trumponomics, 50 year debt, and a worrying desperation

buckle up, the news does not look great

as many longtime readers know (and some certainly disagree) i have never had much faith in the economic instincts of donald trump, especially when times get tough.

he had a decent thing going in his first administration but blew it on lockdowns and the “cash cannon economics” of PPP and stimmy. this seems to be his go-to play and it looks to me like he’s currently looking at going back to it.

this new raft of ideas is cause for meaningful concern

in essence, his economics have always been a weird mix of center-left populism and mercantilist luddite doctrine, but when he panics, he really seems to go off the deep end and my worry is that the deepening struggles and tensions of the parts of the US economy not in on the AI caper are surfacing all of donnie’s worst instincts.

i’m honestly not sure what to make of this new set of talking points. they seem disconnected from reality to the point of incomprehensibility.

it feels like panic to me.

spamming another ~$300-400 bn round of covid-check tariff dividend (assuming 150-200mm checks) will just set off another sugar high of inflation. (also note it’s multiples of what tariffs have raised)

so will 50 year mortgages.

so will tariffs. (as they did in 2016)

many of these claims seem like grandiose reality detachment.

manufacturing jobs have been decreasing for 2 years and the more rapid decrease since late year has not abated. trade wars do not create jobs.

the last positive year on year comp for manufacturing jobs was september 2023. and the summer of 2024 saw an increase in this rate of decline from which we have not recovered.

i’m really struggling to imagine what actual data trump could be imagining to back this narrative. we’re not standing at the cusp of some manufacturing boom. thats’ all happy clappy talk from companies trying not to get extorted any further and will all dissolve in recession like a sugar sculpture in a tropical downpour.

as one who has seen a fair few business cycles, it’s not exactly a longshot bet that “but they said they had a big hiring plan!” will not pan out.

so what is don doing here? why is he saying this?

it feels like populist pandering calculated to set his economic credibility on fire.

there is a zero percent chance we start paying down debt. we’re running structural deficits of $1.5-$2 trillion a year and this cannot be fixed without massive reform to entitlements because entitlements and interest costs on the debt alone are over $5 trillion and consume functionally all tax receipts before a dollar of discretionary spending is even paid.

2025 saw $5.1tn in receipts, $5.1tn in spending on entitlements and debt service, and a $1.8tn deficit.

this year the deficit is forecast at $1.7tn and that looks optimistic (and does not include this new bout of cash giveaway.)

i’m honestly struggling to see what trump is playing at here.

does any serious human think the US federal debt level will be lower when trump leaves office than it is today?

because i’ll take the other side of that bet.

this is so obviously a promise that cannot be kept that is smacks of nothing so much as economic and fiscal pastiche. i struggle to see how it could even be the “bad economics, good politics” playbook because it’s so obviously wrong and will so clearly be shown to be so in short order as to wind up as egg on face.

bessent, who at least has some economic grounding, already seems to be trying to walk this back.

i have not spent enough time listening to him to know if this is just normal for him or not, but he sounds scared. his voice is tight, he’s stammering and his blink rate is just bizarre. (if folks have insight on this, please leave in comments)

but somehting is up.

we’re getting a sudden fusillade of subsidy from trump and none of it makes any sense.

this new mortgage idea and the messaging around it is just horrible.

he’s comparing himself to the architect of the great depression as though that’s worthy of emulation. i mean, yikes.

a 50 year mortgage will not work to durably create any sort of affordability.

first off, it changes the monthly payment very little.

on a $500k home with 20% down, you pay $2,199/month on a 50 vs $2,480 on a 30.

$281/month savings. that’s simply not going to move the needle on affordability and when you look at the overall interest costs over the life of the loan, they rise 87%.

great for banks, bad for borrowers.

but even this small reduction will have a mayfly-level lifespan.

it’s just adding leverage to the system and that leverage will rapidly express as higher prices as prospective buyers are more able to bid up price.

prices will rise until payments wind up about the same because the same people will be competing for the same homes and have the same budgets. so that home will now cost $565k instead of $500k, the down payment will be $113k instead of $100k, payments will be the same as before, and the life of the first-time buyer is worse than ever.

there is no case where subsidizing demand without increasing supply leads to better affordability.

again, this is just economic illiteracy which will just drive buyers deeper into debt.

it will also crush the ability to build equity in homes.

with a 30 year mortgage, a homeowner will have paid off 17% of the balance in the first 10 years.

with a 50 year, that plummets to 5%.

this is not a solution, it’s a path to deepen debt slavery.

so why all this sudden and extremely aggressive anti-economics populist positioning?

i have 2 theories (which are not mutually exclusive):

1. the off-year elections went heavy dem, driven mostly by young people who seem to be expressing severe opinions on affordability and employment prospects and trump wants to head this off/compete to pander.

2. the admin can now see how badly the wheels are starting to come off the non-AI economy and fear impending recession badly enough to go looking for cash to splash on the populace in hopes of heading it off.

to the extent that number one pertains, this is likely a mistake. it’s going to be another covid sugar high. maybe it gets you to the midterms, but probably, it doesn't, and it’s just going to drive another round of inflation, though this may be the goal to avoid price collapse in a number of product spaces.

i think it’s pretty clear that what happened to the US economy as a result of the monetary and fiscal lunacy of the times covidian was widespread inflation due to currency debasement and spending propped up with stimmies and debt holidays. this reached a point and could go no further without reducing revenues. economists call this “price elasticity of demand.” if i raise prices 1%, how much do unit sales drop? if the answer is 0.8%, then raising prices raises revenues. if it’s 1.2%, then raising prices causes revenues to drop.

and we hit that point like a bird hitting a plate glass window.

consumers were pulling back more unit demand due to price than prices were up. producers could not raise prices further so they responded to this with quality cuts. they made products cheaper, crappier, smaller, whatever it took to keep costs in line. and this REALLY broke the consumer who just threw up his hands and said “high price, low quality, shrinkflation, i’m out.”

the high-end US consumer has remained strong, but middle and lower rungs are suffering. the mcdonalds CEO said this in August:

“With middle and lower income consumers, they’re under a lot of pressure. If you’re upper income earning over $100k, things are good. Stock markets are near all time highs. You’re feeling, quite confident about things. You’re seeing international travel, all those barometers of upper income consumers are doing quite well. What we see with middle and lower income consumers is actually a different story. It’s that consumer is under a lot of pressure in our industry. Traffic for lower income consumers is down double digits, and it’s because people are either choosing to skip a meal. So we’re seeing breakfast, people are actually skipping breakfast, or they’re choosing to just eat at home.”

general mills discussed needing to cut prices and shore up quality.

this has been the game all over:

price is way up, units are not (this is retail sales)

and this is being debt funded

credit card balances are up 22% since 2019

delinquencies were already soaring (and have now reached rates approaching 2010-11)

when this new stressor got applied to the finances of the young:

the 5 year student debt hiatus has ended and this was always going to hurt, but into a regime of tariffs and wobbly job prospects, it’s a hand grenade. one of the metrics i use to gauge the economy is “how easy is it to hire consultants?” a year ago, getting a software implementation team was challenging. they were booked out and bid up. today, you can hire them to start “tomorrow” once you get done beating them down 40% on price. that tells you a lot about what’s going on.

outside of AI, the economy is at stall speed.

this is work done by a harvard professor on the topic. he concluded that it was 92% of H1 2025 growth with the growth rate ex this being 0.1%. i think his analysis is a bit flawed and failed to net out imports, but even after one does so, it looks to me like AI was ~70% of all reported growth in H1 and that if one excludes it GDP growth drops to 0.3-0.4% and well within the range of “this was conceivably negative because I think the CPI/GDP-d numbers smell fishier than a pike’s market dumpster.”

spending on AI is now way above that of internet and telecom during the top of the dot-com boom. we haven’t seen anything like this since the railroad bubble of 1873 whose collapse sparked the world’s first global depression.

we’re in some worryingly rare air and the “tale of two economies” moniker, in all its hackneyed and overused glory, seems entirely apt.

outside the top 10-15%, you can see the stress all over. drops in paid bad cattitude subscriptions have been an excelent economic indicator, and we’ve shed maybe 3% since june. (last time i saw this was the biden recession of 2022 that the NBER refused to declare despite two consecutive quarters of contraction because of the (now revealed to be dodgy) jobs figures. i’ve had a number of folks express that it’s just belt-tightening. i get it. cat memes are a luxury good. take care of yourselves. the core content here will remain free.

labor force participation continues to drift lower as it has been doing since late 2023.

it’s just a weak economy out there for most people and looks to be getting worse, not better. there are a great many social and financial stressors.

and if this equity market rolls over, spending will go into a tailspin because ~50% of consumer spending is now driven by the top 10% of US earners and those earners spend based on perceived wealth rooted in equity markets, VC, PE etc.

and those markets look overdone and vulnerable.

no wonder donnie wants to slash rates and jam the tape. it’s that or a doozie of a recession, though it’s very possible to wind up trying to moon the markets, failing, and getting both.

altman and the rest of the circular revenue gang of the current AI play are suddenly looking for federal loan guarantees for the people running the jet engines of cash incineration known as “frontier AI models.”

he too sounds scared.

this is how you know that this playbook is running out of gas:

we’re just way over the line in way too many places.

after 30 years of “print ‘till assets inflate” fed policy there are bubbles in basically everything.

and the “everything bubble” will need to burst and rationalize at some point because at some point, you really do run out of other people’s money, even the feds’.

my sense is that we’re heading into some very serious times with deeply unserious people at the economic and fiscal helm.

and i think they are starting to panic like they did in 2020-1 and that the sheer size of the intervention required to play another round of “extend and pretend” is deeply, perhaps catastrophically dangerous.

wish i had better news, but what i’m seeing is worrying.

buckle up. this feels like it’s going to get sporty.