President Biden handed off the best economy to an incoming president since at least the 2001 handoff from Clinton to Bush II. In his last quarter in office, GDP grew at a 2.3 percent annual rate (final demand, which excludes inventory fluctuations, grew at a 3.2 percent rate). That brought the average growth rate for Biden’s presidency to 3.2 percent, the highest since Clinton’s second term.

The unemployment rate fell to 4.0 percent in January, keeping it in the narrow band between 4.0 percent and 4.3 percent it has been in since last May. For Biden’s whole term the unemployment rate averaged 4.1 percent, the lowest since Johnson’s last term, more than half a century ago.

Inflation is still slightly above the Fed’s 2.0 percent target, but it shows no clear trend. It’s worth noting in this respect that below 2.0 percent inflation rates were largely a post-Great Recession story. Prior to the Great Recession, inflation generally ran somewhat about 2.0 percent. Inflation, as measured by the CPI, was 3.4 percent in 2000, the last year of the Clinton administration.

In addition, productivity growth has been unexpectedly fast, running at close to a 2.0 percent rate in the last year. And these productivity gains are being passed on in rising real wages, with workers across the wage ladder getting their share of productivity growth.

This translates into an extraordinarily good economic picture, but we know that Donald Trump has big plans for the economy. Given his bold pronouncements coming daily, or even hourly, he has many possible routes for ending the boom we have been seeing.

Here are my eight favorite economy wreckers, in no particular order:

1. Stock market crash
2. Mass deportation
3. Tariffs run wild
4. Pandemic wipe out
5. Global warming disasters
6. Splurge of spending cuts
7. Debt limit crisis
8. Messing with economic data

It is not entirely accurate for me to say there is no order. I do think a stock market crash is by far the likeliest way that the economy gets derailed. I should also say that a crash would not necessarily be Trump’s fault. If we have a bubble, as I strongly suspect, then it is likely something will burst it, even if we had competent people setting economic policy.

However, after the prospect of a stock crash, my views on the likelihood of the other dangers changes by the hour, or even the minute, as some new craziness spews out of Donald Trump or Elon Musk’s mouth or social media feed. Rather than making an arbitrary, as of this minute, ordering, I’m just going to say that the other seven are equally likely. I’ll quickly go through each in turn.

Stock Market Crash

The story here is straightforward. The price-to-earnings ratios in the stock market are near their 1990s bubble peak, even as most projections are that real profits will grow slowly over the next decade. This implies that either the profit projections are grossly understated, that price-to-earnings ratio will go even higher, people are willing to invest in stocks for returns only slightly higher than what they can get from bonds, or the market is likely to crash.

I’m inclined to think that the crash is the most plausible scenario, but I could be wrong. It is worth correcting an important error on this one. Clearly the highest PEs can be found on AI-related tech states, but the market as a whole is likely over-valued, even if it might be by a smaller amount. If we go back to the 1990s, people often referred to the soaring stock market as a tech bubble. The tech stocks were the ones that took the largest hits when the market did crash, but even the stock of companies like GM and McDonalds lost close to half its value. So, the bubble was much more broadly based than just the tech companies.

I would speculate that there is a similar story today. The AI companies might well take the biggest hit in a stock market crash, but a much wider set of companies is likely to be affected. (For an especially pessimistic assessment of the prospects for AI and the tech companies listen to this On the Media segment.)

A plunge in the stock market will have two effects. First, it can destroy tens of trillions of dollars of wealth. People who thought they had plenty of money in their 401(k)s for retirement suddenly find out otherwise. This is likely to lead to major cutbacks in spending, especially for those who are near retirement or have recently retired.

The other effect is likely to be a hit to investment. The companies that are now throwing money indiscriminately at everything related to AI will suddenly be more careful to only spend in areas where they can reasonably expect to see a payback in the not-too-distant future.

It is also worth correcting a common misunderstanding about the stock crash recession in 2001. From a GDP standpoint this looks like a very short and mild recession. We did not even see the traditional two consecutive quarters of declining GDP. However, we get an opposite picture from a labor market perspective.

Employment peaked before the recession in February of 2021. We didn’t get back to this same level of employment for four full years. At the time, this was the longest period without job growth since the Great Depression. It is wrong to think of this as a short and mild recession.

Mass Deportation Sends Prices Soaring

The biggest uncertainty with mass deportation is whether we will actually see it. While the call for mass deportation was central to Trump’s campaign, the reality of recent immigration bears almost no resemblance to the tales of drug dealers, rapists, and murderers overrunning our borders, and many people around Trump know this.

The simple fact is that the overwhelming majority of recent immigrants came here to work. They take physically demanding, low-paying jobs that few native-born workers would want. If a large share of them were rounded up and thrown out of the country, we would see massive labor shortages in large sectors of the economy.

This would be most apparent in agriculture, where estimates put the share of undocumented workers as high as 45 percent. However, a large share of workers in food processing, construction, and a number of other industries are undocumented.

If we see mass deportations, it is a safe bet food prices will rise considerably, and construction will slow. This will mean a boost to inflation and a reduction in people’s purchasing power. If the Fed responds to higher inflation by raising rates, this will further weaken the housing sector and slow demand through other channels. It’s worth noting that even a Trump-controlled Fed may not be able to keep long-term rates from rising, unless it is prepared to engage in highly unorthodox monetary policy.

The end story here is that we get a recession. This again could be a long one, depending on how many people get deported, as the economy eventually adjusts to having a considerably smaller workforce.

Tariffs Flow Like Water

Donald Trump seems to really like tariffs and also have no idea what they are. As much as Trump likes to talk about imposing tariffs on China, Canada, Mexico or whatever other villain of the moment appears in his sights, he actually is imposing a tax on us, on the goods we import from these countries. We pay the tariff, not the bad actor in Trump’s tough guy warnings.

Higher import taxes raise the price of imports in the same way that a tax on barrels of oil leads to higher gas prices at the pump. Depending on how many goods get subject to the tax, and the actual tax rate, we could end up paying out a lot of money to cover the cost of Trump’s tariffs.

As a simple approximation, our goods imports come to roughly $4 trillion a year, or 13 percent of GDP. If we imposed an import tax of 20 percent, we would be paying $800 billion a year ($6,000 a family) as a result of the tariffs. (This assumes no reduction in imports, which clearly would not be the case.)

As with mass deportations, this would directly push inflation higher, in addition to pulling money out of our pockets. If the Fed raised rates in response, we again would face a serious risk of recession.

Here also we get very mixed signals from the administration. He threatened 25 percent tariffs on Mexico and Canada, but then walked the threat back before the tariffs actually took effect. However, he did go through with 20 percent tariffs on aluminum and steel.

There are clearly people in the administration who know that major tariff hikes will be bad news for the economy, and even more immediately the stock market. It would take someone with more inside knowledge than me to know whether a tariff hungry Trump or a more reasonable advisor is likely to determine policy.

It is also worth noting that running economic policy like a TV game show does have a cost. Businesses like predictability when they look to make investment decisions. If they are trying to decide on expanding their capacity, it matters hugely whether items coming in from Canada and Mexico are mostly tariff free, or whether the US is imposing large taxes. At the very least, the TV game show approach to economic policy is likely to delay some investments as businesses try to determine the ultimate course Trump will take.

Pandemic II

This one is totally speculative both since I have very little knowledge of epidemiology and also because the future course of prospective pandemics would be guesswork by anyone. There are a couple of things we can say.

First, there are always various diseases being spread among domesticated animals as well as wildlife. For the most part, these diseases pose little risk to humans, but that can always change as a result of new mutations.

This raises the second point, the Trump-Musk team have eviscerated our public health agencies so that they will be far less prepared to deal with any major threats to humans that might arise. (They have already delayed the circulation of a report on the spread of bird flu for no obvious reason.)

The economic consequences of this tampering with the public health agencies is most likely to take the form of higher prices for eggs, meat, and chicken. This would also mean somewhat higher inflation, but probably not the sort of stuff that leads to big interest rate hikes and a recession.

There is the risk that these viruses will spread to people, as has already been the case to a limited extent. This is bad news from a public health perspective, but not likely a major economic calamity unless a strain proves to be both highly contagious and also to pose a severe health risk. Based on my very limited knowledge, that seems unlikely, but the risk is surely higher with Elon Musk’s “super-high IQ” DOGE boys calling the shots instead of people who actually understand the issues involved.

Global Warming Disaster or LA Fire Sequel

We have been seeing many more extreme climate events in recent years as a result of global warming. Trump has doubled down on a commitment to do everything he can to advance global warming as much as possible. He wants to eliminate all the Biden and Obama programs to promote EVs and clean energy, and to subsidize the use of fossil fuels.

This is horrible from the standpoint of saving the planet, but fortunately China and much of the rest of the world are moving aggressively to restrain greenhouse gas emissions. Still, the immediate issue from the standpoint of the economy is the damage to the environment that is already baked into the cards from past emissions.

This should require us to take steps towards both mitigating potential damage and enhanced emergency preparation for the increasingly intense hurricanes, floods, and wildfires that we will see. This is not going to happen, both because of Trump’s determination to pretend global warming is not real, and also because he is firing most of the people competent to lead this effort. His efforts to punish people who didn’t vote for him are also likely to increase the economic damage from global warming.

In terms of mitigation, we should be discouraging people from building in areas that are especially prone to damage from floods, hurricanes, and wildfires. There are some efforts at the state level to do this, but it’s a safe bet the Trump administration will not be encouraging it. Also, it is actively trying to destroy the agencies that gather the information that would facilitate this process.

Private insurers actually would assist in this process, if regulators allow them. This is not out of benevolence, it’s simply due to the fact that they don’t want to insure a home that is likely to be destroyed in a wildfire or hurricane. However, state regulators often impose rules that block insurers from charging premiums that reflect true risk.

Anyhow, Trump’s efforts are likely to make the human toll and property damage from future disasters considerable worse. This is especially likely to be the case when he decides that he knows best what to do and prevents competent people from conducting sound disaster management and relief efforts.

The disasters themselves will be a hit to the economy but are unlikely to be recession-causing stuff. We could see tens or even hundreds of thousands of homes destroyed, businesses put out of operation for weeks, or even months, and hundreds of thousands of workers possibly without jobs. However, relief efforts actually provide a short-term boost to the economy, unless Trump refuses to do them to punish blue areas.

The bigger hit is likely to be the longer-term response to disasters. Insurers are not in business to lose money. When they see enough disasters in an area, they will simply pull out of selling policies as many have done in Florida and California. If they see the risk as growing and/or decide they can’t gage the risk adequately because Trump has shut down good data sources, they are likely to pull out of more areas.

If people can’t get insurance on a home, they won’t be able to sell it, since banks all require insurance to issue a mortgage. We could see the housing market shut down in large parts of the country. This can be a very serious blow to the economy and financial markets. I won’t try to etch out details here, but let’s just say it is serious bad news.

Splurge of Spending Cuts

I won’t spend much time on this one, just because I consider it highly unlikely. The point here is simply that Elon Musk and his team seem to have no idea of how the economy works. When he initially set off with his DOGE team he was boasting about finding $2 trillion to cut from the annual budget, as in not over ten years. This would be a bit less than one-third of the budget and close to 7.0 percent of GDP.

If Musk actually did cut spending by 7.0 percent of GDP it would lead to a Great Recession type recession. Fortunately, this seems off the table for now, as Musk has learned a little bit about where government money actually goes.

The Trump-Republican team still seem intent on big cuts, but these look to be roughly an order of magnitude smaller. And they are likely to come with tax cuts to rich people, whose spending will largely offset the economic (not the human) impact of cuts to programs like Medicaid and SNAP.

Debt Limit Crisis

This is one that would appear on almost everyone’s list. The story is that Democrats refuse to provide any votes to raise the debt ceiling, and the small number of Republicans who actually care about the debt block passage of the necessary legislation. This would mean that the government would be unable to borrow, and at least for a period of time unable to pay all its bills.

This would clearly shake financial markets. Whether it leads to a full-fledged economic meltdown is more questionable and likely depends on how long the standoff lasts. This issue also involves even more speculation than usual since its not clear Trump feels bound by the rule of law, so his actions, even if not legal, could mitigate the impact.

In any case, this is likely to lead to higher interest rates, as investors attach greater risk to holding U.S. debt. That is a needless cost to the economy, but we are most likely talking about tenths of a percentage point, not whole percentage points.

Messing with Economic Data

This is probably not on most people’s Trump crises lists but should be. The story here is that we have top quality statistical agencies, most notably the Bureau of Labor Statistics (BLS) and Bureau of Economic Analysis (BEA), that provide us accurate data on a regular basis untainted by political interference.

Both parts of this are hugely underappreciated. We often hear complaints about large revisions to the data (I’ve made them myself), but this is due to the complexity of trying to measure a $30 trillion economy with 340 million people. The data are never perfect, but these agencies do the best they can, based on their own research, and work done by academic economists and statisticians around the country and the world.

This brings up the second and more important part: The people putting together the unemployment statistics, the Consumer Price Index, and other data that we depend on to know the state of the economy are professionals who are committed to the integrity of the data. They do not lower the unemployment rate to make the president look better or make inflation go away by cooking the numbers.

The MAGA crew, starting with Trump, often complained about the numbers being manipulated under Biden and Obama. This was utter nonsense. Unfortunately, it never got the pushback from the media, or even the Democrats, that it should have. Comments from Trump or other prominent Republicans saying the data was manipulated should have been treated as being equivalent to declaring the Earth is flat, they are that crazy.

Anyhow, as the MAGA crew will tell us, the president has the unquestioned authority to make the unemployment rate or inflation rate whatever he wants it to be. If Trump’s tariffs or his inept handling of the bird flu pandemic push the year- over-year inflation in March to 4.0 percent, he can just order BLS to report the inflation rate as 2.0 percent. The top people there will quit, or be fired, but Trump can force them to publish whatever inflation rate he wants.

The same applies to our GDP numbers. If Trump’s policies of not paying out money owed and laying off tens of thousands of government workers and contractors, cause GDP to slump in the first quarter, he can just instruct BEA to report strong 3.5 percent growth.

This may sell on Fox News and other right-wing media outfits, but it will be a disaster on financial markets and for the longer-term health of the economy. We should expect interest rates to soar and the stock market to plummet, since investors will decide that they no longer have any idea of the true state of the U.S. economy.

Over the longer term, we will see both domestic companies scaling back investment plans and foreign companies looking elsewhere. The United States will have declared itself an untrustworthy nation, where rules mean nothing and can be changed for convenience. Hopefully, Trump, or the people around him, will have enough sense to keep him from undermining the statistical agencies, but at this point, we can not take that for granted.

Recipes for Disaster

Okay folks, those are my MAGA eight, come up with your own stories for how Trump can crash the economy. Also, I welcome people who know these issues better than I do to expand on or correct what I wrote. Anyhow, looks like we might have some exciting times ahead of us.