Greg Sargent: This is The Daily Blast from The New Republic, produced and presented by the DSR network. I’m your host, Greg Sargent.
Kathryn Edwards: Thank you for having me back.
Edwards: We are where we have been mostly for the last, I would say, five to six months. Not just starting with January 20 but for a few months before then, there was a lot of uncertainty in the economy. And this has stemmed from basically a rotating set of candidates, of, Where did this uncertainty come from? Four years ago [or] three, it was, How fast will it take to come back from the pandemic? And then it was, Are we going to be able to bring down inflation without causing a recession? Now it’s been substituted by this incredibly volatile economic policy that is coming out of the White House, which almost all has some degree of destruction and very little hope of construction. Companies are saying quite plainly [that] they do not know what is coming, and you can’t really plan or move forward without standing on firm ground. So the reasons for our concern have shifted from larger economic pressures to a manmade disaster.
Edwards: So I think of it on another level, which is that the three primary policies that the Trump administration has championed for the economy are to fire as many federal employees and cut as much government spending as possible; to deport as many people as possible; and to start trade wars. Those policies all contract the economy. So it’s just a matter of how much they’re actually going to do it before they rapidly backpedal and change their mind. And what we are seeing is basically that happening in real time to the extent that these policies are being pursued at all.
Sargent: Right. And a big sore spot in this jobs report is the loss of 8,000 manufacturing jobs. I want to play some audio of Fox News host Stuart Varney questioning Labor Secretary Lori Chavez-DeRemer about those 8,000 lost jobs. Listen to this.
Lori Chavez-DeRemer (audio voiceover): Well, we’re certainly holding steady. And as we increase construction jobs, as we increase health care jobs, and again, that focus on building those manufacturing plants, it will take some time. The president has done a wonderful job in negotiating the level playing field as far as the tariff discussions have gone. But those onshore of those jobs, we’re seeing tens of trillions of dollars being reinvested here in the United States. And I’ll continue to focus on that skilled workforce as those manufacturing jobs continue to grow.
Edwards: I’m glad someone finally said it from the administration that manufacturing is not something that you can start and stop on a dime. I think it allows the space to explore, hopefully on a national level, that manufacturing takes a lot of planning, a lot of investment, a lot of certainty about where markets are coming from. And if you wanted to use tariffs to bring back manufacturing, they would look exactly opposite from what we’ve seen so far. Manufacturing plants require so much capital and investment in lead time, they need a ton of runway to know what exactly is going to happen in the economy. That’s why tariffs, to the extent that they are part of a portfolio of manufacturing resurgence, really come at the end.
Sargent: And Kathryn, she also says that tens of trillions of dollars are being reinvested here. What is she referring to there? And is that right?
Sargent: Yeah, no, it’s crazy. Let’s listen to a little bit more audio. Here’s Fox’s Maria Bartiromo questioning Trump trade adviser, Peter Navarro. Listen.
Peter Navarro (audio voiceover): Well, the U.S. Trade Representative building, I don’t know if you ever been over there. It’s right across the street. It’s a historic building. It played a really important role in the Civil War. It looks more like a deli now where you go in and you get your number and you stand in line. And you do that so you can negotiate with Jamieson Greer, the USTR, and Howard Lutnick, the secretary of Commerce. And that’s what we’re doing. We will have deals. It takes time. Usually, it takes months and years. In this administration, it’s going to take more like days. We’re on task and on target.
Edwards: I thought the most interesting part was about the USTR building during the Civil War. I’m a massive history buff. I was like, Do tell, I would love to hear this. Yeah, trade deals take time. It’s interesting. Sometimes I think that the way an economist would look at this would be to say, You can take an introductory game theory class in undergrad and it will teach you that people anticipate what the other person is going to do in any type of classic economics game. And that informs how we think about negotiation. And we’re negotiating with a lot of countries that know that the U.S. has midterms, a lot of countries that know that these tariffs are not popular amongst us businesses and that most members of Congress are under incredible pressure to walk back these tariffs by businesses in their constituency. And they also know that kowtowing to a bully, especially one who has been so brutal about immigrants and the place of people who are not born in the U.S. in the U.S. that could be from their own country, is not politically popular. And they will not score points by rushing into a trade deal with someone that the people in their country do not like who might not have hardly any power at all in, what, 15 months?
Edwards: What you’re lacking here is any type of thoughtful deliberation, which I know we’re not.... That’s not a phrase that you would necessarily, or easily, apply to Congress. But of course, this is why tariff policy and tax policy lies with Congress because there is deliberation. And it’s interesting to watch the.... This is the “big, beautiful bill.” The “big, beautiful bill” is the big tax cut. But even watching that go through, you are seeing the difference between an executive body and a legislative body. This tax bill is under such intense scrutiny and I don’t know what it will pass, but we are watching this process of you have to win over a lot of people in order to get it passed.
Sargent: So where does this all go, do you think? What’s your sense? I think Elon Musk, in the middle of his immense war with Donald Trump, predicted a recession in the second half of this year, which I’m sure made people inside the White House very happy. What do you expect to happen?
I think the only thing we know is the path of an economy with major actors under uncertainty. And it’ll keep looking like this: sluggish reports, not big numbers, trending close to zero, happening slowly. To the extent that these destructive policies are pursued in full force—like deportation, or we do have permanently, say, bad tariffs—it’s just a matter of how quickly the economy decelerates and leads to recession. So we’re basically on two paths. We’re on one path to recession, which is the slow boat; we’re in the right lane. We could jump into the left lane and speed right ahead, depending on the policies pursued. But we have not seen anything from the White House that would say we are going to pursue a growth strategy that looks like x, y, and z. They’re still basing their economic policy on three destructive policies. And that’s to say nothing of the cuts from the tax bill for Medicaid and food stamp recipients. Kicking 10 million people off of Medicaid is not a trivial effect on our economy, although that will happen over a 10-year period.
Sargent: No, no, I think the story is slow boat to recession, right? Isn’t that the story? Let me ask you this, though: Isn’t the big story ultimately that none of this has to be happening? Right? So Donald Trump came in, he inherited an economy that was in decent shape. There were some flaws, right? And people really were sour on it in many ways. And there’s a whole big argument over whether that’s justified or not. Putting that aside, it’s clear that the current situation—all these uncertainties, all the signs that we are on a slow boat to recession—[is] created by Donald Trump’s policies. Is that the deal?
That’s never going to come from Trump, because he’s stuck in the past and trying endlessly to recreate something that’s been gone for decades. And he lies about how to get there, and you can’t build a future based on lies. You can’t recreate a past that is gone, but we can build a better future and we have everything we need to do so. So I am eternally optimistic about the U.S. economy—not that that means that nothing bad will ever happen, but that we will continue to have the strongest and best economy in the world. Maybe we just have to get some stuff off our chest, like terribly destructive policy that people kind of like but are going to learn is terrible like these tariffs.
Edwards: Thank you so much.
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