Dean Baker breaks down the latest economic reports:
When Donald Trump campaigned on making America great again, not many of us realized he was talking about the 1970s. That was a decade of unprecedented inflation and a sharp slowdown in growth after a quarter-century boom following World War II.
We’re just two quarters into the Trump administration, but the picture we have seen to date is not good. In the first quarter of this year the economy actually shrank at a 0.5 percent annual rate. A decline in GDP is unusual, but many of us downplayed the drop since there were unusual quirks in the data responsible for the decline.
Specifically, there was a massive surge in imports as businesses and households rushed to buy things in anticipation of Trump’s tariffs. Imports were a major drag on growth in the quarter. But we saw the reversal in the second quarter, with imports falling back to a more normal level. That was by far the most important factor behind the 3 percent growth reported for the second quarte
While the Trump administration touted the big comeback from a 0.5 percent first-quarter decline to growth of 3 percent, those not on the administration’s payroll pointed out that it is necessary to talk the two quarters together. And that picture is not pretty.
Growth in the first half of 2025 averaged 1.2 percent. That’s down from a 2.8 percent growth rate in Biden’s last year. When Trump talks of turning the economy around he speaks the truth, he just gets the direction of change wrong.
Consumption grew at an anemic 0.9 percent in the first half of the year, down from 3.4 percent.
Also:
Spending on air travel fell at an 8.5 percent rate in the first half of the year. Restaurant spending rose at a modest 1.6 percent rate in first half, but spending in fast-food restaurants, reflecting the situation of more moderate-income households, fell at a 0.1 percent rate.
Factory and hotel construction is cratering despite Trump’s alleged commitment to manufacturing. As Baker points out,
Biden’s semiconductor bill and Inflation Reduction Act led to an unprecedented boom in factory construction, with the 2024 inflation-adjusted level more than twice the 2019 level. Construction is now headed in the opposite direction.
Tourism is “falling through the floor” and exports have actually fallen.
And the jobs picture and inflation aren’t good either.
We are looking at a pattern of slowing wage growth and rising prices, which means stagnant or falling real wages. That will further depress consumption growth, slowing GDP and job growth.
We are also seeing a slowdown in productivity growth, which is the key to rising living standards in the long run. Productivity fell at a 1.5 percent rate in the first quarter. We will see modest growth in the second quarter, but the average for the first half will not be much above zero. This compares to a 2.1 percent rate in 2024. Slower productivity growth is another factor contributing to rising inflation.
And if you think everything looks bad in the short term, the long term prospects are quite grim. Slashing research spending and attacks on universities means that many of the innovators who create future prosperity are taking their talents elsewhere.
As he concludes;
And his random tariff rates have alienated all of our trading partners. They are now eagerly looking to make new trade deals with each other, so that they are not dependent on the whims of a US president who changes his policies on a whim. The attack on clean energy is also locking us into antiquated fossil fuel technology that is falling further behind by the day. It’s still early in the Trump administration, so perhaps things will turn around. But we may also end up with an economic picture that will make the 1970s look good.
l think that when Trump said he wanted to make America great again, what he really meant was that he wanted to make himself young again. That was the 1970s . And take it from me, you don’t want America to relive it.
Update —
Lol:
Aaaaaand scene!
