{"id":3452,"date":"2025-04-09T13:59:38","date_gmt":"2025-04-09T13:59:38","guid":{"rendered":"https:\/\/nationalgunowner.org\/index.php\/2025\/04\/09\/obamas-chief-economic-advisor-says-were-heading-for-stagflation\/"},"modified":"2025-04-09T13:59:39","modified_gmt":"2025-04-09T13:59:39","slug":"obamas-chief-economic-advisor-says-were-heading-for-stagflation","status":"publish","type":"post","link":"https:\/\/nationalgunowner.org\/index.php\/2025\/04\/09\/obamas-chief-economic-advisor-says-were-heading-for-stagflation\/","title":{"rendered":"Obama\u2019s Chief Economic Advisor Says We\u2019re Heading for Stagflation"},"content":{"rendered":"
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Jason Furman, economist and professor at Harvard University, speaks at a meeting at the annual meeting of the IMF and the World Bank in 2023. Christophe Gateau\/picture alliance via Getty Images<\/span><\/figcaption><\/figure>\n

Fears of stagflation, the dreadful combination of high inflation and low growth, have gripped Wall Street since before \u201cLiberation Day<\/a>,\u201d and now it seem to be the nation\u2019s new best-case scenario. Jason Furman<\/a>, a Harvard economist who served as chair of the Council of Economic Advisors (CEA) under former President Barack Obama from 2013 to 2017, said the U.S. is moving in that direction.<\/p>\n

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\u201cOver the last four months, economists have upgraded their forecasts for inflation and downgraded their forecasts for growth,\u201d he told Observer. \u201cThere is no technical definition of \u2018stagflation,\u2019 but this definitely moves the economy in that direction.\u201d<\/p>\n

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Stagflation is one of the trickiest economic situations, because tackling inflation requires contractionary monetary policy while low growth calls for expansionary policy. Dealing with one will dangerously exacerbate the other, leaving countries stuck with stagflation for years (or decades, in the case of the 1990s Japan).<\/p>\n

This scenario will put the Federal Reserve in a difficult position. Fed Chair Jerome Powell warned last week that tariffs will cause \u201chigher inflation and slower growth<\/a>\u201d but didn\u2019t share any plans for interest rate adjustments. The central bank will meet May to determine next steps.<\/p>\n

Tariffs fuel recession fears<\/strong><\/h3>\n

Imports and exports account for roughly a quarter of the U.S.\u2019s economic output. A full-blown trade war could reduce the volume of goods going in and out of the U.S. and significantly hamper GDP, especially as the U.S.\u2019s largest trade partners impose retaliatory tariffs:\u00a0China announced a 34 percent tariff<\/a> on American goods in response to President Trump\u2019s \u201cLiberation Day\u201d tariffs.<\/p>\n

At the beginning of the year, the International Monetary Fund predicted that the U.S. economy would grow 2.7 percent<\/a> in 2025, the fastest among G7 nations. Some economists lowered that estimate to around 1.5 percent as President Trump announced tariffs targeting Canada and Mexico and certain industries, like automobile. One of those economists is Diane Swonk<\/a>, the chief economist of KPMG. After the \u201cLiberation Day\u201d levies, she now expects the U.S. to enter a recession in mid-2025.<\/p>\n

Major banks also see recession as increasingly likely. Goldman Sachs (GS)<\/a> predicts there\u2019s a 45 percent<\/a> likelihood of recession in the next 12 months\u2014up from 35 percent before \u201cLiberation Day.\u201d JPMorgan Chase (JPM)<\/a> predicts a 60 percent likelihood<\/a>.<\/p>\n

Tariffs are now around an effective 22.5 percent on all imports, the highest level since the early 1900s. \u201cWhen we raised tariffs in the 1900s, especially with the Smoot-Hawley, we saw a 67 percent decline in global trade. That is why we reversed tariffs,\u201d Swonk told Observer. The Smoot-Hawley Tariff Act, signed by President Hoover in 1930, raised tariffs on 20,000 imported goods in an attempt to protect domestic industries during the Great Depression. Today, economists generally agrees that those measures ended up worsening the economic crisis.<\/p>\n

A key distinction this time around is that Trump\u2019s tariffs are imposed through executive orders, meaning they could change tomorrow or when a new President is elected. This uncertainty makes it difficult for foreign companies to decide whether they should move manufacturing to the U.S.\u2014a process that could take years.<\/p>\n<\/div>\n<\/div>\n

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