Even Before the Iran Oil Shock, U.S. Economy Was Under Stress

In the absence of a direct military threat against the United States, nothing should concentrate a president’s mind as much as the economy, especially when signs are pointing to possible “stagflation” if things continue as they are. Previous presidents understood this. We can’t be sure about today’s provocateur in chief.

Consider Gerald Ford. Though he lost the Bicentennial-year presidential election in 1976, nobody could accuse Ford of indifference to the economic hardships Americans were facing from inflation.

From the time he assumed the presidency in October 1974, following Richard Nixon’s resignation, Ford made fighting inflation a priority. Ford’s “Whip Inflation Now” campaign was generally mocked and didn’t have much of an impact, but at least it showed that the president was focused on the problem and had the public’s interests at heart.

Given current economic conditions, one wonders whether you can say the same about President Donald Trump’s administration, and whether the president and his economic advisers fully grasp the harm the confrontation with Iran has caused. His effort to reach a deal may indicate he is beginning to understand the price of the military intervention in the Middle East and the risk of prolonging the fight. Let’s hope so.

Even before the Iran oil shock, however, the economy was showing signs of stress. The federal government’s annual deficit in the last 12 months had reached $1.6 trillion, and will probably surpass $2 trillion this year, a huge number, even for a country with a $31 trillion economy.

Moreover, the deficit will likely get worse, with the administration requesting $1.5 trillion for the “Department of War” in its next budget, with no serious spending cuts to offset the increase. The national debt, meanwhile, already nearing $39 trillion, is growing by about $1 trillion per quarter.

Inflation, which helped undo the Ford presidency and that of his successor, Jimmy Carter, is back with a vengeance, with the Producer Price Index standing at 4% and reaching 6% month-to-month.

Events in and around Iran have added an additional layer of uncertainty, with the Hormuz double blockade slashing more than 20 million barrels of oil equivalent from the world’s supply, pushing the price of Brent crude oil above $93 per barrel for more than a month.

The job market, despite the rhetoric coming from optimistic quarters, is also not bearing good news. Net job creation in the first 15 months of the current administration, according to the Bureau of Labor Statistics, totaled just 386,000—that is, 25,000 per month—a poor performance considering that the number of potential new entrants into the job market is several times higher (155,000 in 2023-2024).

Other parts of the world are not exhibiting dynamic economic growth either, including Europe, where gross domestic product is expected to grow by only 0.9% this year.

This is a small consolation for an administration that desperately needs to live up to its own rhetoric and the expectations of an electorate that voted the Democrats out of office mostly for reasons related to the economy.

The economy should have been uppermost in the president’s mind, and in the minds of those advising him, before he attacked Iran on Feb. 28.

Given the ugly surprises the last few weeks have brought, Trump should understand the grave economic risks of resuming the war. The economy should be the administration’s daily obsession.

Tariffs and trade wars, shooting wars, deficit spending, pressuring the Federal Reserve, constant policy changes, and a daily barrage of threats and taunts against foes and friends at home and abroad (including the pope), do not seem an intelligent way to assure the public he’s on their side—or to prevent the Democrats from taking control of both houses of Congress in November and trying to kick Trump out of office again.

It beggars belief to see how little the administration and its allies seem to be doing to reverse this situation, not only because it could cause widespread hardship for millions of Americans, but also because it could spell disaster for Republican candidates in the fall, and—yes—trigger another impeachment drama.