How bad would a recession be right now?
As the Trump administration implements economic policies like tariffs and cuts at the IRS, fears of a recession have gone up. Earlier this month on Fox News, President Trump was asked if he was expecting a recession this year and said, “there is a period of transition, because what we’re doing is very big.” Other administration officials, like Treasury Secretary Scott Bessent, have echoed this sentiment. Bessent said the economy may need a “detox period.”
The economy is not in a recession right now, but the administration is signaling a slowdown might be coming. So “Marketplace” host Kai Ryssdal spoke with Mark Blyth, a political economist at Brown University, about what a recession might look like and how that would impact the American people. Blyth has written several books, including “Austerity: The History of a Dangerous Idea,” and he is co-author of the upcoming “Inflation: A Guide for Users and Losers.” The following is an edited transcript of their conversation.
Kai Ryssdal: Let’s set the stage for one second here. President Trump and his advisors have said in almost this many words, if there’s a recession, so be it. We’re shooting and we’re playing the long game here. We’re going to do a little short term pain for a little long term gain. Do you buy that?
Mark Blyth: I buy that there’s going to be short term pain, and it’s probably not going to be that short term. If they’re going where I think they’re going, this is a once-in-a-generation shift in how we run the global economy.
Ryssdal: Global economy, so it’s not just here?
Blyth: No, it’s the whole thing. Here’s how to think about it. For the past 40 years, the United States has basically been sending digital dollars called Treasury bills to the rest of the world to pay for all its imports. Imagine this, in 1975 the three biggest employers here were ExxonMobil, General Motors and Ford. 2025, the biggest employers are, in reverse order, Home Depot, Amazon Logistics and Walmart. In other words, we don’t make anything anymore. And eventually, all those digital dollars we’ve been sending out, somebody’s going to want something real for them. And we stopped making real stuff a long time ago. So whether it was Biden with the IRA, with green re-industrialization, or Trump with tariffs and trying to double down on a carbon model, it’s a bigger thing than just what’s going on for local pain and a little bit of Social Security here.
Ryssdal: Yeah, but look, I’m not going to be a Biden apologist, but he admitted he was playing the long game. We did a whole series about this, where he said it was going to take decades. Trump is now trying to do it in like an hour and a half.
Blyth: Yeah, I know. And lots of things will break, and it’s really difficult to execute this type of turn. But they do seem to be serious about, this is the direction of travel. America is no longer just writing IOUs to the rest of the world. Everyone else needs to rebalance. And that’s the one advantage the U.S. has. It can cause the pain to go elsewhere.
Ryssdal: Let’s talk about the pain domestically for a second. To be completely clear, we are not in a recession. A recession is not happening right now, but indicators are not great. If there is a recession in this country, it has typically been the federal government that has come in and supported people as we make our way through it. Based on what you see with this administration now, what do you anticipate happens if the economy goes south?
Blyth: There will be far less attempt to cushion the effects. Because this is going to be compounded by DOGE’s cuts. This is going to be compounded by the desire to do this alongside massive tax cuts. There’s simply no way to put on the fiscal brakes to stop that recession really hurting if you go down that track.
Ryssdal: This is a stupid question, but then what happens?
Blyth: That’s the $64,000 question, Kai. Nobody has said, ‘Hey, I’ve got a great idea, why don’t we take stuff that’s been working reasonably well for the rest of the world and for us for the past 30 years, and let’s just trash it all in a two year period and rebuild the 19th century balance of power with us behind McKinley tariffs?’ If that’s what’s going on, it’s a really, really big challenge.
Ryssdal: Put on the political side of your political economy hat here. Do you suppose there’s a degree of economic pain that would make the politics of this untenable for the Trump administration?
Blyth: If you go after Social Security. Roosevelt thought that no one would ever touch it because it’s a contributory program. If they go after Social Security, that’s a really, really tough one. If they go after Medicaid to really fund these tax cuts, while at the same time firing people in the IRS who are tax collectors, then that’s a really hard sell to the public that you’re doing this for the greater reordering of the world to benefit the United States.
Ryssdal: Of course, that all plays into the austerity that Elon Musk and his minions have said that they want and that the President of the United States is going along with, right? They want to cut, cut, cut.
Blyth: And austerity means recession. I mean, they’re basically synonyms. You can’t have one without the other, so it’s kind of baked into the cake directionally.
Ryssdal: So as I sit here internally debating whether to ask you this question or not, I’m going to ask it anyway. Do you think they’re lying to us?
Blyth: I think there’s a real danger that what I could be doing, and a lot of other people are doing, are basically looking for designs within disorder. This could simply be sane-washing the way that the Trump administration is essentially just going for a grift, whether it’s on taxes, whether it’s hollowing out the state, we don’t know. But let’s assume for a second that the United States government isn’t just a giant grift machine, and this is the play. We got to think it through as to what’s going to be coming ahead, and also how we’re going to deal with the fallout from it.
Ryssdal: Let’s talk about that fallout for a second. The last big recession we had in this economy was 2008, 2009, the scarring of which, as we’ve talked about on this program, and economists and experts such as yourself know, the scarring from that lasted a decade or more. If, and I don’t want to put words in your mouth, but if this is worse than the Great Recession, what does that mean for the scarring for the next 10 to 20 years in this economy?
Blyth: What it means is it’s really hard to get back to where you were at the start. That was the lesson of the Great Recession. Because people’s skills atrophy, because people get afraid to invest. No one invests, in a recession, and then when no one invests, the investment collapses, the recession gets worse. It’s really hard to dig yourself out of this. And if you’re not going to do it with any type of state action to counterbalance it, if you’re going to basically say, bring it on, because we want to break things and purge the system, then there’s kind of two ways of looking at this. The world can be divided into people who think the economy can get into trouble, and if the state doesn’t step in to stop it, it’s one way traffic all the way down. And then there’s people who think, no, absolutely not. Let’s break things. And then when we do, there’ll be a huge amount of growth afterwards. We’re making a bet, one way or the other, that that’s going to be what’s happening.