Mar 14, 2025

WCE Warning: Detox Recession? What is the Trump Pain Threshold?

Key players in the Trump Administration are hinting they see a recession coming. If you read between the lines, they believe it might take a recession to detox the U.S. economy from depending on government deficits and spending.

Indeed, our view is the two factors that have been keeping the U.S. economy from entering contraction were massive government spending (chart DebtRate25) and the surge in immigrants/migrants. If both are being unwound as appears to be the present direction, economic contraction not only seems certain, but likely to be imminent and very severe.

The recent recession hints and comments have come in different forms, perhaps just to cover all the bases. Scott Bessent, Treasury Secretary, commented that the market and the economy have become addicted to this government spending and there is going to have to be a detox period as the economy makes a natural adjustment away from public spending to private spending. Commerce Secretary, Howard Lutnick, argued that there is not going to be a recession in America. President Trump commented there could be some disturbance, a little bit of disturbance, but there is a period of transition because what we’re doing is very big!

The implication seems to be that they see a short-term economic contraction may be necessary to detox the economy; give time for the tariffs to get imposed, be up and running; and for the tax cuts and deregulation to get into place.