On the economy, Trump says he "inherited a mess"

Donald Trump recently said this of Argentina's president, Javier Milei: "He, like us, inherited a mess."

Yes indeed, Donald Trump inherited an economic mess. How big a mess was it?

On October 19, 2024, in the waning months of the Biden administration, The Economist produced a special issue with the headline "The envy of the world."

"The American economy has left other rich countries in the dust," proclaimed one of the issue's headlines. Another was "American productivity still leads the world." A third was "What can stop the American economy now?"

This was just a couple of weeks before the presidential election. After Trump took office we have been getting a pretty good sense of what could stop the American economy.

The "mess" that Trump says he "inherited" included declining inflation. As Trump took office, inflation was slightly above the Fed's target, but was on a downward trajectory. The Fed accordingly cut interest rates three times in 2024, by a total of one point. Recall that prices had soared a few years earlier as a consequence of pandemic-related supply chain issues, but had been steadily falling since then under the Fed's monetary supervision.

As Trump was being sworn in, Biden had created two million jobs in 2024, for a monthly average of more than 167,000. He created 16.1 million jobs over his four years in office, a feat unmatched by any other American president in history. That's a jaw-dropping monthly average of 336,000. Over four years.

That was the mess that Trump inherited.

In point of fact, the U.S. led the world in the post-pandemic economic recovery during Biden's presidency. That was the endowment bequeathed to Trump. So what has he done with it? He created a total of 487,000 jobs in his first seven months. That's a monthly average of just 70,000. The unemployment rate has risen from 4.0 percent in January to 4.3 percent now. The inflation rate has bottomed out and is now edging higher once again. Trump has imposed sweeping tariffs that are already causing consumer prices to rise, and we're just in the early stage. It will get worse.

According to The Hill, a new Goldman Sachs analysis says that American consumers will pay 55 percent of the tariff cost this year. American businesses will eat 22 percent of those costs, and foreign exporters will eat 18 percent. Tariffs are an extremely regressive tax on consumers, because low and middle income persons pay a far higher proportion of their income on such taxes than do rich persons. The Yale Budget Lab estimates the short-run price increase from tariffs at 1.7%, which represents a $2,400 annual average cost per household.

The value of the U.S. dollar has declined by approximately 10 to 11 percent during Trump's second term so far. This decline is the steepest for the first half of a year since 1973. The drop reflects a weakening dollar against a basket of major currencies, including the Euro, Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc. Whatever your opinion about this—Trump actually wants a weaker dollar—it does represent less buying power for U.S. consumers at a time when prices are already rising for other reasons. Reasons for the dollar decline include uncertainty over Trump's chaotic and frequently shifting policies (especially on tariffs), plus the large debt increases baked into Trump's "One Big Beautiful Bill" that overwhelmingly benefits the rich. Other concerns include Trump's meddling with the Federal Reserve. All these factors make investors jittery and less inclined to hold dollar-denominated assets than they otherwise would be.

And whatever you think of Trump's immigration policy (which Pope Leo recently suggested involves "inhuman treatment of immigrants"), mass deportations undeniably make the economy smaller by removing both workers and consumers.

Trump has always made assertions about the economy that are untethered from reality—assertions that aggrandize his own accomplishments and deflect blame from his failures. Bad things are thrown into his lap and he heroically fixes them in unprecedented fashion. His "inherited mess" excuse is more of the same. In February 2019 I wrote of the absurdity of Trump's claiming he had launched an "economic miracle" (Trump's words). Not only did Obama consistently create more jobs than Trump, but GDP growth during Trump's first term was quite unspectacular as well, approximately matching Obama's second term performance.

Indeed, Trump's first term was basically a continuation of Obama's economy, except Trump created far fewer jobs. One way of observing that there was no Trump "miracle" is to consider a graph of the unemployment rate since 2010. Note the steady decline under Obama's two terms from high financial crisis levels. (And indeed, it was Obama who truly inherited a mess.) The rate flattened slightly under Trump, but the long term trend continued. There was no Trump miracle. Never was. But to accept that you have to live in the reality that is, not the one in Trump's mind.

Copyright (C) 2025 James Michael Brennan, All Rights Reserved

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