In 2008, most of the country was unprepared for the financial collapse that lead to the Great Recession. Millions of lives were ruined and millions more suffered the effects of Wall Street’s greed. My wife Debbie and I weren’t destroyed like so many others but we still felt the pinch. 10 years older, wiser, and far more tuned into politics, we’re watching the oncoming disaster of Trump’s Great Depression and we’re frantically getting ready.
The First Great Depression
On October 24, 1929, the stock market crashed, heralding the onset of the Great Depression. The financial sector had been left to run rampant. The rich were gobbling up all of the wealth while the average American’s wages stagnated. Manufacturing and agriculture were already struggling. All of these condition piled up into the perfect storm and the system collapsed.
Adding gasoline to the fire was President Hoover’s disastrous decision to cut government spending in the name of “austerity”. This bit is important: As the spender of last resort, the government is the only entity large enough to step in and continue to pump money into the economy when the private sector runs into trouble. This is why presidents as conservative and anti-government as Reagan have vastly increased the government payroll in times of economic stress. Republicans claim the government cannot create jobs but the money from a government job is curiously identical to the money from a private sector job. Groceries and landlords don’t care where the money came from.
When Hoover took away the spender of last resort (by cutting it back from the levels needed), he turned a recession into a depression. It was not a move based on sound economic thought.
Trump’s Great Depression Will Be Worse
Fast forward almost 100 years. Donald Trump and the GOP are again letting the financial sector run rampant. The rich are again gobbling up all the wealth while the average American’s wages are stagnant (or dropping). Manufacturing and agriculture were actually doing pretty well and the economy was solid; “were” and “was” being the key words here.
But now that Trump has kicked off several trades wars and continues to escalate them, We are facing billions in lost revenue. At the same time, agriculture is losing billions on top of the trade wars because the white nationalist crackdown on immigration is leaving crops in the field to rot. Trump’s deliberate acts of sabotage are cracking the foundation of Obama’s solid and stable economy. Part of this is his because of his ego, but most of it is that he simply doesn’t understand what he’s doing.
No, seriously. So much worse
There are huge swathes of the country that are still struggling to recover from the Great Recession. While Obama’s economy is solid and stable, it’s been very slow to recover, particularly for the non-wealthy. Part of this is due to Obama’s refusal to artificially inflate a bubble to make it look like the economy was recovering quickly. A lot of it is simple corporate greed. Corporations have the money to pay workers more but they refuse, even when the labor market is tightening. Instead, they’re artificially inflating their own stocks and manipulating the market to generate more wealth for their rich stockholders. And so we have a financial sector running rampant.
That means that when Trump’s Great Depression comes, millions of people that never recovered from the last corporate engineered disaster will be hurt the most. It also means the impact will be even severe than the before. And it gets worse.
Two things are going to put the next crash on steroids and there’s nothing we can do about it right now. First, the Federal Reserve has only raised interest rates to 2%. When the 2008 crash occurred, the Fed was able to drop interest rates in order to goose the economy. The crash was so bad that they had to drop the rate to effectively zero percent but it helped keep the financial markets going. That gave us the time we needed to enact other measures. If they can’t raise the interest rate to its pre-crash levels before the next crash, they won’t have the room to maneuver in an emergency.
Think of it as needing a portable defibrillator but forgetting to fully charge the battery. The one zap you get might work but if it doesn’t, you’re out of luck.
About those goddamn tax cuts…
Second, because Republicans gave their billionaire masters a trillion dollar tax cut, the deficit is once again massive and growing. Want to know what a $2 trillion deficit will look like? We’re going to find out in the next couple of years.
When Trump’s Great Depression hits, millions of people will be forced on to unemployment. Reliance on food stamps, Medicaid, and other forms of government assistance will spike. That alone will add billions to how much the government spends. Tax receipts will plummet as well as all those people lose their jobs and the economy stalls.
The result will be a deficit unlike anything imaginable just 5 years ago when Obama was steadily lowering it from its Republican peak of $1.4 trillion.
If Trump is still president, Republicans will do whatever they can to reverse the damage. Not because they care about the millions of lives they’ve destroyed (again), but because it will cost them politically. If a Democrat is in the White House, Republicans will obstruct everything in hopes of making the crisis worse and blaming it on “liberal policies.” If that sounds insane, you’ve clearly forgotten what Republicans did during Obama’s presidency and why. They desperately wanted to turn the Bush’s Great Recession into Obama’s Great Depression.
But no matter who is in office, Republicans will naturally demand that everyone except the rich make massive sacrifices after the immediate crisis is past. Count on it.
Getting ready for the pain
Just because the Great Recession didn’t wreck our lives (we didn’t lose or jobs or life savings), doesn’t mean my wife and I didn’t have problems. Like many Americans, we had foolishly racked up a great amount of credit card debt. Suddenly the easy credit was gone. Food got more expensive. So did gas if I recall correctly. We also had school loans piled up so we were not in great shape financially when everything fell apart for the country.
We spent the last 10 years paying off about $60,000 in debt. During that time, we had two kids and moved to a different state. We’re now down to 2 credit cards and 2 student loans. Normally, we’d be just fine. Now we’re in a mad dash to pay off as much of our debt as possible as quickly as possible. Debbie is working one week a month out of state making overtime and I’m working a second writing job. The extra hours and time away from the family is a source of serious stress. We’re working twice as hard to shield the kids from it but it has to be done.
The less debt we have, the better we can ride out whatever nightmare Trump and the Republicans are bringing down on our heads. We’re also stockpiling dry goods again. A habit we picked up from the constant threat of government shutdowns and possibility of Debbie being furloughed. Six month’s worth of rice and beans and powdered mashed potatoes will take up a lot of room but peace of mind is more important.
I already volunteer at one food bank a month during the school year. I may look into volunteering at a second one because it never hurts to be able to pick up a free gallon of milk and some cheese every couple of weeks. Sometimes you get lucky and you walk out with 40 jars of delicious gefilte fish because you’re the only Jew there and no one else wants to touch the stuff (true story!).
Maybe we’re wrong. Maybe nothing happens. In that case, hooray!, we got rid of most of our debt and we can go on a family vacation! We should all only be so lucky. But if or when (OK, “when”) Trump’s Great Depression washes over the country, I’ll know that we did everything we could to be ready for it.
So should you.
I’m a stay at home dad, father to a special needs son and a special daughter, a donor baby daddy, a militantly pragmatic liberal, the president of the PTA, a hardcore geek and nerd and I’m going to change the world. Or at least my corner of it.