'Chaos monkeys' are back: Krugman thinks the economy is on borrowed time

Roughly 19 and one-half months into his second presidency, Donald Trump continues to insist that the U.S. economy is firing on all cylinders. But many polls are showing that Americans feel worried, not optimistic, about the economy. The United States isn't in a recession, but according to liberal economist Paul Krugman, the economy can endure only so much of the "ever-growing chaos" that Trump is inflicting.

"Here's the good news: The U.S. economy has proved remarkably resilient since the chaos monkeys, AKA Donald Trump and company, took over the zoo," Krugman explains in an early September Substack column. "There has been shock after shock — a trade war against everyone; a shooting war against Iran in which the vaunted U.S. military performed very poorly; loss of trust on the part of all our erstwhile allies; the degradation of U.S. government capacity and competence, on the civilian side by Elon Musk, on the military side by Pete Hegseth; mass deportations; a surge in long-term interest rates to levels not seen in decades. Yet the economy keeps plodding along."

Krugman argues that only "Trump sycophants" really believe the U.S. is "in a golden age," yet adds that "normal indicators like GDP growth and the unemployment rate aren't flashing red.

"Here's the bad news: The shocks just keep coming," Krugman warns. "To an important extent, the economy's resilience has depended on the widespread belief by investors and businesses that the Trump shocks are one-time events. Businesses can live with 10 or 15 percent tariffs, if that's the new normal. The world economy can even manage in the face of significantly reduced flows of oil from the Persian Gulf. But it's much harder to deal with a trade war in which Trump keeps finding new enemies — with a spiraling conflict with Canada, of all places, a nation whose auto industry, in particular, is so integrated with U.S. manufacturing that separating them is almost impossible to manage."

The former New York Times columnist continues, "The Iran War has been a disaster, but markets were beginning to believe that the worst was over — until Trump began bombing Iran again with no clear objective beyond the visceral desire to reach out and hurt someone, doing so despite overwhelming evidence that the U.S. military is desperately short of munitions and that (Defense Secretary Pete) Hegseth has pushed out many of its competent leaders … Maybe the economy can cope with the ever-growing chaos. But the fact that it has muddled through so far is no guarantee that it can deal equally well with the hits that just keep coming."