"It's a Barnum and Bailey world. Just as phony as it can be." These lyrics from the classic Nat King Cole song, "It's Only a Paper Moon," are relevant to what the US economy is about to endure. As President Donald Trump, Elon Musk, and their team of DOGE fighters search for waste, fraud, and abuse, taking an ax (chainsaw?) to government transfer payments, the United States could be staring down the barrel of a paper recession. But is this even a proper downturn?
Coming Soon: a Paper Recession
The Federal Reserve Bank of Atlanta sent shockwaves through the econ Xverse and business news publications when it downgraded its first-quarter projections. According to the regional central bank's GDPNow Model estimate, the US economy will contract 2.4% in the January-March period. For weeks, the Atlanta Fed predicted 3% growth.
Current conditions go beyond the institution’s widely watched model. Imports surged 10% in January, resulting in the largest trade deficit on record (this is important because imports take away from the Bureau of Economic Analysis’ growth calculations). Consumer sentiment has tanked on tariff-fueled inflation fears. US stocks have cratered. Even stagflation – a mix of anemic growth, rising unemployment, and elevated inflation – has become a focal point of discussion on Wall Street. Suffice it to say, the near-term optics are not looking good for the new administration.
President Trump has shrugged off these developments since he is looking at the long-term picture, calling recent news “a little disturbance.” Additionally, speaking to reporters at the Oval Office on March 6, Trump said that the United States has been ripped off for too long and that his tariff plans are necessary to revive the American Dream.
“I think it’s globalists that see how rich our country’s going to be and they don’t like it. Big market out there. But again, they’ve been ripping off this country for years. And they’re going to do great — everyone’s going to do great. But we can’t let this continue to happen to America. Otherwise we’re not going to have a country any longer.”
While some might cave under political pressure, President Trump, with a long way to go until the midterm elections, has time to enact his Trumponomics agenda. A downturn could be in the cards, but it would likely be a paper recession after dismantling the pillars propping up a fake economy.
Feeding the Swamp With Poor Data
For the last few years, Liberty Nation News has reported on how government spending paints a false portrait of the economy. Whether in job creation or taxpayer-funded subsidies, the previous regime depended on the state's growth to bolster economic conditions. Employment, for example, ballooned because government payrolls skyrocketed and accounted for a significant share of the new jobs appearing in the Bureau of Labor Statistics data.
Commerce Secretary Howard Lutnick wants to change the way GDP is calculated. He recently revealed the Commerce Department could remove government spending from the quarterly GDP reports to provide the American people with an accurate assessment of the economy.
“You know that governments historically have messed with GDP,” Lutnick said in an interview with Fox News’ Sunday Morning Futures. “They count government spending as part of GDP. So, I’m going to separate those two and make it transparent.”
This would be huge since government expenditures typically contribute as much as one-third to the final GDP growth rate. Even for the public's more than $24 trillion income, government outlays represent approximately one-fifth due to benefits or payments from various federal programs.
Billionaire Elon Musk understands this. He wrote on the social media platform X that the GDP can receive an artificial boost by "spending money on things that don't make people's lives better." Cough, USAID, cough. “For example, you could shift everyone who is building cars to working at the DMV," Musk said. "That would result in no cars and a much worse standard of living, but GDP would appear to be the same!”
Of course, the mainstream media will misconstrue or mislead this quest by conveying to the public that the administration will try to mask abysmal data. Vox is already engaged in this campaign, publishing the headline: “Economic growth is slowing — so Trump wants to redefine ‘economic growth.’” However, if this were the reality, the White House would want to keep everything intact to pad the president’s economic record.
How Long Until We Reach the Ground?
For too long, the world’s largest economy – and even the US dollar – has relied so much on government largesse. It is an inevitable consequence that removing this crutch would prompt a collapse in the gross domestic product. Prognosticating the severity or length is perhaps a fool’s errand because it is not a real economic downturn in the sense that it devastates the private economy. It is merely a paper recession fueled by draining the Swamp.
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