A Minsky Moment for Government After Years of Bidenomics
Donald Trump’s attempt to detox the economy by cutting government spending and regulation has the usual suspects shrieking about an imminent recession. But what if the real problem isn’t Trump’s cuts but the bloated government-driven economy Biden built over the past three years? This isn’t just a policy disagreement—it’s a “Minsky Moment for Government.”
The term “Minksy Moment” comes from the work of Hyman Minsky, an American economist best known for his work on financial instability and economic cycles. Born in 1919, Minsky earned his PhD from Harvard University under the mentorship of Joseph Schumpeter, a towering figure in economic thought.
Minsky spent much of his academic career at Washington University in St. Louis, where he developed his groundbreaking Financial Instability Hypothesis. His theory argued that periods of economic stability encourage greater risk-taking, eventually leading to speculative excess and inevitable collapse. Though largely ignored during his lifetime, Minsky’s work gained significant attention during the 2008 financial crisis, when many economists and policymakers turned to his insights to explain the sudden implosion of global financial markets. Today, he is remembered as a prescient thinker whose warnings about the fragility of economic systems seem more relevant than ever.
His Financial Instability Hypothesis laid out a brutal truth: periods of economic stability encourage reckless risk-taking, and stability itself becomes the breeding ground for instability. Under Minsky’s framework, financial systems evolve from prudent, hedge finance to speculative finance, and ultimately to outright Ponzi finance. As the cycle progresses, more and more of the economy becomes dependent on continued expansion and borrowing to stay afloat. And when the music stops, the whole system collapses.
Minsky’s theory has been used to explain everything from the Great Depression to the 2008 financial crisis. But here’s the irony: what Minsky described for private markets now perfectly fits Biden’s government spending spree. The Biden administration’s relentless push to build a new economy through federal spending has gone from speculative to outright Ponzi finance. And as Minsky would tell you, the bill always comes due.
The Illusory Biden Manufacturing Boom: Smoke, Mirrors, and Billions of Dollars
The clearest example of Biden’s speculative binge is his aggressive attempt to transform American industry through the CHIPS Act and Inflation Reduction Act. These initiatives were designed to supercharge green energy and high-tech manufacturing, but they’ve mostly succeeded in pouring taxpayer money into projects that look impressive on paper but produce little real value.
From 2015 to 2020, annual construction spending on manufacturing averaged about $77 billion. Under Biden, the numbers have gone wild. In 2022, manufacturing construction spending skyrocketed to an average of $125 billion, a stunning 62 percent increase over the five-year baseline. In 2023, the average hit $193.6 billion—more than double the baseline with an increase of 151 percent. And in 2024, it climbed to a jaw-dropping $233.1 billion, a spike of 202 percent over the pre-Biden years.
President Joe Biden records a digital video on “Bidenomics” on August 16, 2023, in the Map Room of the White House. (Official White House Photo by Adam Schultz)
Of course, some of that growth is due to higher costs. Inflation was running hot throughout the Biden years. To get a clearer picture, we need to adjust those numbers for inflation using the Producer Price Index by Industry: New Industrial Building Construction. When we do, the five-year average for 2015-2020, adjusted to 2020 dollars, comes out to about $84.6 billion. Compare that to the inflation-adjusted 2022 spending of $113.9 billion, an increase of 34.6 percent. The adjusted 2023 figure rises to $176.4 billion, a surge of 108.5 percent. And in 2024, the inflation-adjusted spending is $212.3 billion, a spectacular increase of 150.9 percent.
Yet despite all this, the results are meager. Real manufacturing value-added output only rose by about 4.5 percent over this period. Employment in the manufacturing sector has remained stagnant, hovering around 12.765 million jobs as of early 2025, with minimal change from previous months. And labor productivity, measured as output per hour, managed only a feeble 0.3 percent improvement in the final quarter of 2024.
This disparity between the massive investment in construction and the absence of corresponding growth in output, employment, and productivity speaks volumes. This is not organic growth driven by genuine market demand. It’s the kind of artificial boom that Minsky would have recognized instantly as a hallmark of Ponzi finance. When the money spigot is inevitably turned off, it will leave behind unfinished projects, overleveraged firms, and a private sector starved of meaningful opportunities.
The Misallocation of Human Capital
But the overinvestment in manufacturing construction is only part of the problem. The broader story is the unprecedented growth of government itself. Over the past three years, federal spending and employment have surged to levels that make the Obama years look like an era of restraint. Since January 2023, more than one in five new jobs in the U.S. have been in state and local government or public education. That’s over twice the rate of public-sector job growth seen in the decade before COVID-19.
The hiring spree isn’t just unsustainable—it’s a distortion of the economy itself. When government work becomes the most attractive and reliable form of employment, talent and capital are inevitably diverted away from genuinely productive activities. Education systems churn out graduates tailored for government-related jobs, while private industry struggles to attract skilled labor. Worse, much of this public-sector employment growth has been financed through deficit spending. This is the kind of reckless borrowing that Minsky would immediately recognize as Ponzi finance.
Treasury Secretary Scott Bessent has been sounding the alarm, warning that the economy is “hooked” on government spending and needs a “detox period.” The real problem, he argues, isn’t recession but the structural damage caused by an economic model built around continuous government expansion. Ray Dalio has echoed those concerns, pointing out that the U.S. debt-to-GDP ratio has now surged past 122 percent. When you’ve borrowed so much that even foreign buyers start to hesitate, you’re in serious trouble.
Ending the Government-Spending Ponzi Scheme
The tragedy of Biden’s economic model is that it’s built on the assumption that government can replace the private sector as the primary engine of growth. But government can only direct resources; it cannot create real value. The more the state attempts to engineer growth through subsidies and deficit spending, the more it undermines the productive capacity of the private sector.
We’re experiencing a Minsky Moment for government, a reckoning with an economy driven to instability by the excesses of government spending-driven stability. The Biden administration’s attempt to force the economy into its own green energy utopia has only created an economy that’s fragile, over-leveraged, and increasingly unable to generate real growth. Trump’s plan to scale back government is about more than just balancing the books. It’s about forcing the economy to confront the reality that government-driven growth is a lie. And unless the detox happens soon, the inevitable collapse will be far worse than any recession the media wants to blame on Trump.
Read the full article here