Anxious Consumers Shop Less

 Popular Economics Weekly

“Disposable personal income (DPI)—personal income less personal current taxes—decreased $125.0 billion (0.6 percent) and personal consumption expenditures (PCE) decreased $29.3 billion (0.1 percent).”

BEA.GOV

We are seeing one of the classic signs of a looming recession—consumers are spending less and saving more, and they power 70 percent of economic activity.

The personal consumption expenditures (PCE) for May from the Bureau of Economic Activity (BEA) showed the personal savings rate has risen to 4.8 percent (black line in graph), while personal consumption expenditures decreased -0.1%, Personal savings had been increasing since early 2025. No surprise, since that is when Trump’s tariff plans were first announced.

Why are they spending less? One of the reasons cited by the consumer sentiment surveys is too much future uncertainty. Not so surprising with inflation worries still high, and the on again, off again tariff announcements that probably mean even higher prices.

The PEW Centers most recent survey said the public again sees inflation as one of the top problems facing the nation, with 62 percent saying inflation is a very big problem for the country – only slightly down from the 65 percent who said this last year (2024).

The Conference Board Consumer Confidence Index® deteriorated by 5.4 points in June, falling to 93.0 (1985=100) from 98.4 in May. “Consumer confidence weakened in June, erasing almost half of May’s sharp gains,” said Stephanie Guichard, Senior Economist, Global Indicators at The Conference Board. “The decline was broad-based across components, with consumers’ assessments of the present situation and their expectations for the future both contributing to the deterioration.”

The University of Michigan’s Consumer sentiment survey surged 16% from May in its first increase in six months but remains well below the post-election bounce seen in December 2024 when last year’s economic growth was 3 percent, the highest in the developed world, and jobs were still plentiful.

“Despite June’s gains, however, sentiment remains about 18% below December 2024, right after the election; consumer views are still broadly consistent with an economic slowdown and an increase in inflation to come,” said Survey Director Joanne Hsu.

From the same month one year ago, the PCE price index for May increased 2.3 percent. Excluding food and energy, the PCE price index increased 2.7 percent from one year ago. It’s at least a sign of stagflation if the spending slowdown continues, since the PCE report also shows signs of higher inflation that the Fed is worried about.

No wonder consumers are more worried. Bloomberg research reveals AI could replace 53 percent of the white-collar market research analyst tasks and 67 percent of sales representative tasks, while managerial roles face only 9 to 21% automation risk.

The World Economic Forum's 2025 Future of Jobs Report reveals that 41 percent of employers worldwide intend to reduce their workforce in the next five years due to AI automation. Industries like technology, finance, and consulting are highlighted as particularly vulnerable.

It really looks like Republicans are trying as hard as possible to start a recession. They are shrinking the workforce by deporting undocumented immigrants who work with their hands and thus would be needed to fill some of the 400,000 vacant manufacturing jobs.

And passing Trump’s Big Beautiful Bill will create an unsustainable debt load, keeping interest rates high.

So though Biden suffered through higher inflation, it was because of the $trillions in New Deal legislation that caused 3.2 percent GDP growth during his term. The Trump administration has managed just -0.5 GDP growth in Trump's first quarter as President.

This is what happens when Republican tax cuts transfer even more wealth to the Oligarchs from middle and working class Americans.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

First Quarter Growth Revised Lower

 Financial FAQs

“Real gross domestic product (GDP) decreased at an annual rate of -0.5 percent in the first quarter of 2025 (January, February, and March), according to the third estimate released by the U.S. Bureau of Economic Analysis. In the fourth quarter of 2024, real GDP increased 2.4 percent.” BEA.GOV

We won’t know yet if we can stay out of a recession because first quarter GDP was revised downward in its final (third) estimate, but Americans have been stocking up on cheaper imports before the tariffs kick in, just in case.

Real GDP was revised down 0.3 percentage point from the second estimate (-0.2%), primarily because of downward revisions to consumer spending and exports. This was before the April 2 tariffs and retaliatory tariffs hit consumers.

But the final (third) revision of Q1 GDP showed inflation already rising because of the rush to buy before April 2. The price index for gross domestic purchases increased 3.4 percent in the first quarter, a revised +0.1 percentage point from the previous estimate. The personal consumption expenditures (PCE) price index increased 3.7 percent, and the PCE price index excluding food and energy increased 3.5 percent, both +0.1 percentage point higher than previously estimated.

So, what are consumers and businesses to do while waiting for the final outcome of the tariff wars? (If there will be a grand finale, that is.) Trump is using the tariffs to not only pay for the huge deficit that his Big Beautiful Tax bill will create, but as a way to bully other countries to do all manner of things, like get NATO to up its military spending, and China to import more U.S. exports.

The general consensus is that tariffs will ultimately end up being about 10 percent for most countries (30 percent for Chinese imports), up from 4 percent in recent history. The financial markets are rallying again because of Trump’s TACO (Trump Always Chickens Out) negotiating techniques—suddenly raising retaliatory tariffs, then cancelling them. It can’t prevent higher prices, since so much of what we consume is imported.

Things might look brighter for a while, like in the second quarter just coming to a close in June. The Atlanta Fed’s GDPNow estimate of second quarter growth is still holding at 3.4 percent because of continued investment in AI and other high-tech innovations in its most recent Nowcast. But we won’t see the first estimate of second quarter GDP growth until July 30.

“The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2025 is 3.4 percent on June 18, down from 3.5 percent on June 17. After this morning’s housing starts report from the US Census Bureau, the nowcast of second-quarter real residential fixed investment growth decreased from -2.8 percent to -4.4 percent.

Higher fixed investment is good for growth, of course, yet we are also seeing increases in weekly initial jobless claims that come close to Great Recession and COVID-19 pandemic numbers. The number of jobless workers collecting longer term unemployment benefits rose by 37,000 to 1.97 million, marking the highest level since November 2021.

That’s because much of the high-tech and AI investment will be replacing White-collar workers. We now must wait until July 30 before Q2 growth numbers come out from the Bureau of Economic Analysis. That’s a long time to wait these days, since so much can happen.

Stocks and bonds are rallying because corporate profits are higher, as well as the hope that TACO Trump won’t level any more retaliatory tariffs. The Foreign Trade Court has said the retaliatory tariffs aren’t legal. So maybe that’s what the markets are betting on—no more tariff increases. Most analysts are predicting the new 10 percent tariff level will shave approximately 1.5 percent from GDP growth this year, however.

Harlan Green © 2025

Follow Harlan on Twitter: https://twittter.com/HarlanGreen

Fed Rate Cuts Coming Soon?

 The Mortgage Corner

“Existing-home sales rose in May, according to the National Association of REALTORS®. Sales elevated in the Northeast, Midwest and South, but retreated in the West. Year-over-year, sales progressed in the Northeast and Midwest but contracted in the South and West.” NAR

CalculatedRisk

President Trump is now putting on a full court press to convince the Fed Governors to cut interest rates. There are some good reasons to lower interest rates, including the fact that home sales are at levels that last prevailed during the 2008-09 Great Recession (see above graph).

But his “Big Beautiful Bill” will add an additional $3 trillion to the federal debt that means almost $1 billion in annual interest payments. Trump has said he wants rates to be cut as much as one point (-1.0%) from the current 4.25% Fed Funds overnight rate that adjusts the Prime Rate controlling credit card and auto loan payments.

Any rate cuts would give a huge boost to financial markets as well that have been held back by the high borrowing costs for both consumers and businesses.

Fed President Powell speaks to congress this week and Trump wants congressional Republicans to grill him on why he hasn’t lowered interest rates further.

This is because Powell said at his recent press conference, “For the time being, we are well-positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance.”

Two of the Fed Governors appointed by President Trump are already leaning in his direction. Chris Waller and Michelle Bowman said after the bank stood pat last week that they would be open to a rate cut at the July 29-30 meeting, according to MarketWatch’s Jeffry Bartash.

And we mustn’t forget housing sales have been flat since January 2023 when the Fed began to raise their short-term rates. That’s why the National Association of Realtors have also been lobbying for lower interest rates.

"The relatively subdued sales are largely due to persistently high mortgage rates. Lower interest rates will attract more buyers and sellers to the housing market," said NAR Chief Economist Lawrence Yun. "Increasing participation in the housing market will increase the mobility of the workforce and drive economic growth. If mortgage rates decrease in the second half of this year, expect home sales across the country to increase due to strong income growth, healthy inventory, and a record-high number of jobs."

There’s also another reason why interest rates may fall further in July; fears that tariff wars may induce a recession. The Federal Reserve’s release of its minutes from the last FOMC meeting didn’t have much to say about the continuing tariff wars, because nothing has yet been negotiated—just some retaliatory pauses and a written understanding with the UK.

That puts the Fed in a very difficult position. We now know why President Trump has attempted to disguise the fact that it is an import tax. The Court of International Trade has ruled that Trump’s retaliatory tariffs (i.e., import taxes) are illegal.

Hence Chairman Powell’s concern that a recession may be on the horizon was mentioned in last week’s FOMC minutes. “The staff viewed the possibility that the economy would enter a recession to be almost as likely as the baseline forecast.”

We know from past history (i.e., Trump’s first term) that higher tariffs cause higher inflation, which Trump denies will happen again (because it was a campaign promise), and Powell, et.al., have worked hard to get inflation down to its current level.

We also now have reports that imports have declined almost 40 percent in the west coast, which handle most Chinese supplies. Long Beach and Los Angeles posted month-over-month drops of 31.6 percent and 29.9%, while Tacoma and Seattle fell over 40%.

So, there is a good case to be made that interest rates should be coming down, for both good and bad reasons. It does look like Republicans’ “Big Beautiful Bill” will pass, regardless of the consequences. And who doesn’t like lower interest rates?

But Republicans are playing with fire by endangering the “full faith and credit” of the U.S. in wanting to finance it with another $3 trillion in debt.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

U.S. Already in Recession?

 Financial FAQs

The Conference Board Leading Economic Index® (LEI) for the US ticked down by 0.1% in May 2025 to 99.0 (2016=100), after declining by 1.4% in April (revised downward from –1.0% originally reported). The LEI has fallen by 2.7% in the six-month period ending May 2025, a much faster rate of decline than the 1.4% contraction over the previous six months.

ConferenceBoard

Are we already in a recession? The Fed doesn’t think so, but the Conference Board’s Index of Leading Economic Indicators conjectures we will be in a recession soon, if not already. The LEI is a tricky read because it looks at indicators spanning longer periods, hence its name.

The Conference Board’s index of Leading Economic Indicators is now signaling that a recession might have begun in May 2025, though Fed Chair Jerome Powell and the Fed Governors don’t think so. Powell said after last Wednesday’s FOMC meeting that interest rates will stay on hold for now.

“The economy is in solid shape, so the labor market is not crying out for a rate cut,” said Powell. (Therefore, the Fed has time to “learn” more about the economy.)

However, Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board, said “With the substantial negatively revised drop in April and the further downtick in May, the six-month growth rate of the Index has become more negative, triggering the recession signal,”

The Conference Board creates several surveys, including the Consumer Confidence Index, so it puts the most weight on consumer expectations for business conditions, which has been dropping sharply in its surveys.

And the ISM’s New Order Index as well as private housing building permits have continued to decline as well, thanks to the Fed’s intransigence on reducing interest rates further.

So the LEI is hedging its bets just as the Fed is doing by taking a longer wait and see. “The Conference Board does not anticipate recession, but we do expect a significant slowdown in economic growth in 2025 compared to 2024, with real GDP growing at 1.6% this year and persistent tariff effects potentially leading to further deceleration in 2026.”

Federal Reserve President Chris Waller, one of the Fed Governors, is a dissenter: “I don’t think [the inflation impact of Trump’s tariffs] is going to be that big,” Waller said in an interview on CNBC. “I think we have room to bring [rates] down in July (the next FOMC meeting)”

Almost everyone in congress and President Trump also want lower rates because the new fiscal budget’s annual interest expense could be close to $1 trillion annually on approximately $38 trillion in debt.

This is unsustainable, so everyone is waiting to see if the Republican congress succeeds in driving the U.S. economy over the cliff with their new fiscal budget. Then what good will any amount of import taxes (tariffs) do to fill the debt void?

It’s becoming evident that Republicans will do anything to get their tax cuts, and Democrats don’t seem to be shouting loud enough to win at least two Republican House members to their side that don’t want to bankrupt the U. S. economy.

That’s all they require to block the looming budget disaster. This is while it looks like Trump’s tariffs will ultimately equal those in 1930. And we know the 1930 Smoot-Hawley tariffs that raised prices on imports was one of the reasons for the Great Depression.

Harlan Green © 2025

Follow Harlan on Twitter: https://twitter.com/HarlanGreen

Tariffs Trump Consumer Spending

 Financial FAQs

“Advance estimates of U.S. retail and food services sales for May 2025, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $715.4 billion, down 0.9 percent (±0.5 percent) from the previous month, and up 3.3 percent (±0.5 percent) from May 2024.” U.S. Census Bureau

FREDretailsales

Retail sales have declined in four out of five months since January, a sign that consumers don’t like trade wars; i.e., not knowing what will happen to prices and whether shelves will soon be empty if  President Trump can’t finalize any of the trade deals that he says are almost done.

There’s even more that affects consumer spending and economic growth—the new federal budget still in negotiation and immigration crackdown that will become evident in coming months.

Consumers and businesses are complaining about the uncertainties, which is why President Trump keeps postponing the deadlines while pushing for better “deals”. He can keep promising, though even the UK tariff tax hasn’t been finalized.

The Senate could shave as much as $1 trillion from Medicaid spending in the Senate version of the bill not yet out of committees, according to reports.

And it will increase the federal debt by $2.8 trillion, which will drive up interest rates because bond investors will demand higher returns for the added risk of default. Higher interest rates will then slow growth, while rising import prices from snarled supply chains caught up in the tariff war will cause higher inflation, which is the other half of the stagnation + inflation (stagflation) equation that will result.

Motor vehicles and parts as well as construction sales declined in the retail sales report, as did healthcare and gardening supply sales. Consumers have also dined out less over the past two months, another sign that consumers are becoming more cautious in their spending habits.

All the Trump administration seems to be able to do at present is round up undocumented immigrants, which should cause even more serious damage to economic growth. Immigrants also like to shop, and now there are fewer of them working or shopping due to the growing arrests of undocumented immigrants.

According to estimates on its website from the Center for Migration Studies of New York (CMS) and other groups, as many as 8.3 million undocumented immigrants work in the US economy, or 5.2 percent of the workforce. They work in construction (1.5 million), restaurants (1 million), agriculture and farms (320,000), landscaping (300,000), and food processing and manufacturing (200,000), among other occupations.

That’s a lot of undocumented immigrants in the workforce, and the Trump administration wants to deport one million of them per year. As the numbers of working immigrants decline so will the amounts they produce, which also effects the family members who are American citizens.

And guess where many of them work—in red states with lots of agriculture for which immigrants are needed. That, and the draconian cuts to the health services will hurt MAGA-dominated red states the most that have fewer public services.

This is Economics 101, folks. Without more workers our economy can’t grow. And without paying for our debts, interest rates will continue to rise. And with tariffs at historically high levels, as high as they were in 1930, the cost of almost everything will rise. It’s not bringing down inflation on ‘Day 1’ or any other day of this administration.

Harlan Green © 2025

Follow Harlan on Twitter: https://twitter.com/HarlanGreen

Calkfornia Can't Be Bullied

 Popular Economics Weekly

Governor Gavin Newsom today announced that California has officially overtaken Japan to become the world’s fourth-largest economy, according to newly released data from the International Monetary Fund (IMF) and the U.S. Bureau of Economic Analysis (BEA). April, 2025

LATimes

The Trump administration’s efforts to bully California in the past week by sending in contingents of the California Coast Guard and active-duty Marines to ‘guard’ its ICE agents that are bent on rounding up as many undocumented workers in California as possible, is almost comical.

Would they try the same with Japan or Germany, who have economies that are basically the same size? Of course not, though Trump wants to pick on smaller Canada, and maybe Denmark’s Greenland.

Of the 850,000 farmworkers in California that are providing close to one-quarter of the agricultural produce of America, some 400,000 are seasonal workers (i.e., with permits) or undocumented, which is why President Trump has told ICE workers to stop rounding them up, for fear Americans will no longer have enough fresh (or canned) produce to eat.

It’s a sign of the Trump administration’s tremendous ignorance that their efforts to deport as many of the 11 million undocumented U.S. workers is looking worse than ridiculous, it is enraging the populous of those cities that depend on immigrants to work in the service and hospitality industries, as well as feed them.

If Trump also thinks he can humble California by attacking the University of California system (UC) as he is doing to Harvard, he is also mistaken.

The system's ten campuses presently have a combined student body of 299,407 students, 26,100 faculty members, 192,400 staff members, over 2.5 million living alumni, and $41.6 billion in annual operating revenues.

And as an alumnus, I can attest it teaches or promotes no particular ideology or political view, just the scientific and social science truths that are verified and tested empirically, not by rumor or conspiracy theories.

Trump and the Republican Party have succeeded in bullying the smaller red states they have dominated since the 1970s, making them the poorest states in income (many have no minimum wage), health care, social services and education.

Republican led red states are mostly dependent on the excess tax revenues passed on to them from blue states.

“In 2023, the federal government collected around $4.67 trillion from states and their residents through taxes on individuals and businesses and redistributed about $4.56 trillion back to states and residents through programs like Social Security, Medicaid, Medicare, food stamps, and education grants, says USA Facts.

Virginia alone depended on $79 billion in transfer payments in 2023 to balance its budget from states like California and New York, who contributed $78B and $89B in 2023 to the federal kitty.

So why have Republicans gone to all this trouble that will do very little harm to the likes of UC and California’s economy? Their red states can’t do without the income coming from blue states.

Oh, their leaders want more tax cuts, which will continue to increase federal debt. Americans will find out soon enough that’s not how to stay in business.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Republicans Have Never Paid Their Bills

 Financial FAQs

“The new law will reduce federal revenues by significant amounts, even after allowing for the impact on economic growth. It will make the distribution of after-tax income more unequal. If it is not financed with concurrent spending cuts or other tax increases, TCJA (Tax Cuts and Jobs Act) will raise federal debt and impose burdens on future generations. If it is financed with spending cuts or other tax increases, TCJA will, under the most plausible scenarios, end up making most households worse off than if it had not been enacted.” Brookings

President Trump is justifying his trade war that could wreck the U.S. and maybe world economies because he wants to renew his 2018 Tax Cuts and Jobs Act (TCJA) that could raise the federal debt $2.8 trillion over the next 10 years.

If Republicans would ever pay their bills, rather than continue to lobby for tax cuts, we wouldn’t be in this situation. But they haven’t since Ronald Reagan and now are led by a complete phony who sues those that expose his lies making complete fools of those who support him.

Why are we in a huge financial mess today with a record federal budget deficit and falling value of the dollar President Trump is using to justify an illegal tariff war that is tearing apart the world’s financial order and alienating our closest allies?

Trump’s Republicans are twisting themselves into pretzels to justify the tariff wars Trump is waging on the whole world—all 180 countries—that could lead to product shortages last experienced during the COVID-19 pandemic.

Yet rather than destroy the U.S. and other world economies with unjustified DOGE job cuts and tariffs, if Trump Republicans were serious about reducing the federal debt, they should raise taxes on those that have benefited most from decades of tax cuts enacted by Republican administrations

It doesn’t have to be this way. The Clinton/Gore government downsizing of the 1990s created four years of budget surpluses, because they negotiated with congress to make the cuts that were in congressionally mandated programs.

“Unlike the current effort, the cutting didn’t start until they had gone through a six-month study process and developed a blueprint of how to best reinvent the federal government,” said a recent Newsweek article on the subject. “Government agencies were brought into the process to determine the best ways that efficiencies could be realized. In fact, the effort was led by some 250 federal employees that remained on their agency payrolls.”

The federal workforce was reduced by 440,000 employees between 1993 and 2000, or about 17 percent of the total. The cuts made the government the smallest it had been since the Eisenhower administration, according to the Newsweek report.

FREDdebtpercentageGDP

The St, Louis Fed (FRED) graph of federal debt as a percentage of GDP shows precisely when Republicans began to drastically cut taxes in 1980 under President Reagan—from a 75 percent maximum personal tax rate to below 40 percent, whereas the 90 percent corporate tax rate and 92 percent maximum personal tax rate of the Eisenhower era paid for the “new hires, new equipment, and product research which are deductible from taxable earnings.”

In other words, the higher tax rates made corporations use their profits to finance U.S. growth. Whereas today the tax cuts have mostly financed corporate stock buybacks.

How times have changed! President Eisenhower asked wouldn’t it be better to spend a majority of earnings on expanding the U.S. economy rather than to horde it?

Not any more, because Republicans don’t want to pay their bills rather than provide social services and environmental protection that would benefit all Americans. That’s their history since President Reagan declared that “government was the problem” and immediately fired the federal air traffic controllers who were striking for higher pay and better working conditions.

Will Americans realize and restore Republicans’ theft from American taxpayers via the tax cuts since 1980? It’s estimated some $1 trillion in wealth has been transferred from American workers to the owners of wealth since then that is causing the record income inequality we have today.

Make no mistake, if enough Americans don’t realize what fools they’ve been to support a President who says we’ve just won World War I, and appointed a Navy Secretary who held a ceremony honoring the 1941 Japanese attack on Pearl Harbor on June 6 instead of December 6, it will result in the wholesale destruction of our democracy and loss of the “good faith and credit” of the U.S. Government.

Harlan Green © 2025

Follow Harlan on Twitter: https://twitter.com/HarlanGreen

Immigrants Make a Difference

 Popular Economics Weekly

“Total nonfarm payroll employment increased by 139,000 in May, and the unemployment rate was unchanged at 4.2 percent, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in health care, leisure and hospitality, and social assistance. Federal government continued to lose jobs.” BLS

FREDnonfarmpayrolls

The above FRED graph is the best picture of where the jobs market has been headed over the past two years (May 23-May 25). It’s a slow downward trend that is averaging a monthly gain of 149,000 over the prior 12 months.

But since January 2025 and Donald Trump’s inauguration (last five bars in graph), job growth has averaged just 124,000 per month increases, and Trump’s anti-immigrant policies will continue to harm the job market and economic growth

It's becoming obvious that firms are hiring less because of rising uncertainty caused by the DOGE cuts and Trump’s tariffs. And don’t forget the immigration crackdown that is reducing the number of workers available for those jobs. The Trump administration has trumpeted the ‘removal’ of some 72,000 undocumented immigrants already, and intention to remove more than one million over the next year.

We know what that will do to our workforce. Some 625,000 working adults have dropped out of the adult workforce just in May, which means they stopped even looking for work.

So, it’s difficult to know if the immigration crackdown is causing more to simply stop working as well as the hiring slowdown. We know that immigrants, whether legal or undocumented, have become a major component of our job market with our declining population growth.

According to the Center for Migration Studies, a non-partisan think tank, an estimated 8.3 million unauthorized immigrants contribute to the economy, representing about 5% of all workers. This number has increased since 2019 but is like the 2007 figure. Lawful immigrants make up most of the immigrant workforce at 22.2 million, or 13% of all workers. Many work in construction (1.5 million) and restaurants (1 million), and fewer in Agriculture and farms.

Reducing the number of workers will hurt both our employment picture, as well as future growth, since if the normal one million plus annual influx of immigrants is reduced, it will impact GDP growth as well.

But in wanting so badly to feed red meat to his MAGA followers with the propaganda that immigrants are evil and criminals, employers cannot find the workers they need. There are still more than 7 million job vacancies, according to the Labor Department’s JOLTS report.

This didn’t have to happen, if Trump had allowed the bipartisan immigration bill to pass that Biden had negotiated, which gave a path to citizenship and allowed immigrants to obtain legal work permits.

But the Trump administration isn’t interested in economic growth as much as branding non-European whites as undesirables—even though our Hispanic population, mostly South and Central American, are of white European origin.

It's how autocrats stay in power. President Trump is dividing Americans in artificial ways—whether by economic class, or birth origins—any way he can think up to exacerbate the divisions.

And it will not only shrink the working population, but U.S. economic growth as well.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Is American Exceptionalism Dead?

 AK 6-9-25

American exceptionalism may not be dead yet, but our democratic principles and Constitution are under assault (“U.S. Market Dominance Is On Pause. It Will Roar Back,” Other Voices, May 29). There’s plenty of research on the decline of sustainable economic growth in autocratic regimes. Massachusetts Institute of Technology economist Daron Acemoglu won a Nobel Prize for his research on the superior growth of “inclusive” (more democratic) versus autocratic (exploitative) governments. American exceptionalism may suffer from more than a “prolonged period of U.S. underperformance” under a president who has demonstrated little regard for our democratic institutions.

Harlan Green

Santa Barbara, Calif.

More Signs of Slow Growth

 Financial FAQs

“The manufacturing economy continues to struggle,” Susan Spence of ISM said. “It will continue to struggle” due to all the trade uncertainty.

“The administration’s tariffs alone have created supply chain disruptions rivaling that of Covid-19,” an executive at an electronics company told ISM.

FREDmanufacturingemployment

The only number in the Institute of Supply Management’s (ISM) manufacturing survey that rose were prices due to a shortage of commodities—i.e., supply. Every other component of the supply managers’ survey was contracting—such as new orders, production, and employment.

Manufacturing employment had been declining since 1980; from 19,000,000 jobs to 12,765,000 jobs in April per the FRED graph out of a total 159 million jobs.

It’s the first sector of the U.S. economy that is showing stagflation—prices are up while production is stagnating. Hence the above remarks from supply managers and Susan Spence, Chair of the ISM Survey.

The services index of the Institute for Supply Management also contracted for the first time in a year. It fell to 49.9% in May from 51.6% in April, the ISM said Wednesday. Any number below 50% signals contraction.

Economic activity in the services sector contracted in May, the first time since June 2024, say the nation's purchasing and supply executives in the latest Services ISM^® Report On Business^®. The Services PMI^® indicated slight contraction at 49.9 percent, below the 50-percent breakeven point for only the fourth time in 60 months since recovery from the coronavirus pandemic-induced recession began in June 2020.

The Labor Department’s JOLTS report shows that the service sector is still adding jobs. Job openings rose in April for white-collar, retail, healthcare, and entertainment and recreation roles. But job listings fell at hotels and restaurants, whose business has been hurt by a decline in tourism. Some foreign visitors have put off trips to the U.S. because of the trade wars and other White House policies.

Another disheartening jobs report came out today. ADP, a private payroll processor, reported that privately run businesses created just 37,000 new jobs in May — the smallest increase in more than two years — as the most damaging global trade wars since the Great Depression spurred many firms to put a pause on hiring.

The real problem is that employers won’t begin to hire again until the trade wars are resolved, and President Trump says he isn’t letting up on the tariff wars because it will create more manufacturing jobs. But that will take years, and automation has replaced most of the manufacturing jobs (which no longer pay as well) before we see any signs of a manufacturing resurgence.

Economists such as Paul Krugman, who won a Nobel Prize for his pioneering research in foreign trade, remarking on the sudden 50 percent increase in steel tariffs, believes the damage  to the U.S. Economy from such draconian tariff rates (i.e., import taxes) is already done.

So steel tariffs don’t make any policy sense. But then neither does anything else in Trump’s trade war — and the nonsensical nature of the whole enterprise is why I don’t think he’ll find an off-ramp. After all, it’s obvious that the increased steel tariff wasn’t a considered policy, it was a temper tantrum after the Court of International Trade ruled against his other tariffs.

Is the contraction of both the service and manufacturing sectors the first sign that the U.S. economy is already in recession? This Friday’s ‘official’ U.S. Labor Department unemployment report will tell us more.

Harlan Green © 2025

Follow Harlan on Twitter: https://twitter.com/HarlanGreen

Trump's Big Beautiful Bill?

 Answering Kennedy’s Call

“The House has now passed what must surely be the worst piece of legislation in modern U.S. history. Millions of Americans are about to see crucial government support snatched away. A significant number will die prematurely due to lack of adequate medical care or nutrition. Yet all this suffering won’t come close to offsetting the giant hole in the budget created by huge tax cuts for the rich. Long-term interest rates have already soared as America loses the last vestiges of its former reputation for fiscal responsibility.” Paul Krugman-Substack

 Graph: Last Tech Age

Budget analysts have been saying (almost unanimously) that it will increase our federal debt by as much as $4trillion and raise the federal debt level to as much as 130 percent of GDP, further endangering the “full faith and credit” of the U.S. Government.

In passing their ‘Big Beautiful Bill’ (BBB) by just one vote, Republicans will worsen the income inequality and partisan divide that has picked ordinary Americans’ pocketbooks since the 1980s and President Reagan’s ‘trickle down’ economic policies.

The BBB will essentially renew the Trump administrations first term Tax Cut and Jobs Act (TCJB), that gave even more tax breaks to the wealthiest—to Trump and his oligarchs.

The U.S. Is already in 106th place of the 149 countries in income inequality as ranked by the CIA’s World Factbook, I said in 2017; with a Gini inequality index that ranks it with developing countries like Peru and Cameroon. Whereas Finland and the Scandinavian countries are at the top of equality rankings; Germany and France are ranked 12th and 20th, respectively. The higher the index, the greater the gap between wealthy and poor citizens of a country.

So how much worse can it get before MAGA followers realize Trump has never meant to fulfill the “Day 1” promises of lower inflation, more good paying jobs, and a Ukraine peace deal?

The nonpartisan Center on Budget and Policy Priorities gave the most digestible breakdown of the TCJA effects, if it passes the Senate as well:

· Giving the biggest benefits to the wealthy. Households with incomes in the top 5 percent, who have incomes over around $320,000, would receive roughly half of the benefits of extending the expiring tax cuts.

· Ballooning the deficit. Along with the 2001 and 2003 tax cuts enacted under President Bush, the 2017 law has severely eroded our nation’s revenue base. The House budget would compound the damage, adding hundreds of billions of dollars to deficits each year. Extending the 2017 tax cuts would cost $3.6 trillion through 2034.

· Failing to significantly boost economic growth, workers’ earnings, or other benefits for workers. The trickle-down benefits that proponents claimed the 2017 law would produce never materialized, and the law hasn’t come close to paying for itself. Yet the House budget claims that extending the tax cuts would generate trillions in revenue — far more than any independent estimate.

Our ranking of the worst income inequality among developed countries is bound to influence U.S. voters once the Trump’s higher import taxes take hold as well, and stagflation returns.

Even worse is the effect the BBB will have to our credit rating. Will it continue to decline? That is really what Paul Krugman is most worried about. It’s the worst kind of fiscal responsibility. Why such a blatant and foolish attempt to make the rich richer and working Americans poorer? Republicans aren’t even attempting to hide it anymore.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

What's the Fed Saying?

 The Mortgage Corner

“In considering the outlook for monetary policy, participants agreed that with economic growth and the labor market still solid and current monetary policy moderately restrictive, the committee was well positioned to wait for more clarity on the outlooks for inflation and economic activity.” FOMC

Photo: Andrew Harnik/Getty Images MarketWatch

The Federal Reserve’s release of its minutes from the last FOMC meeting didn’t have much to say about the continuing tariff wars, because nothing has yet been negotiated—just some retaliatory pauses and a written understanding with the UK.

And it may take a while—could be months and years before actual trade agreements are agreed upon as they must pass congressional approval as well. The NAFTA North American Free Trade Agreement wasn’t agreed upon until 1992, though negotiations began in the late 1980s.

That puts the Fed in a very difficult position. We now know why President Trump has attempted to disguise the fact that it is an import tax. The Court of International Trade has ruled that Trump’s retaliatory tariffs are illegal.

The trade court ruled for a group of small businesses and Democratic-led states in finding that Trump tried to get around congressional approval by invoking a 1977 law that doesn’t mention tariffs.

It’s a separation of powers issue that will be fought in the courts, and may take some time, in other words.

Hence Chairman Powell’s concern that a recession may be on the horizon. “The staff viewed the possibility that the economy would enter a recession to be almost as likely as the baseline forecast.”

Why? Because higher taxes generally cause higher inflation, which trump denies will happen (it was a campaign promise), and Powell, et.al., have worked hard to get inflation down to its current level.

BEA.gov

So it was good news that the just released Employment Cost Index rose just 2.1 percent in April; the core rate up 2.6 percent without auto and gas prices figured in. But the personal savings rate (black line in BEA graph) has been rising steadily, is up to 4.9 percent from its December low of 3.8 percent, which is a sign that consumers are becoming more cautious.

We already have a decline in two of the four major components that have determined past recessions: declining employment and flat industrial production because the tariff wars are slowing supply chains. The unemployment rate has risen from 3.6 percent in 2022 to 4.2 percent in April and long-term jobless compensation claims have been steadily rising.

The two other main indicators of a recession are consumer spending that has slowed to 1.2 percent from its usual 3-4 percent annual growth, and GDP growth that went negative -0.2 percent in Q1 for the first time since the COVID-19 pandemic.

So we could already be in a recession, and the tariff wars will certainly cause even more uncertainty.

The real problem is that Trump is trying to get around the legal process with what he asserts are emergency powers to stem the flow of fentanyl and lower the trade imbalances. Only Congress has the power to tax, not the Executive Branch, unless there’s a real emergency. Historical trade imbalances and fentanyl imports aren’t considered national emergencies that require making enemies of our closest allies.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Consumers Not Very Confident

 Financial FAQs

“Consumer confidence improved in May after five consecutive months of decline,” said Stephanie Guichard, Senior Economist, Global Indicators at The Conference Board. “The rebound was already visible before the May 12 US-China trade deal but gained momentum afterwards.”

Conference Board

The rebound in the Conference Board’s Consumer Confidence Index after its five-month plunge reflects how important China is in providing consumer products, and world trade. It also says consumers will have a very bumpy ride in trying to anticipate what lies ahead.

Why not? Trump has made it clear that the China pause in tariff negotiations is only temporary and that some form of higher import taxes on their products is coming. Trump’s ‘shock and awe’ negotiation tactics will eventually slow foreign trade and encourage higher inflation; just not when it will happen.

So what should consumers and investors do? Economic activity will fluctuate as well—buy the lows (i.e., discounts) and hold onto savings when prices jump. It’s what we all did during past stagflationary times.

Yes, it’s further confirmation that stagflation is on the way with more wild market activity as the public and investors attempt to anticipate what Trump will do next. This is probably why survey consumers still believe a recession could happen.

The Conference Board’s Present Situation Index—based on consumers’ assessment of current business and labor market conditions—rose 4.8 points to 135.9. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—surged 17.4 points to 72.8, but remained below the threshold of 80, which typically signals a recession ahead.

The above graph is telling us that confidence is down to the level that last prevailed in 2020 during the COVID-19 pandemic. What was happening then? Almost no foreign trade because supply chains had been shut down from the pandemic and took years to restore.

President Trump is unfortunately causing the same supply disruptions as happened during the pandemic with his shock and awe tactics. Pandemic shutdowns were the major cause of the soaring inflation at the time (Not Biden’s New Deal legislation).

And it’s happening again. California’s Long Beach and San Pedro ports handle most west coast imports and have reported a 45 percent decline in activity while importers wait to learn what Trump may do next.

It’s the unfortunate consequence of One-man rule. Trump is deciding what the tariff rules are, not Congress. Republicans in this case have given him the power, even though he has been exhibiting increasingly erratic behavior.

Are Republicans choosing to ignore what the public may already be seeing? Is there already a coverup, an attempt to hide his declining mental acuity, as Republicans have accused President Biden’s White House of doing?

Let’s hope it doesn’t lead to another recession.

Harlan Green © 2025

Follow Harlan on Twitter: https://twitter.com/HarlanGreen

Why Harvard?

 Answering Kennedy’s Call

“But the Trumpist effort to destroy Harvard and other elite universities — for that is clearly their intention — will do vast damage to our nation’s future.” Paul Krugman

           FREDERIC J. BROWN/AFP/Getty Images)

Huffington Post

The dumbing down of the Republican party has a history long before I began to write about it in The Huffington Post. The attempt to dumb down Harvard University that Paul Krugman is talking about, by wanting to control even its curriculum and course content, is the latest attempt to bring down our educational system to the Republican Party’s dismal intellectual level.

When one political party needs ignorance to keep its followers in compliance, believing whatever the party hacks want its followers to believe, its messages will be based on conspiracy theories, rumors, or made up fictions, as Trump does with his accusations that Harvard has anti-Semitic policies.

His habitual lying hides the unpleasant truth that he just wants to pick the wallets of his followers. It’s why the poorest Americans live in Republican-controlled red states.

I first witnessed it in 2015 during the CNN Republican candidate debate that seemed to be a prolonged campaign to discount almost all scientific facts, as well as intelligent discussion of the most important issues of the day.

Especially scary was Donald Trump saying if we build up our military enough, we won't have to negotiate with anybody. Or Marco Rubio, the seemingly most moderate Republican, endorsing a 1,900 mile fence along our entire border with Mexico (or double fence, says Dr. Ben Carson) over mountains and rivers, or Carli Fiorina saying that Planned Parenthood was aborting live babies to harvest their organs.

But the anti-intellectual, anti-science bias goes much further and deeper. It is in fact an almost totally American phenomenon that Republicans have taken advantage of in an attempt to dumb down the electorate to levels that would even deny evolution.

Why would anyone not want to support public education, when it educates more than 80 percent of our students? The result is that higher education is also falling behind.

According to the National Research Council, only 28 percent of high school science teachers consistently follow the National Research Council guidelines on teaching evolution, and 13 percent of those teachers explicitly advocate creationism or "intelligent design," said Psychology Today in a very damning 2014 article entitled, Anti-Intellectualism and the Dumbing Down of America:

"After leading the world for decades in 25-34 year olds with university degrees, the U.S. is now in 12th place," said Psychology Today. "The World Economic Forum ranked the U.S. at 52nd among 139 nations in the quality of its university math and science instruction in 2010. Nearly 50 percent of all graduate students in the sciences in the U.S. are foreigners, most of whom are returning to their home countries"

What else was debated in 2015, before Trump won his first term in the White House? Republican candidates were echoing the Republican platform that advocated the deportation of all illegal aliens, would abolish or cripple whole government agencies (including the Environmental Protection Agency), shut down the federal government over Planned Parenthood funding, and maintain that a fertilized egg is a viable human being that can't be aborted.

I reported then (in 2015) journalist Chris Hedges said in a PBS interview that President Clinton in co opting moderate Republican positions, such as deregulation of the financial industry, putting 100,000 more cops on the street, and 'reforming' welfare, had driven the Republican Party to "insanity".

That’s as good a description of what Trump’s MAGA Republicans are attempting to do again. Isn’t it the perfect definition of insanity—doing the same things over and over again, expecting different results?

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Manufacturing Not the Problem

 Popular Economics Weekly

“In April, U.S. manufacturing activity slipped marginally further into contraction after expanding only marginally in February. Demand and output weakened while input strengthened further, conditions that are not considered positive for economic growth.” ISM Manufacturing

FREDIndustrialproduction

U.S. industrial production has stalled. Manufacturers are producing more than they can sell (higher input vs. output/demand). Unable to export the excess production, the Federal Reserve’s measure of industrial production showed seven months of zero or negative growth since last April.

What does that tell us? That manufacturing is no longer as important to our economy. We are now a mostly consumer-driven society that shops until we drop (and savings are exhausted), do lots of leisure things like travel and services that cater to us, such as healthcare, education, professional services (lawyers, doctors, engineers, etc.) construction, transportation and warehousing, and financial services.

But we also develop and export lots of software; information technologies, AI, ChatGPT and the like. This is all part of the service sector that really drives our economy. So, when President Trump says we need to bring back manufacturing, there’s not much manufacturing to bring back that would improve growth.

Also, we don’t have enough workers to fill the manufacturing jobs we have now. NyTimes’ David Brooks in an excellent Op-ed piece on our manufacturing history, said manufacturers can’t find enough workers today. There are almost 500,000 vacancies in manufacturing jobs. Trump is leading us down a blind path that only benefits him and Republicans, in other words.

This is while the service sector is still growing and will continue to grow even with more tariff threats if consumers will keep spending. The financial markets are more uncertain about future growth with higher tariffs because it means higher interest rates. We shouldn’t forget that former Fed Chair Alan Greenspan’s “irrational exuberance” speech warning that the financial markets were oversold, was four years before the Dot-com bubble burst and a recession ensued in 2000.

The Institute of Supply Management’s report on the service sector remains optimistic. “Economic activity in the services sector expanded for the 10th consecutive month in April, say the nation's purchasing and supply executives in the latest Services ISM^® Report On Business^®. The Services PMI^® registered 51.6 percent, indicating expansion for the 56th time in 59 months since recovery from the coronavirus pandemic-induced recession began in June 2020.”

The take from this news is that Trump will make up any story to justify higher tariffs. He is thereby raising import taxes on the one hand for consumers and Main Street because we import so much, while cutting taxes for the wealthiest with the other hand via renewal of his tax cut bill that will cost more than $3trillion, according to government watchdog agencies.

Add the Medicaid and benefit cuts to the tariff costs, while firing those workers that run social security, Medicare; services that benefit all of us; and we can see the huge transfer of wealth to the oligarchs that Republicans’ budget deficits are engineering.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

No Art of the Deal?

 Financial FAQs

“It’s 100 days into the Trump Presidency and looking more and more like President Trump is no more effective at running the country than his business interests. His book, The Art of the Deal was meant to tout his negotiating skills, but the results were never very successful.” 2017

Huffington Post

I wrote this Huffington Post piece in April 2017 after President Trump’s first 100 days in office, and nothing has changed in Trump 2.0. There was no significant legislation then and nothing has been accomplished in 2025 to date, other the Trump’s initiation of a worldwide tariff war, while Republicans are attempting to renew the Tax Cuts and Jobs Act (TCJA) that was his sole accomplishment in Trump 1.0.

Why? Because Trump’s negotiating skills have been overblown, as evidenced by his countless business failures and multiple bankruptcies. But he has been able to disguise his weaknesses, such as his inability to stay focused his need for attention, thanks in large part to his first biographer, Tony Schwartz, in Trump: The Art of the Deal, who created the myth that he was a skilled wheeler-dealer.

But it wasn’t real, Schwartz said later to New Yorker Magazine’s Jane Mayer in a famous 2016 interview.

“I put lipstick on a pig,” he said. “I feel a deep sense of remorse that I contributed to presenting Trump in a way that brought him wider attention and made him more appealing than he is.” He went on, “I genuinely believe that if Trump wins and gets the nuclear codes there is an excellent possibility it will lead to the end of civilization.”

Trump with all his weaknesses—his lies, self-aggrandizement, and short attention span—is now getting a second attempt to destroy the U.S. economy.

Renewing the TCJA, even though Moody’s downgraded U.S. Treasury debt to Aaa because the renewal won’t pay for itself, is endangering the “full faith and credit” of the U.S. Government.

The Penn Wharton Business School model predicts it would add at least $4.5 trillion to the federal debt. Cuts to Medicaid, food stamps and clean energy programs would save $1.6 trillion. But this is more than offset by the incomes of the wealthiest 1 percent and 0.1 percent.

The result is that today we have a wanna-be autocrat in charge of an economy “that creates an environment in which corruption and bribery are necessary to gain access to the ruler and either win his favor or avoid his wrath,” writes Barron’s columnist Lewis Braham.

Sound familiar with Trump’s Meme-coin investments and solicitation of $billlions from Middle east potentates?

There is a tremendous amount of research on the decline of sustainable economic growth in autocratic regimes. MIT economist Daren Acemoglo won his Nobel Prize for researching the superior growth of “inclusive” (more democratic) vs. autocratic (exploitive) governments.

“The good news is that democracy can be rebuilt and made more robust,” says Professor Acemoglo.

“The process must start by focusing on shared prosperity and citizen voice, which means reducing the role of big money in politics...The task of remaking democracy thus falls to center-left forces. If Trump’s victory serves as a wake-up call for the Democrats, then he may have inadvertently set in motion a rejuvenation of American democracy.”

In fact, we have little choice but to rebuild our democracy if we want to preserve the most basic freedoms it’s taken centuries to win.

Harlan Green © 2025

Follow Harlan on Twitter: https://twitter.com/HarlanGreen

Wh Needs a Tax Cut?

 Popular Economics Weekly

“A bill that cuts federal income taxes for middle-class families makes absolutely no sense, except as a sad way of camouflaging the real intent of the bill: Giving millions of dollars to the very wealthy, who happen to be the only people who are really benefiting from our uneven economic growth,” Rex Nutting

Huffington Post

I wrote this Huffington Post piece in 2017 during President Trump’s first term when he passed the Tax Cuts and Jobs Act (TCJA) that is set to expire but is being renewed if Republicans succeed in passing their new fiscal budget.

But in seeking to repeat Trump’s first term, Trump and his Republicans are regressing to an economic model that existed more than 100 years ago, and that is completely out of touch with the modern world.

His tax cut helped very few income earners, i.e., ordinary working folk. MarketWatch economist Rex Nutting calculated that those in the 60 percent middle-income brackets—from $32,000 to $140,000 per year—pay just an average 2.5 percent in income taxes. It’s only the richest 0.1 to 1 percent income earners that pay more and therefore want the huge tax cuts Congress and the Trump administration are proposing.

The TCJA renewal in 2025 will add at least $3 trillion to our federal debt in the next 10 years, according to the Congressional Budget Office, and raise our federal debt from 120 percent to as much as 130 to 150 percent of GDP because Republicans have no mechanism to pay for it, except higher import taxes from the tariffs and cuts to health care services such as Medicaid.

Hence the just announced sovereign debt downgrade of Moody’s AAA to Aaa, the last debt rating agency that held a AAA rating on U.S. Treasury debt, which will raise the cost of U.S, Treasury securities.

The tariff war that Trump illegally initiated with the dubious rationale that it will bring back a bygone era of manufacturing (Congress has the power to regulate tariffs during wartime emergencies but they have since allowed presidents to enact them during peacetime), will cause another period of stagflation as happened in the 1970s that took 10 years and double-digit interest rates to cure.

How soon voters and investors have forgotten what stagflation was like! The Federal Reserve under Chairman Paul Volcker raised its Fed Funds rate to 20 percent in the 1980s because inflation had risen to 14 percent rate and resulted in two back-to-back recessions under President Reagan.

“Top this off with another record for corporate profits, up 7.4 percent in a year, and there is no reason to be cutting their taxes,” I said in 2017. “They haven’t been using their profits for productive purposes, so what’s needed is for them to pay higher taxes so government can use that money to invest productively in the $2 trillion plus in outmoded infrastructure that badly needs replacement,”

And that’s precisely what the Biden administration did, pass bipartisan legislation that invested $2 trillion in the Infrastructure, CHIPs and Science, and Inflation Acts to modernize the U.S. economy.

Yet voters re-elected a man in Trump 2.0 that is returning the budget and tax cut debate to an earlier historical period. President Trump is now touting the need for another Gilded Age that prevailed in 1900 when tariffs protected fledgling industries.

Tariffs became less important with the introduction of income taxes in 1913 to support government services, and the trend since then has been downward to the very low rates that prevailed until now.

Then why have so many Americans re-elected someone who is only interested in reducing taxes to enrich himself and his Oligarchs; who has shown an almost total ignorance of basic economics (in maintaining a tariff isn’t an import tax) with a history of countless business failures, and that is causing investors to flee the US economy and impoverish the rest of us?

Will it take another recession to convince voters once again that One-man rule doesn’t work if Americans still want to live and prosper in a democracy?

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Consumers Are Unhappy

 Financial FAQs

“Consumer confidence declined for a fifth consecutive month in April, falling to levels not seen since the onset of the COVID pandemic,” said Stephanie Guichard, Senior Economist, Global Indicators at The Conference Board. “The decline was largely driven by consumers’ expectations. The three expectation components—business conditions, employment prospects, and future income—all deteriorated sharply, reflecting pervasive pessimism about the future.”

The University of Michigan’s Sentiment Survey Index has also declined for five consecutive months, from 74 to 50.8. It’s mainly about the growing inflation fears.

“Year-ahead inflation expectations surged from 6.5% last month to 7.3% this month. This month’s rise was seen among Democrats and Republicans alike. Long-run inflation expectations lifted from 4.4% in April to 4.6% in May, reflecting a particularly large monthly jump among Republicans.” Survey Director Joanne Hsu.

Why so much doom and gloom in surveys while consumers are still fully employed? Consumers don’t like uncertainty any more than businesses. and their lack of confidence could have an even larger impact on economic growth than uncertainty in the financial markets.

Consumer activity drives two-thirds of economic growth, and a recession begins when a majority begin to save more than they spend for a prolonged period. There are many ways to measure this, such as a growing cutback in retail sales.

Retail sales rose just 0.1% in April. That’s a big comedown from a 1.7% spike in March that marked the biggest increase in more than two years because consumers bought ahead of the April 2 tariff announcements that imports from all 180 countries in the world would be taxed at least 10 percent.

FREDretailsales

Retail sales account for one-third of consumer spending and and shoppers have been hunting for more bargains. Sales have declined in three of the past 13 months as portrayed in the FRED graph and were flat another three months, but are still 4.7 percent higher in a year.

Motor vehicle and parts dealers were up 9.4 percent (±1.8 percent) from last year because consumers knew that motor vehicle import taxes (i.e., tariffs) of at least 25 percent had already been announced, while food service and drinking places were up 7.8 percent (±1.8 percent) from April 2024.

The Conference Board’s Index of Leading Economic Indicators (LEI), another growth indicator that attempts to predict future growth, showed more weakness.

“The US LEI for March pointed to slowing economic activity ahead,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board. “March’s decline was concentrated among three components that weakened amid soaring economic uncertainty ahead of pending tariff announcements: 1) consumer expectations dropped further, 2) stock prices recorded their largest monthly decline since September 2022, and 3) new orders in manufacturing softened.

Manufacturing will be hardest hit, because Trump’s tariffs will bring higher inflation and interest rates, which especially hurts manufacturers because they need to borrow lots of money to build their factories. The LEI survey reported new manufacturing orders were already softening.

This will defeat what he says is the main reason for tariffs—bringing manufacturers home—as will the immigration crackdown, which reduces the working age population at a time of worker shortage. The Manufacturing Institute and Deloitte accounting firm have projected that manufacturing will need an additional 3.8 million workers by 2033. Where will they come from?

In fact, this tells us it’s not the real reason for his tariffs, since he is more concerned about cutting taxes and federal spending that would also disincentivize more domestic manufacturing investment.

No, it looks like Trump’s chaotic tariff war will create bottlenecks last seen during the COVID-19 pandemic or worse, unless he relents.

We know what those supply interruptions did to economic growth during the pandemic and why it took the succeeding Biden administration four years to fix with its bipartisan New, New Deal legislation.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Trump's Manufacturing Scam

 Financial FAQs

“Why? It’s not like we’re a small country or full of stupid people. No, it’s the takeover of the economists and bankers. Simply put, modern American law is oriented towards ensuring very high returns on capital to benefit Wall Street and hinder the ability to make things.” Matt Stoller, American Economic Liberties Project

CBPP.org

Matt Stoller’s cry is a sign that even Libertarians are alarmed at Donald Trump and the Republicans’ scheme to grow the manufacturing sector. It’s another scam that enables them to turn the economic clock back to the 19^th century, the Gilded Age of Robber Barons and rampant corruption and downsize government while ignoring modern laws and even the constitution.

Trump is doing it by raising tariff rates to a level not seen since 1930 at the onset of the Great Depression. But it won’t bring back a manufacturing industry that was lost to a globalized economy over the past 30 years.

The Manufacturing Institute and Deloitte accounting firm have projected that manufacturing will need an additional 3.8 million workers by 2033, in part due to the Biden administration’s $2 trillion worth of projects already invested by the Infrastructure, CHIPs and Science, and Inflation Reduction Acts, according to a recent NPR report.

And the Trump administration’s goal of deporting millions of undocumented workers as well as eliminating DEI programs that develop more skilled minorities will defeat his purpose by hollowing out the required workforce.

Early 19^th century was a time of few laws to protect working folk, and there was no income tax until 1913 when Teddy Roosevelt’s Progressive era began to level the income playing field for workers. Oligarchs had to pay income taxes for the first time.

It was Ronald Reagan and the Business Roundtable of corporate CEOs that began the “takeover of the economists and bankers” that moved whole industries overseas while reducing their income taxes—from a maximum personal tax rate as high as 92 percent in President Eisenhower’s time—transferring $trillions that once went to the 80 percent of Americans earning salaries to the oligarchs that owned the capital and became “rentiers”; i.e., living off the capital created by their workers.

Trump wants a return to the era because it’s how he made his money. Who better than a convicted felon, a “liar and cheat” his whole life in the words of his erstwhile attorney Michael Cohen, to con Americans into believing that a tariff war against the whole world is the best way to bring back our manufacturing industry that has already migrated to Southeast Asia and China?

He has rationalized the economic chaos his tax war is creating with the promised goal of returning to an earlier era when we were a manufacturing superpower. But workers had fewer rights and benefits until Roosevelt’s New Deal.

Are we to believe it justifies more tax cuts for himself and his oligarchs that will grow our record federal debt ever higher, endangering the “full faith and credit” of the U.S. Government, as well as creating another era of stagflation with possible double-digit inflation and interest rates as happened in the 1970s?

Trump is attempting to recreate a time (1900) when we invaded and occupied Cuba and the Philippines. The reason for his nonsensical pronouncements that Canada should become our 51^st state and Greenland a U.S. territory now begin to make sense.

Democrats do have an answer to the huge wealth gap between blue states and red states that might bring US back to present times. Start with small steps such as lobbying to raise the national minimum wage, currently $7.25 per hour to what it is today when inflation adjusted—$10.50/hour. That is already the case in 30 of the mostly blue states, where the minimum wage has risen above $15 per hour.

It will be a terrific struggle that will take time. President Trump and Republicans have erected such a wall of ignorance to protect his administration—officials of such incompetence that they lack the ability to even think for themselves that they will obey his commands without question and even anticipate them beforehand (Pete Hegseth, et. al.).

We aren’t a country of stupid people that can’t see the erosion of rights and civil liberties the Trump administration is justifying that enacts a return to an earlier century. The mass protests and demonstrations against Trump and Musk’s chainsaw tactics are proving it.

It’s a good time to return the Democratic Party to the party that has always supported greater equality for wage-earners and farmers. That is the best way Democrats can block Trump’s impossible time travel back to an earlier century that no longer exists.

Harlan Green © 2025

Follow Harlan on Twitter: https://twitter.com/HarlanGreen

Stopping the Steal

 Popular Economics Weekly

“We were losing hundreds of billions of dollars with China. Now we’re essentially not doing business with China. Therefore, we’re saving hundreds of billions of dollars. Very simple.” Donald Trump

NYTimes

Why would Trump mouth such an obviously stupid statement, other than to maintain the lie to his MAGA base that tariffs are not import taxes?

The above Donald Trump quote during his Sunday “Meet the Press” interview with NBC’s Kristin Welker is alarming for too many reasons. It indicates Trump is living in a surreal world, ignoring the warnings from small businesses, and even the U.S. Chamber of Commerce, that are literally terrified over the damage that his tariff war is already causing.

“Stopping the Steal” was an HBO documentary that described the January 6 uprising and Donald Trump’s attempt to overturn Joe Biden’s election. But the title is also a good description of Donald Trump’s attempt to justify his poorly though out tariff war on all 180 countries in the world that he maintains have been stealing from Americans and deserve the chaos it is causing.

It must be exhausting, having to maintain such falsehoods every time he makes public statements, especially economic untruths that are threatening to wreck the U.S. economy.

Bloomberg reports that because there are no agreements with anyone in the first 100 days, trade flows are shifting away from America. Canadian exports to the US tumbled while shipments to other countries soared. The Trump administration’s duties on Canadian steel, aluminum, autos and other products, as well as Canada’s retaliatory levies on a range of American goods, led to a large pullback in activity between Canada and its largest trading partner in March.

Canadian exports to the US plunged 6.6%, the biggest drop since the pandemic, while imports fell 2.9%. Canada’s exports to countries other than the US jumped 24.8%, however, almost entirely offsetting the decline in shipments to the U.S.

Most worrisome of all, Trump is becoming more incoherent in his speeches and interviews. He also claimed on Sunday, he did not know that as President he swore to defend the U.S. Constitution “from all enemies, foreign and domestic.”

Some of his pronouncements could be an act but it is an act that will cause sky-high inflation and the empty shelves that we have not seen since the COVID-19 supply shortages.

Why the lies? Mental health experts have said many of Trump’s actions are designed to create the chaos he needs to control his surroundings. He created a cabinet in his second term as dysfunctional and subservient as that of his family and real estate business.

Mary Trump, his niece and a Clinical Psychologist, wrote a book about her uncle. There is no understanding Donald Trump without understanding his “malignantly dysfunctional family”, according to Mary, in a 2020 Guardian interview with David Smith about her best-seller,  Too Much and Never Enough: How My Family Created the World’s Most Dangerous Man.

It was a family patterned after Trump’s father, Fred, Sr., that was “a nightmare of traumas, destructive relationships and a tragic combination of neglect and abuse” that Donald Trump grew up in, said Mary Trump.

She also told The Current guest host Mark Kelley it has resulted along with being "fairly unstable and easily manipulated," the president's ability to "destroy alliances, rip up treaties and be in control of an enormous nuclear arsenal" has made him a "very dangerous" leader.

Paul Krugman, who won his Nobel Prize for original research on foreign trade, has said, “The best bet, then, is that the trade war will proceed, even intensify. There will be some winners, at least in terms of global influence, including China, which gains from America’s loss of credibility, and the European Union, which unlike Trump’s America can be trusted to honor its agreements. The United States will be a big loser, both politically and economically.”

So the question Americans must answer if we are to save our economy, how much longer are we willing to live in such chaos?

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen