The Possibility of an Intentional Recession

Paul Neiffer wondered aloud whether President Donald Trump wants to see the country fall into recession. He knows that is quite a statement. But Trump is not a traditional politician. Neiffer is a longtime farm certified public accountant, keynote speaker, author of the Farm CPA Report, and Top Producer podcast host. His career has been about watching trends, finances, and budgets. That is why recession is on his mind.

Recession talk begins with tariffs. “I think it’s still a little bit of posturing,” Neiffer told American Farmland Owner about Trump’s emphasis on raising tariffs on other countries both to extract concessions for those countries, as well as providing new federal revenue that Trump thinks could fund future income tax cuts (economists may disagree).

Tariff Threats

The first two months of the Trump presidency brought an ever-changing series of tariff threats, adjustments, tariffs implemented, and back tracks. That can make it difficult for anyone in the agricultural sector to know the true impact of tariffs. How long will they last? How many countries will face higher tariffs from Trump? How many other countries will levy higher tariffs on American goods in retaliation?

Many uncertainties for sure, Neiffer believes. But he also thinks that history should serve as a guide for those believing that hiking tariffs will lead the United States to better economic prosperity.

“If you look at history,” Neiffer said, “trade wars have caused some fairly bad depressions and recessions.”

Federal Income Tax Revenue Instead of Tariffs

The U.S. moved toward a free trade system more than a century ago and began relying on revenue generated from income taxes rather than tariffs.

RELATED: President Donald Trump told American farmers to “have fun” after he announced higher tariffs. 

Americans frequently complain about their tax burden. But federal income taxes have largely been falling since Ronald Reagan became president in 1981, especially the highest rate which dropped from 70% then to 37% now.

Taxpayers may still wish to see their obligations fall more in the years ahead, so they can keep more of their incomes. However, that may leave federal officials with a challenge: How do they reduce federal taxes more, which could further reduce incoming revenue, when the nation’s debt climbs at nearly $2 trillion per year already?

President Trump has speculated that increased federal revenue from higher tariffs could replace federal revenue from income taxes.  

Count Neiffer among the skeptics. “Do Trump and the team want to put us into recession?” Neiffer wondered.

RELATED: About six weeks ago, Federal Reserve Chair Jerome Powell told Congress that the country’s “economic activity has continued to expand at a solid pace.”

The financial markets, a point of pride for Trump because of their gains during his first term, experienced a “correction” during his first two months back in office as they lost more than one-tenth of their value. Over a three-week period the S&P 500 lost more than $5 trillion in value.  

Trump during the campaign last year had said that the markets would collapse similar to the 1929 Great Depression if Vice President Kamala Harris, the Democratic presidential nominee, won the election. He didn’t say that markets would drop if he became president.

Trump also did not credit Biden’s policies for the numerous times that the financial markets set record highs during that administration. Instead, he said that those records happened because investors were confident that Trump would become president in 2025.

Financial Markets Fall Since Trump Took Office

Since Trump took office, he blamed the financial markets’ fall on Biden who left office in January. The Associated Press looked at what Trump has said over the years about the importance of the stock market performance and what the results means. 

Neiffer wonders whether a recession could get something that Trump wants: lower interest rates. “If we go into recession that then allows the Federal Reserve to cut interest rates.”

But that is a short-term reduction and wouldn’t mask the damage that a recession would do to agricultural producers, various industries, and American consumers.

On Wednesday, the Fed kept rates at their current level. 

Neiffer also thinks about bankruptcy. Before getting into elected office, Trump filed for bankruptcy six times after his companies lost billions of dollars, according to the Washington Post. The federal government doesn’t have the same options as a private company.

But Neiffer worries the current $37 trillion debt, the potential for trillions more if Republicans extend or expand the expiring tax cuts without dramatically cutting spending, and a tariff-triggered recession could put the country’s future in a precarious financial situation.

“I just have concerns,” Neiffer said, “I mean, I'm not concerned necessarily for myself. But I'm more concerned for my kids and grandkids.”

RELATED: Watch Paul Neiffer’s full interview with American Farmland Owner here.