Donald Trump's Latest 'Political Bankruptcy' Will Have 'Horrifying' Outcome, Nobel Economist Warns

Nobel prize-winning economist Paul Krugman has warned that what he calls President Donald Trump's 'political bankruptcy' could have 'horrifying' consequences, arguing that a Republican defeat in the 2026 midterm elections may leave the president feeling he has little to lose.

Writing on Substack on 19 October 2026, he suggested that weakened electoral prospects could reduce Mr Trump's incentive to exercise restraint.

Krugman's argument rests on his expectation of Republican losses in the midterms. He argued that Democratic control of Congress would bring investigations and subpoenas that could threaten Trump and his allies.

Krugman's essay presents political analysis, not an announcement of government policy. His predictions about Trump's future decisions and motives remain assessments, not established facts.

Paul Krugman Sees a President With Little To Lose

Krugman compared Trump's position to that of a business owner whose company is close to collapse. In financial economics, he wrote, owners facing ruin may make destructive bets because a successful gamble could rescue them, while a failure leaves creditors carrying the cost.

Krugman described Trump's predicament as political rather than financial bankruptcy. He argued that this could encourage damaging decisions.

He used the business analogy to explain why he believes the midterms could influence Trump's decisions before and after the vote.

He argued that the prospect of congressional investigations could encourage Trump to take greater risks, invoking the concept of 'gambling for resurrection'.

In his analogy, an owner facing business failure may take a risky bet because success offers an escape from collapse.

Fears of Escalation Over Iran

Krugman discussed the possibility of renewed US bombing of Iran. He contrasted expectations of action after the midterms with an argument that strikes could come before voting.

He identified Robert Pape, author of the Substack publication 'Escalation Trap', as the analyst advancing the latter view. Krugman considered that argument plausible.

Krugman acknowledged that he did not know whether Trump would resume bombing Iran before the midterms.

Political Bankruptcy and the Risk of 'Policy Looting'

Krugman's broader concern extended beyond Iran. He argued that expected electoral defeat could encourage Trump to pursue unpopular policies reflecting his personal preferences. He called this 'policy looting', using the phrase to describe the exercise of presidential power rather than a specific allegation of theft.

Krugman argued that an electoral defeat would not necessarily make Trump more moderate. He described the president's presumed desires as 'horrifying'.

Krugman pointed to Trump's stance towards Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskyy as evidence supporting his argument.

He cited Russian diesel purchases, sanctions decisions and alleged restrictions on Ukraine's satellite access. Trump's 16 October order waived specified sanctions and duties, rather than cancelling all Russia-related sanctions.

Krugman attributed the alleged satellite restrictions to Trump. The Ukrainian presidential office's subsequent statement about Starlink/Starshield did not establish who ordered the restrictions. Krugman also criticised Trump's rhetoric about Somalis, describing it as racist.

No response from the White House, the Republican Party or the officials named in Krugman's commentary was included in the material provided. Their positions on his analysis therefore cannot be fairly stated here.

Krugman argued that the prospect of congressional investigations could influence Trump's decisions. He rejected the assumption that a midterm defeat would necessarily make the president more cautious.