Politics & Government
Lagging consumer confidence points toward an economic recession
Economist Klepper-Smith says Trump's tariffs, domestic 'Big Beautiful Bill' could 'elongate' a downturn
By Scott Benjamin
When Donald Klepper-Smith talks, people listen.
Over the last 45 years, he has provided economic advice to former Connecticut Govs. M. Jodi Rell (R-Brookfield) and Lowell Weicker (ACP-Old Lyme) , AT&T, banks and a handful of work force councils.
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Klepper-Smith is noted for his detailed PowerPoint presentations at the Greater Danbury Chamber of Commerce’s economic forecast breakfasts. He has made economics reporters underscore how Connecticut has not recaptured all of the jobs it had in 2008 when the Great Recession struck.
He says the current Wall Street metrics appear “fine,” but “consumer confidence data show some of the lowest readings since the 1950s.”
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Klepper-Smith said he forecast the 2008 recession to the month. He now says that there is “a 70 percent chance” of a major recession in the next year.
He commented that personal debt – car loans, mortgages and college student loan payments - is “well above” where it was in 2008 when Republican former President George W., Bush signed the Troubled Asset Relief Program Act.
Klepper-Smith said Federal Reserve Board Chairman Jerome Powell deserved the standing ovation he recently received at the Economics Club of Chicago for waiting to lower interest rates until it can be determined what that impact will be from Republican President Donald Trump’s liberation tariffs plan.
“His efforts to balance between economic growth and inflation are appropriate,” he remarked.
However, The Wall Street Journal has reported that Trump is already auditioning candidates to replace Powell when his term ends next spring.
Klepper-Smith, who now lives in South Carolina, said in a phone interview with Patch.com that Trump’s tariffs could “elongate” a pending recession.
“It has essentially taxed consumption,” he remarked. “We’re living in a world where increasingly there is more uncertainty. Uncertainty is a job killer, it undermines business investment and I think it takes strategic planning off the table for many firms.”
Klepper-Smith commented, “Tariffs and the policies to implement those tariffs have been done in a haphazard basis,”
He called the tariffs “an isolationist policy that is destroying relationships [with long-term trade partners].”
Klepper-Smith also criticized the president’s Big Beautiful Bill – which, according to the Congressional Budget Office, will increase the federal budget deficit by $3.3 trillion through 2034.
He cited Larry Summers, the former Treasury secretary and director of the National Economic Council, who has said, “There is no economist with an ax to grind who is going to say that this legislation is a good thing.”
Come September 30 it will be 24 years since there has been a balanced federal budget. In 1998 under Democratic former President Bill Clinton there almost was a confetti shower when the federal budget was balanced for the first time in 29 years.
“I am a longtime believer in fiscal discipline,” Klepper-Smith asserted.
Between the W. Bush tax cuts and spending on wars, the Obama stimulus to tackle the Great Recession, the tax cuts from Trump I and the Biden Build Back Better initiatives, the deficit has grown to such a historic level that annual payments on it now exceed the military budget.
Summers and Bob Rubin, who preceded Summers as treasury secretary in the Clinton Administration, recently wrote in The New York Times that, the debt “could grow to 135 percent or more [of American economic output, with an annual budget deficit equaling 8 percent of gross domestic product, by 2035.”
Commented Klepper-Smith, real estate billionaire Warren Buffett has said if you want to lower the budget deficits then pass a law “that anytime you have a budget deficit exceeding three percent of real GDP, then every member of Congress is not eligible for re-election.”
What is his economic forecast for Connecticut?
“We can see the current administration has declared war on blue states,” Klepper-Smith exclaimed.
Connecticut is among the bluest. Its last Republican congressman left office two weeks before Obama took office.
Klepper-Smith said reductions in Medicaid and other federal social programs will strain the Connecticut state budget.
In 2008, Rell said that when there is a recession, states usually are seeking additional money from the federal government for Medicaid and unemployment insurance.
Klepper Smith commented, “One of every five dollars comes from the federal government."
He added, “Trump’s policies are making planning almost impossible,” Klepper-Smith said. “Before the Trump Administration we had a situation that was much more predictable.”
Klepper-Smith cautioned, “Historically, Connecticut underperforms the national economy during a recession.”
Resources:
Phone interview with Donald Klepper-Smith, Patch.com, on Saturday, July 12, 2025.
Donald Klepper-Smith PowerPoint presentation for the Greater Danbury Chamber of Commerce, April, 2025.
Opinion | We Both Served as Treasury Secretary. We Know This Bill Is Dangerous. - The New York Times
M. Jodi Rell news conference, Chuck’s Steakhouse, Danbury, October 2008.
