Stagflation Is ‘Just the Beginning’ for America’s Economic Crisis: Peter Navarro

Then-White House Trade Adviser Peter Navarro speaks to the press outside of the White House in Washington, on June 18, 2020. Saul Loeb/AFP via Getty Images

Economist Peter Navarro, erstwhile adviser to former President Donald Trump, told Epoch TV’s “Crossroads” program in a recent interview that the current stagflationary downturn stalking the U.S. economy is “just the beginning” of America’s economic woes, and that Trump is the one who’s best poised to pull the country out of a dire slump.

Navarro said in the interview that he believes the United States has fallen prey to the destructive force of stagflation—a toxic combination of high inflation and sluggish growth.

“That’s what we’ve got now because of the fecklessness of Joe Biden, the Congress, the Federal Reserve, and this administration,” he said.

There’s been fierce debate about what led to prices accelerating at their fastest pace in decades, eroding purchasing power, and squeezing American households.

Some, including many members of the Biden administration, have mostly blamed supply-side constraints and external shocks like the war in Ukraine. Others, including many Republicans, have pointed the finger at unprecedented levels of fiscal and monetary spending.

The inflationary wave that has swelled into a persistent cost-of-living crisis for many Americans was driven mostly by a stimulus-fueled demand surge, although supply-side bottlenecks made the problem worse, a team of economists concluded in a recent study.

Soaring inflation, which Fed officials have admitted is far more persistent than they initially believed, has come alongside deteriorating economic conditions. The U.S. economy contracted for two consecutive quarters this year, according to updated figures released by the government on Sept. 29, which meets the rule-of-thumb definition for a recession.

‘This Is Just the Beginning’

Navarro argued in the interview that the United States is already experiencing stagflation—and that it’s going to get worse.

“This is just beginning. This economic crisis is just beginning, and it’s going to be as bad or worse and as long as it was during the 1970s,” Navarro said.

The dreaded toxic brew of high unemployment and high inflation plagued the U.S. economy for over a decade in the 1970s. America’s unemployment rate doubled to 9 percent between 1973 and 1975, while inflation peaked at around 14 percent in annual terms.

Inflation didn’t fall substantially until the early 1980s, and only after the Federal Reserve jacked up interest rates to around 19 percent, leading to two back-to-back recessions in 1980 and 1981–82.

In the interview, Navarro offered a lookback on the Trump administration’s economic policies and credited them with low unemployment and low inflation.

“What we did was structural in nature, designed to increase the real wages of American workers, the productivity of American workers, the prosperity of the middle class,” Navarro said.

“And we did that beautifully through structural elements, not just the traditional Republican tax cuts and lower regulatory burdens, but by securing the southern border, which prevents a flood of uneducated, low-income workers coming in,” he said.

Navarro added that Trump’s policies on re-shoring manufacturing and bringing supply chains back to the United States helped boost wages for blue-collar Americans.

The economist further argued that bringing back Trump-era policies is key to pulling the country out of stagflation.

“I think the only one who fully understands how to get out of that is Donald Trump,” Navarro said. “I don’t see anybody else in the Republican Party who has that kind of sophistication.”

His take on the trajectory of the U.S. economy dovetails with remarks made by other economists, who see darkening clouds on the horizon.

‘Stagflationary Debt Crisis’

Economist Nouriel Roubini, for example, who’s been dubbed “Dr. Doom” for his pessimistic, yet accurate, prediction of a financial market meltdown in 2007–08, told Bloomberg in a recent interview that he expects “a real hard landing” for the U.S. economy.

Roubini also said he continues to believe that it’s “delusional” for analysts to expect a short and shallow recession, arguing instead that it will be long and severe.

In an op-ed for Project Syndicate, he also warned of a looming “stagflationary debt crisis” with “some of the worst elements of both the 1970s and the 2008 crash” as public debt levels have become unsustainable and most of the fiscal ammunition already used.

“Things will get much worse before they get better,” he predicted in the op-ed, adding that he believes the economic downturn will come alongside financial market turmoil.

Billionaire investor Stanley Druckenmiller said at a recent investor summit in New York City that he’s worried that the economic downturn affecting United States could be worse than an “average garden variety” recession.

At the same time, investor pessimism has hit levels not seen since the financial crisis of 2008–09.