Opinion Columnists |

Carl P. Leubsdorf: Recession would fit a familiar first-term GOP pattern

The stock market is falling, the index of leading indicators is off, and new jobless claims are up. Retail sales are down, and so is consumer confidence.

And President Donald Trump’s threats to impose stiff tariff increases on imports are raising concerns of an international trade war.

Does this mean that an economic recession is coming, as has been true for most new Republican presidents? Not necessarily, though Trump isn’t ruling one out while warning his policy shifts may create “a little disturbance.”

“I hate to predict things like that,” he told Maria Bartiromo on Fox’s Sunday Morning Futures show. “There is a period of transition, because what we’re doing is very big.”

Treasury Secretary Scott Bessent added to the expectations of some trouble ahead.

“Could we be seeing that this economy that we inherited (is) starting to roll a bit?” he said on CNBC. “Sure…. We’ve become addicted to this government spending, and there’s going to be a detox period.”

Commerce Secretary Howard Lutnick sought to scotch such talk. “There’s going to be no recession in America,” he said Sunday on NBC’s Meet the Press.

Still, a downturn remains possible. If it comes this year, it will fit a familiar post-World War II pattern: an economic recession in the first two years of a Republican administration.

Recessions, not entirely their fault, created first-term political problems for GOP Presidents Dwight Eisenhower, Richard Nixon, Ronald Reagan and George W. Bush. For Eisenhower, Nixon and Reagan, they led to mid-term election losses.

For George H. W. Bush, a recession came later — as did the political damage. Though the recovery from the 1990-91 recession was under way by 1992, Bill Clinton used the downturn successfully against Bush in the 1992 presidential election.

By contrast, Democratic presidents had generally better records. The Kennedy-Johnson administrations of the 1960s and the Clinton administration of the 1990s saw sustained years of economic growth without any downturns.

John F. Kennedy, Barack Obama and Joe Biden inherited recessions, and helped the economy recover. Job creation under Democrats has significantly outpaced that under Republicans.

Trump inherited a growing economy from Obama. He kept the upturn going, in part with the massive 2017 tax cut, until the 2020 COVID pandemic sent the U.S. economy, along with most others, into reverse.

That downturn, along with Trump’s mismanagement of the pandemic, were factors in his narrow 2020 election defeat.

This time, Trump inherited a period of post-pandemic economic growth, tempered by the persistence of inflation. But his actions in the first six weeks of his presidency are contributing to the kind of uncertainty that helps to trigger recessions.

His layoffs of federal government workers, along with resulting job losses in the private economy, have yet to show up in the economic statistics, based on the March 7 jobs report.

But their impact may grow in coming months.

Meanwhile, Trump’s on-again, off-again moves to impose massive new tariffs on imports from Canada, Mexico and China have unsettled the financial markets. The markets initially greeted Trump’s election with enthusiasm and increasing stock prices, expecting him to spur growth by cutting taxes and curbing regulations.

But they fell when he vowed to impose tariffs, which could re-ignite inflation and curb consumer spending. Last week, after his formal imposition of some tariffs sent stock prices plunging, Trump reversed himself, and the markets turned around too.

By early this week, though, stock prices were again sharply lower, amid a growing perception that Trump’s volatility has created uncertainty that is bad for economic stability. Unknown so far is the degree to which the Elon Musk-engineered government job cuts will actually cut federal government spending.

Meanwhile, a prominent economic forecast suggested first quarter statistics will show an economic contraction, after 11 straight quarters of growth. It takes two consecutive quarters of negative growth to create a recession.

The Federal Reserve Bank of Atlanta sent shock waves through the economy when its tracker of economic activity indicated a first quarter decline of 2.8 percent in the gross domestic product (GDP), compared with growth of 2.3% in the fourth quarter of 2024.

Three days later, it lowered that estimate slightly but still forecast a significant decrease, just weeks after it predicted first quarter growth, as have most other forecasts.

For example, the New York Fed predicts robust first quarter growth of nearly 3%.

Still, the prospect of lower or negative growth numbers prompted Lutnick, whose department issues the official statistics, to propose changing the way they are calculated and published.

“You know that governments historically have messed with GDP,” Lutnick said March 2 on Sunday Morning Futures. “They count government spending as part of GDP. So, I’m going to separate those two and make it transparent.”

His suggestion echoed a recent proposal by Elon Musk on X, formerly known as Twitter, who said excluding government spending would provide a more accurate measure of economic activity.

Actually, the Commerce Department already measures private economic activity, which usually changes about the same way as government activity.

Any downturn might prompt the Federal Reserve board to step up its plan to lower interest rates, something that would be welcomed both by the Trump administration and the business community.

But uncertainty is likely to persist in the coming weeks, since the bulk of Trump’s promised tariff hikes won’t hit until April 2 – if he goes through with them.