Fed's Recession Prediction is Worse Than a Coin Toss

Let's talk about a strange plot twist that might redefine Donald Trump’s legacy—not by his own actions, but thanks to our good friends over at the Federal Reserve and some outside-of-control economic forces. Yes, if Democrats have their way, they might just paint his presidency as an economic belly-flop… again. But before we get to how the economy could play out under Trump 2.0, let’s look at some of his actual policies and their economic effects.

A Taxing Legacy?

Back in 2017, Trump’s Tax Cuts and Jobs Act was a big win for around 60% of Americans. Even though some claim only the wealthiest got a boost, the fact is that people across the board saw some tax relief. Trump has promised more tax cuts and potentially some unique policies: tax breaks for vehicle, plane, and boat purchases, and maybe even zero taxes on overtime and tips. If he follows through, we could see another wave of economic stimulus hitting by late 2025.

And let's not forget Trump's deregulatory love affair. In theory, with less red tape, businesses would be free to innovate more quickly. Imagine driverless cars or robot assistants showing up a few years earlier than expected. Companies might even sidestep bankruptcy, with Spirit and JetBlue’s proposed merger potentially slipping through the regulatory cracks.

The Tariff Tango

Trump’s “Tariff Tornado” from his first term was mostly about posturing. Despite the initial panic and inflation predictions, bond markets largely priced in the worst-case scenario. Trump’s stance now seems more like a negotiation card than a declaration of a trade war. So, unless the economy starts booming uncontrollably, we probably won’t see tariffs right out of the gate.

The "Green" Elephant

On the downside, Trump’s likely plans to undo the Inflation Reduction Act (IRA) could cause some short-term pain. Companies benefiting from “Biden Bucks” for green manufacturing jobs might have to scale back, which could sting the job market. While Trump's tax cuts might help consumers, repealing green energy support could fuel layoffs in sectors that had been riding high on government incentives.

Recession on the Horizon?

Here’s where things get dicey. The Federal Reserve is waving a big red flag, predicting a 57% chance of a recession by late 2025. If that comes true, Trump’s return to the White House could coincide with economic contraction, creating a bit of an unfortunate bookend on his record: COVID recession in 2020, and a Fed-driven slump in 2025. Should that happen, Democrats might rebrand Trump as “Mr. Recession,” even though it’s largely the Fed’s fault for sitting on inflation too long. It’s the ultimate irony—Trump's policies could get buried under the narrative that his presidencies equal recession.

Cue the Trump Rescue Package

If we’re heading into a recession, Trump will have to pull out the stops. Think: tax cuts, hiring incentives, cheap business loans, maybe even those coveted real estate tax credits. Essentially, it would be a stimulus bonanza, but not like the spending spree of the COVID years. Expect Congress to play it safe to avoid any whiff of new inflation.

AI might be the dark horse in this story, too. With businesses leaning on automation, the job market might not bounce back as it did post-2020. Companies are increasingly relying on AI to fill gaps instead of hiring new talent, which could mean Trump’s tax cuts and incentives act more like a safety net than a true economic boom.

The Fed's Wild Card

Should the recession prediction come true, Trump might play a final card: replacing Fed Chair Jerome Powell. New leadership at the Fed could mean rate cuts to zero, reigniting markets, albeit with Trump potentially taking the heat for another recession.

In the end, Trump’s policies could save—or sink—the economy, with Democrats ready to pin every stumble on him. So buckle up for a wild ride. If the stars align (or misalign), we might see Trump framed as the cause of a recession he can’t really control. Wouldn’t that be something?