Making america backward again
President or Mad King?
How Donald Trump and MAGAnomics
are destroying the economy and waging war
on the middle class and the poor
Making america backward again
President or Mad King?
How Donald Trump and MAGAnomics are destroying the economy and waging war on the middle class and the poor
By PAUL KRUGMAN
Illustration by VICTOR JUHASZ
MAY 1, 2025
Even those who knew that bad things were coming, however, have been startled by the damage MAGA has done to our strengths — the speed, if you like, with which it has undermined American greatness. It was obvious that Donald Trump and Co. would pursue some bad economic policies, but few expected them to create a full-blown crisis in a matter of months. It was obvious that Trump’s allies would degrade governance, but not that they would rapidly bring the whole apparatus of government to the point of collapse. It was predictable that MAGA would go after inconvenient research like the study of climate change, but not that it would move so decisively to destroy American science and intellectual endeavor in general.
And much of the damage will be permanent. Even if MAGA is eventually driven from power and its policies are reversed, we may never go back to being the nation we were just a few months ago.
Let’s start with a brief portrait of who we used to be.
The America That Was
The America That Was
America at the end of the Biden years was in a sour mood, mostly because people were still angry about the surge in consumer prices as the economy recovered from Covid. Neither the bout of inflation nor the bad feelings, by the way, were unique to the United States. For example, the cumulative rise in consumer prices between the eve of Covid and January 2025 was almost exactly the same in the European Union as it was in the U.S., while, as the financial journalist John Burn-Murdoch has said, 2024 elections were a “graveyard of incumbents” almost everywhere. (Canada’s Liberal Party was set to join that graveyard with a historic defeat — until Trump came to its rescue.)
But if you look past the bad vibes, America at the beginning of this year was in good shape in many ways. Prices rose a lot between 2021 and 2023, but most workers’ wages had outpaced inflation since the start of the pandemic, while the rate of inflation — the change in prices over the past year — had fallen dramatically from its peak in 2022. Furthermore, disinflation took place without the extended period of high unemployment many economists had said would accompany it.
Taking a longer perspective, the performance of the U.S. economy in the 21st century had made it, as The Economist put it, “the envy of the world.” Productivity and per capita income had grown much faster than in any other wealthy nation, with leading voices in Europe like Mario Draghi, the former president of the European Central Bank, calling for urgent efforts to narrow the growing dominance of U.S. companies in advanced technology, a gap that many attributed to inadequate investment, a lack of entrepreneurs willing to take risks, and the absence of high-tech clusters comparable to Silicon Valley.
Part of that technology gap also probably had to do with the dominance of U.S. science and our superb system of higher education.
Many non-economic indicators were looking good, too. Right-wingers liked to portray a nation terrorized by immigrant crime, but the reality is that the Covid bump in crime rates quickly receded, and by 2024, America’s homicide rate was near its lowest level over the past 65 years. New York had 2,262 murders in 1990; it had only 382 in 2024.
Not everything was going well. Income inequality declined somewhat during the Biden years, with bigger wage gains at the bottom than at the top, but remained extreme. “Deaths of despair,” that is, deaths from suicide, alcohol abuse, and especially opioids remained high. And one way in which America has performed poorly compared with our peers was our low and lagging life expectancy. If you look at a map of the electorate, low life expectancy and high mortality show an obvious correlation with low rates of employment among men — and large majorities for Trump.
All in all, however, Trump took power in a nation that, despite its dark mood, was doing well on many fronts. But he has moved quickly to fix that.
MAGAnomics
MAGAnomics
While many voters expected Trump to bring back the prosperity over which he presided during most of his first term (whether or not he caused it), most economists who looked at his platform during the 2024 campaign gave it poor reviews. Three things in particular looked disturbing.
First, Trump proposed large increases in tariff rates — much bigger than anything he did during his first term. These tariffs, according to basic economics, would cause inflation and reduce real incomes.
Second, he called for large-scale deportations, which would be highly disruptive for industries, like agriculture and construction, that are highly dependent on foreign-born workers, some of them undocumented.
Finally, he made it clear that he wanted to politicize the Federal Reserve, the institution that both fights recessions and tries to keep inflation under control.
All of this chaos is on Trump’s head: The economy would be doing fine if he had left it alone.
All of this chaos is on Trump’s head: The economy would be doing fine if he had left it alone.
The deportations we’ve seen so far have been brutal and illegal, but haven’t yet involved large numbers of workers. Trump has raged a lot against Jerome Powell, the Fed’s chairman, but hasn’t yet tried to take control. So these are still potential rather than ongoing threats to the economy.
But the tariffs are here, belying the belief of many business supporters of Trump that he wouldn’t go through with everything he talked about during the campaign. In practice, the Trump tariffs have been more extreme and, well, crazier than anything he suggested back then.
I do mean extreme. America had fairly free trade, with an average rate of 2.4 percent, when Trump took office. Trump, however, imposed huge tariffs. Imports from China temporarily faced a tariff of 145 percent! That rate has been provisionally reduced to 30 percent, but even after that climbdown, the average tariff rate was 17.4 percent — the highest level of tariffs since 1934, not much lower than the rate after the infamous Smoot-Hawley tariff of 1930.
All indications are that these tariffs will do large economic damage, much larger than pre-inauguration analyses predicted. Why will the damage be so severe?
For one thing, there’s a big difference between imposing 10 or 25 percent tariffs on a few imports and imposing 10 percent on everything and 30 percent on everything one of our major suppliers of both consumer goods and industrial imports produces. As I write this, West Coast ports are reporting a sharp drop in ships arriving from Asia; in fact, the latest report says that no container ships are departing China for America right now.
The results of this collapse in trade could probably show up in a few weeks, as inventories are exhausted. We’ll soon see soaring prices, quite possibly empty shelves, and widespread layoffs — even bankruptcies — among businesses that depended on the flow of goods from abroad, including trucking companies, retailers, and quite a few manufacturers.
“Liberation Day,” when Trump declared worldwide tariffs, including islands inhabited only by penguins.
BRENDAN SMIALOWSKI/AFP/getty images
Adding to this direct impact of tariffs is the huge uncertainty Trump’s tariff policy has created. If you’ve been following the story so far, you know that on April 2 — insanely dubbed Liberation Day by the president — Trump imposed huge tariffs on countries and territories around the world, including islands inhabited only by penguins. Then a week later, he put those tariffs on a 90-day pause, replacing them with a new set of tariffs that were equally extreme on average but quite different in detail. According to press reports, the big change came when two Trump Cabinet members managed to corner him in his office while his trade czar was in another meeting.
So who knows what tariff rates will be, say, six months or a year from now? And how are businesses supposed to plan in the face of such instability? If you’re a company deciding whether to invest in, say, a factory in Mexico or a factory in the United States, you know that either investment could easily turn out to be a waste of money. A Mexican factory will be worthless if Trump keeps 25 percent tariffs in place; a higher-cost U.S. facility will be worthless if he decides to take the tariffs off.
It’s worth noting that Trump’s tariffs violate all of our existing international trade agreements and have run into opposition in the courts. One of the main purposes of such agreements is precisely to help make future policy predictable. Now, we have a U.S. government that treats solemn compacts with other countries as worthless pieces of paper.
In this environment, the rational thing for many businesses — and many consumers, too — is to sit on their hands, accumulating cash rather than making investments.
The result is that we’re facing a substantial risk of stagflation — rising prices and shortages because tariffs have cut off imports, and rising unemployment because erratic policy is deterring spending. And all of this chaos is on Trump’s head: The economy would be doing fine if he had left it alone.
Demolishing Government, Waging War on the Poor
Demolishing Government, Waging War on the Poor
Although the news media keep calling Trump a populist, it was clear before he regained power that his administration would follow a right-wing fiscal agenda: big tax cuts for the rich, savage benefit cuts for the poor and working class.
Even so, the budget bill that passed the House in May has been incredibly extreme. According to the Congressional Budget Office, it cuts almost $700 billion from Medicaid, which will deny health care to millions — we may be talking about 15 million or more people losing insurance by the time this budget and other Trump policies go into effect. The budget also cuts close to $300 billion from SNAP, a.k.a. food stamps, which means that many Americans will go hungry.
These cuts to social programs will, the CBO estimates, reduce the purchasing power of lower-income U.S. households by around four percent; some independent estimates are even bigger. And Trump’s tariffs will also weigh heavily on working families, which will be hit hard by higher prices for clothing, food, and other essentials. It’s a good guess that Americans in the bottom 10 or 20 percent of income distribution, who are already struggling, could find themselves on average seven percent or more worse off, with many suffering even more than that.
The dollar’s value has plunged, suggesting that investors are losing faith in U.S. credibility.
The dollar’s value has plunged, suggesting that investors are losing faith in U.S. credibility.
Yet despite these savage cuts at the bottom, taxes at the top are cut so much that the CBO estimates the budget will add $3.8 trillion to the deficit.
If you don’t believe the CBO’s dismal deficit forecast, look at the bond market: Long-term interest rates on U.S. debt have soared to levels not seen in many years, while the dollar’s value against foreign currencies has plunged, suggesting that investors are losing faith in U.S. credibility, maybe even solvency.
Beyond the viciousness and irresponsibility of its budget, the Trump administration has been destroying the ability of the government to carry out its most basic functions.
When Trump created Elon Musk’s so-called Department of Government Efficiency, it was obvious that DOGE couldn’t possibly deliver the huge cost savings Musk was promising. Of course there’s waste, fraud, and abuse in the federal government, as there is in any large organization, but the great bulk of federal spending goes either to the social safety net or the military, and there was no reason to believe the Muskenjugend — the young tech bros Musk was parachuting into agencies they didn’t understand — could save significant sums without creating chaos.
The skeptics were right. DOGE’s “receipts,” listing purported savings, have itemized only a tiny fraction of the sums Musk claimed he would deliver — and they’re riddled with accounting errors. If DOGE has managed to cut overall spending at all, the amount has been too small to show up in budget data.
DOGE has, however, created a lot of chaos. Stories keep surfacing of sudden dismissals of government workers who turn out to fulfill crucial functions, followed by desperate attempts to hire them back. Agencies the public depends on, like Social Security, are fraying at the seams, with more and more tales of beneficiaries missing their checks, then finding it nearly impossible to get help.
The monetary hit many Americans are about to take is one thing, but if you ask me, the psychological damage of this sabotage will go beyond the loss of money. Even if seniors, veterans, and others who depend on government aid eventually get what they’ve been promised, many will go through long periods of panic and frustration because they’ll never know when or if they’ll be helped.
Moreover, the federal government isn’t a bloated, pointless bureaucracy. It is, instead, largely staffed by millions of good people who care about their jobs — often working for much lower salaries than they could make in the private sector. Subjecting them to arbitrary firings and treating them with contempt amounts to destroying a valuable public asset.
As with Trump’s tariffs, much of this damage will be irreversible. Even if DOGE is eventually shut down and the tech bros sent home in disgrace, how many of the dedicated civil servants we’ve lost will come back? How many young people will be willing to enter government service, knowing what happened to their predecessors?
The pretty good federal government we had just four months ago has been degraded, and it may take decades to restore it.
The War on Knowledge
The War on Knowledge
America leads the world in science and intellectual inquiry of all kinds. Or it did a few months ago. It’s hard to overstate the devastation Trump has wrought since then.
I don’t know how many people realize the extent to which the Trump administration has already brought scientific research in America to a screeching halt. The 2026 budget proposal released by the administration would cut funding for the National Institutes of Health by 40 percent and funding for the National Science Foundation by more than half.
But support for research has already dried up well in advance of the next fiscal year. On April 30, NSF staffers were instructed to “stop awarding all funding actions until further notice.” This doesn’t just mean no new grants, it means no disbursement of increments of money on existing grants. Worse, the NIH appears to be “ghosting” grantees — not formally canceling their grants but simply failing to send the promised funds.
Nor is the war on science just about money. Everywhere you look there’s a push to shut down any research that MAGA types think is woke or touches on “DEI.” This doesn’t have to mean, say, gender studies. It could mean any study that might provide evidence for climate change or suggest that vaccines work and don’t cause autism. This is a frontal assault on intellectual inquiry of any kind.
Here, too much of the damage is likely to be permanent. Even if a future administration were to restore funding and end the campaign against perceived wokeness, who will want to begin a major research project in a nation that behaves this way? How many leading scientists — or talented foreign students — will want to accept positions at U.S. universities knowing that they’re one election away from persecution, maybe even arrest? As far as science is concerned, the American century may well be over.
Crypto’s New Gilded Age
Crypto’s New Gilded Age
One of the more surprising developments deserves mention: the Trumpian boosting and exploitation of cryptocurrency. It may seem hard to believe, but Bitcoin is an elderly idea as informational technologies go: It was created in 2008, which makes it almost as old as the iPhone. In all the years since, the vast legions of cryptocurrency salesmen have failed to find any real economic role for their products. Most legitimate businesses don’t accept payment in crypto, even in countries like El Salvador that have spent large sums trying to promote the digital currency.
But illegitimate business, where being able to transfer large sums that legal authorities can’t track, is another matter. Cryptocurrencies, especially “stablecoins” like Tether, have come to play a huge role in criminal activity, especially in blackmail and extortion.
Now, crypto has found an even more remarkable use: bribery, with useless $TRUMP and $MELANIA coins being used to transfer billions to the president and his family, likely in return for influence. The president even threw a party for crypto enthusiasts, charging them $1 million for the pleasure of his company. It all makes the corruption of the Gilded Age look petty and quaint.
The Triumph of Resentment
The Triumph of Resentment
The obvious question, given this landscape of devastation, is one of motive. Why are Trump and those around him doing this?
Quite a few people on the U.S. left and even the center-left hold the Bernie Sanders view: What we’re seeing is government by and for oligarchs. That is, we’re looking at a cabal of billionaires who want to get even richer. They want to slash government spending, especially spending that helps the vulnerable, to make room for tax cuts. They want to dismantle government so it can be privatized, with contracts going to them and their friends.
There’s clearly something to that. But I don’t think that’s the whole story. It doesn’t explain the trade war, which hurts almost everyone. It doesn’t explain why these people want to make infectious disease great again and destroy American science.
What I think is happening is the triumph of resentment. Try reading Trump’s Truth Social posts, or Musk’s tweets, or RFK Jr.’s speeches, and the overwhelming impression you get is that these are angry, insecure people. “Perhaps Harvard should lose its Tax Exempt Status and be Taxed as a Political Entity if it keeps pushing political, ideological, and terrorist inspired/supporting ‘Sickness?’” Trump said on Truth Social. Does this sound like a rational policymaker? Or like someone with a grudge?
These men clearly aren’t suffering from “economic anxiety.” They’re wealthy and hold positions of great power, and are likely enriching themselves through epic corruption as we speak. Yet anyone who’s spent time around men in privileged positions knows how easy it is for some of them to feel bitter and angry, despite lives 99.9 percent of the population would envy, because privilege isn’t as fulfilling as they thought it would be. (Hey, I’ve spent much of my life around elite academics, and I see it all the time.)
The common feature of MAGA’s leading figures is that they appear to feel that they have, as Trump would put it, been treated “very badly.” Trump senses that many people consider him an ignorant boor, and it drives him crazy. Musk is furious that he no longer receives the admiration he did when Tesla was cool. RFK Jr. seems determined to prove that he isn’t the crank he is.
I would argue that almost all of the administration’s policies have been shaped by this resentment. Trump is going wild on tariffs in large part to get back at economists who think they know how these things work better than a real-estate developer who doesn’t read much. Musk wrecked the federal government to prove that he really is a genius who understands everything better than anyone else. RFK is destroying medical research to silence anyone who might contradict his snake oil.
Obviously there’s something deeply wrong with a body politic that could put such people in power. I do, however, have enough faith in America to believe that their reign will eventually end. In the meantime, however, they’re doing incredible damage. And I don’t expect to see a full recovery in my lifetime.
PAUL KRUGMAN is a Nobel Prize-winning economist, the author of many books, and a former New York Times columnist. Follow him on Substack at paulkrugman.substack.com.
In this article: Donald Trump, ECONOMY, MAGA