said Jessica Riedl, a senior fellow at the Manhattan Institute, a conservative think tank. “The tax cuts are not stimulus because we’re simply extending current policy.”

New measures that could end up in the tax bill, like Trump’s proposals to not tax tips or Social Security benefits, are expected to have little sway over the performance of the entire economy. And even some measures that academics see as actually helping grow the economy, like tax breaks incentivizing capital investment, may not make much of a difference as companies worry about whether the global trading system will collapse.

Plus, Congress is still crafting the legislation, and tax cuts slowly seep into the economy, while Trump’s tariffs take effect imminently. That’s cold comfort for lawmakers who will face voters again in less than two years.

“Even in the optimistic scenario where the economic effects of the tax cuts roughly offset the costs of the tariffs, in the short run it’s pretty clear we’re going to have a reduction in economic activity,” said Alan Auerbach, an economics professor at the University of California, Berkeley.

The tariffs will help fill the budget hole created by the tax cuts in Congress. Analysts at the Tax Foundation, a think tank that generally favors lower taxes, expect that Trump’s various tariffs could generate as much as $3.2 trillion in revenue over the next 10 years, a substantial sum that could help pay for the roughly $5 trillion in tax cuts Republicans in Congress are eyeing. To tie the fate of the two together, some Trump administration officials, like senior trade adviser Peter Navarro, have even gone so far as to say that “tariffs are tax cuts.”

But tax cuts and tariffs have varying effects for different rungs of the socioeconomic ladder. Rich Americans— who pay the bulk of the income tax in the United States— benefit the most from tax cuts. Tariffs, which raise prices on everyday goods, are not much of a burden for the rich, who have plenty of money to spend and dedicate only a slice of it to the more expensive imports.

Poor Americans spend much of their income on consumer items that could become more expensive because of tariffs, meaning they see a larger tax increase as a result. At the same time, these Americans don’t pay much in income taxes, potentially leaving them at a loss.

“It’s a regressive tax to pay for a tax cut. It’s hard to argue that that’s very stimulative,” said Michael Gapen, chief U.S. economist at Morgan Stanley.

Consider Trump’s proposal to allow Americans to deduct interest payments on car loans from their taxes if they purchase car made in the United States. The president has presented the tax break as a complement to his steep tariffs on vehicles made overseas, helping reduce costs for middle-class Americans.

But for Americans who don’t owe much in income taxes, the deduction may not generate savings, while they may still have to borrow more to afford cars that become more expensive because of the trade barriers.

“They’ve never had a deduction. Deductions are supposed to be for rich people, and it’s unfair to have that,” Trump said in the Oval Office recently about his plan. “I think I know more about deductions than any human being on earth.”