Will Consumers Recover?

Financial FAQs

“Retail trade sales were up 0.6 percent (±0.5 percent) from October 2025, and up 3.1 percent (±0.5 percent) from last year. Nonstore retailers were up 7.2 percent (±1.2 percent) from last year, while food service and drinking places were up 4.9 percent (±1.8 percent) from November 2024.” US Census Bureau

FREDretailsales

Retail sales were choppy in 2025, to say the least. Even the slight uptick in November after two months of contraction won’t stop President Trump’s wholesale destruction of the U.S. economy.

Sales declined or were barely positive in six of 11 months through November 2025, per the FRED graph of monthly retail sales and the future doesn’t look brighter for most Americans.

Suffering consumers and businesses have tried every which way to avoid the higher prices from Trump’s TACO tariffs (Trump Always Chickens Out) that can change on a whim and cause consumers to pull back their spending in the face of sharply rising prices caused in large part by Trump’s economic policies.

Or avoid rising insurance costs because Republicans won’t subsidize insurance premiums for some 20 million low-income Americans.

We report retail sales because it comprises approximately half of consumer spending and consumers support some two-thirds of economic growth. So consumer behavior is closely watched by economists attempting to predict the future.

But President Trump’s single-minded policy of levying import taxes on most of the world by fiat—to lower the trade gap between imports and exports which he claims is unfair—is not a good way to do business or run a country. And it continues the wholesale destruction, both at home and of our foreign alliances.

Take Trump’s return to “Drill baby drill” policies, for instance, that are not only causing Detroit automakers to lose $trillions in having to switch back to combustion engines but make more people sicker from the increased air pollution that we thought we had conquered with the EPA’s Clean Air Act.

Ford Motor has just announced a $19.5 billion charge to restructure its EV (Electronic Vehicle) and GM $7.6 trillion in losses over the past two quarters because of Trump’s war against electric vehicles, losses from higher tariff taxes on parts that go into its manufacture and removal of purchase incentives to buy EVs.

It’s hardly a surprise that many of Trump’s executive orders are ad hoc; not only meant to pay for the huge tax cuts in the Big Beautiful Tax Bill that have run up a record federal debt but to coerce our allies to pay for his empire building, such as levying 25 percent tariffs on NATO members that say they will protect Greenland from military seizure.

The question will be can consumers continue to shop in the face of so much chaos, with fewer entering the workforce? Less the half the number of jobs are being created monthly since last Fall’s government shutdown.

The Fed’s January Beige Book on the current state of our economy summed it up. Rising costs are the main elephant in the room.

“Cost pressures due to tariffs were a consistent theme across all Districts. Several contacts that initially absorbed tariff-related costs were beginning to pass them on to customers as pre-tariff inventories became depleted or as pressures to preserve margins grew more acute.”

Consumers are becoming very nervous in the face of such an unknown future, a future that depends on the actions of a man who can willfully destroy an economy to further his own interests.

Harlan Green © 2026

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

Equality Is Good For Everyone!

Answering Kennedy’s Call

“And on the tax front, it’s time for rich people like me to pay more.” Mitt Romney

Getty/Bettmann

This quote from a recent NYTimes Mitt Romney Op-ed is my Christmas message: Equal opportunity hasn’t been available to many Americans, even though it is part of the American Dream—America is the land of opportunity that is taught in schools and heard by immigrants.

Why? Because it’s a larger economic truth that not all Americans have accepted. Equality is good for everyone. It should be self-evident, a statement of common sense. The more equality of opportunity among us, the more we can better ourselves, become more productive citizens, which in turn increases our national wealth (and lowers budget deficits).

It was certainly the dream of immigrants, such as my mother, a British citizen born in Jamaica.

But there are times such as today when many Americans don’t believe it is possible, which is why we are living in another Gilded Age with the worst income inequality of the developed world. It is on a par with developing countries in Africa and has been the major cause of recessions and the Great Depression.

Many have bought the counter narrative by those that don’t like equality, such as Donald Trump and his MAGA supporters, part of the privileged few at the top of the income ladder who want us to believe they are the most qualified to create greater wealth for the rest of us.

This Gilded Age was formed like the last Gilded Age of President William McKinley, from a concentration of power among the wealthiest oligarchs. Then it was monopolies in such as the newly created railroad and oil industries.

Today, it is small government policies of Donald Trump that mirror the trickle-down economic policies of President Reagan because enough Americans believed it, believed government was the problem and cutting taxes the solution, believed that equality is not good for everyone because we live in a zero-sum world with limited resources. What is given to one must be taken from another.

The conservative position espoused by 1970s Economist Arthur Okun, for instance, was that greater equality meant less market efficiencies to produce and so fewer incentives for greater wealth, since leveling the playing field meant leveling out the opportunity for large profits.

But that has never been the case. There has always been copious evidence that the opposite is true; that overly large profits have led to diminished household wealth and breakup of communities.

One can measure inequality with such as the CIA’s World Factbook that ranks inequality among nations. Those with the greatest equality also have less violence, greater freedoms, greater health, and guaranteed vacations!

Richard Wilkinson’s TEDx lecture and book with Kate Pickett, “The Spirit Level” is one of the best studies of the dire effects of income inequality on the quality of life. The most important factor, and a sign of dire consequences when inequality has approached the level of the Great Depression, are the US violent crime and incarceration rates, which Wilkinson discusses at length.

The U.S. is by far the most violent country in the world—worse than any other developed country with the highest incarceration rates. Efforts to reverse such inequality have begun on the local levels, even if congressional conservatives have blocked raising the miniscule national minimum wage of $7.25 per hour that was last set in 2009.

It is worth just $5 per hour today whereas blue states like California and Connecticut have raised their minimum wage to $16.90 per hour in line with rising livings costs.

And there is an increasing awareness of the income disparities, such as the fact that corporate CEOs now earn more than 300 times the income of their employees, and certain hedge fund managers have reported an annual income of $1 billion.

The Center for American Progress launched the Washington Center For Equitable Growth, which aims to deepen the economic critique of inequality. It was set up by Berkeley economist Emmanuel Saez, among others, who is known with his partner Thomas Piketty as the first economists to historically research the history of income distribution over the past 100 years.

The mission statement of the Center explains why it is needed:

“New research suggests that growing inequality in the United States may have broad social and economic effects — by reducing stable demand for goods and services, dampening entrepreneurialism, undermining the inclusiveness and responsiveness of political and economic institutions, limiting access to education, and stunting individual development. Yet our understanding of how these mechanisms interact with the broader economy is limited.”

Mitt Romney’s Op-ed has voiced one of the major issues confronting Americans today—how to fix the overwhelming federal debt load that threatens the ‘full faith and credit’ of the U.S. government.

“The largest source of additional tax revenues is also probably the most compelling for the fairness and social stability. Some call it closing a tax code loophole but the term “loopholes” grossly understates their scale. “Caverns” or “caves” would be more fitting,” said Romney

Donald Trump’s flailing attempts to use higher tariffs to pay down federal debt, when it is in fact another tax on all Americans, is maybe the most important reason to follow Mitt Romney’s advice.

Taxing the wealthiest that haven’t been “paying their fair share”—including Donald Trump’s billionaire supporters, would close one of the largest loopholes that is endangering the U.S. economy, as Senator Bernie Sanders continually reminds us.

Harlan Green © 2025

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

A Different Federal Reserve

Financial FAQs

“Warsh would chart a new course that de-emphasizes the inflationary impact of factors such as supply chains and tariffs in favor of a views of inflation driven by government spending and the money supply.” Barron’s

Graph: Last Tech Age

The Federal Reserve is about to go through a regime change. Though President Trump initially appointed current Fed Chairman Jerome Powell, he hasn’t been happy with Powell’s leadership in his second presidential term because he wants easier credit conditions.

The Fed Governors had been resisting Trump’s pressure to lower interest rates until their rate cut in September, fearing the inflationary effects of Trump’s ongoing tariff wars, which have been boosting inflation.

So what does President Trump want to do? Move the goalposts, so that higher inflation is no longer the danger that the current Fed Board of Governors believe in maintaining their 2% inflation target. This is despite Trump’s promise to bring down inflation on “Day One”.

And Kevin Warsh, a bright young conservative economist who was just interviewed in Barron’s might be the next Fed President to do just that, along with other recently-appointed Fed Governors that are more Trump-friendly.

Do what? The fact that he is the husband of an Estee Lauder heiress worth $billions should tell us all we need to know. He, or someone as conservative, is being groomed as the new Fed Chair to protect great wealth.

A summary of Warsh interview in Barron’s above quote tells us how. He is following the Republican line that most inflation comes from government overspending, for which government must print money. The cure is to cut the size of government in every way rather than raise taxes to pay for it.

So they would blame President Biden and Chairman Powell for the skyrocketing inflation that happened when the Fed printed $2.9 trillion in less than three months, bought roughly $543 billion worth of debt in a week, and reduced interest rates to nearly zero, according to Powell’s Britannica bio.

It caused the Fed’s extensive intervention in the U.S. economy after the COVID-19 crisis of 2020 because consumer inflation then skyrocketed to a high of 9% so that the Fed began to raise short term rates to bring down inflation.

Republicans then made it a cause celebre even though it’s now obvious Trump never intended to bring down inflation on “Day One” or any other day.

In fact, most of the government largesse (with Republicans’ bipartisan support) was meant to be spent on the pandemic recovery and modernization of the American economy, which would take at least a decade. And it would largely pay for itself over the longer term with higher economic growth.

The result was that the American economy recovered from the pandemic faster than the rest of the world and resulted in several quarters of +3% GDP growth.

But now Trump has raised tariffs back to 1934 levels that prevailed during the Great Depression without congressional approval, per Nobel Laureate Paul Krugman, which is raising the cost of everything for ordinary Americans.

And it was a major cause of the Great Depression because it restricted the flow of goods and services from other countries that were badly needed to recover from the Great Depression, just as the COVID-19 pandemic shut down the whole world’s economy and resulted in a brief recession.

So we know what a new Federal Reserve regime will look like with Kevin Warsh, or another such conservative at its helm. Less interference in private sector business, which means combatting inflation isn’t its only priority (therefore allowing higher inflation). And a smaller government paid for with lower taxes and fewer regulations, which means slashing federal government jobs as DOGE is still doing and cutting more public services that benefit all Americans.

It is following a frighteningly similar trajectory to the economy of the 1930s, the last time tariffs were this high, that led to the Great Depression. The question will be how long Americans will tolerate the corruption and favor-seeking that goes with protecting the wealthy, before looking for another Roosevelt and a New Deal.

Harlan Green © 2025

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

What Happens Next?

 Financial FAQs

“In an interview with Fox News on Sunday, Trump refused to rule out a recession for the U.S. this year, implying his tariff strategy and attempts to cut government spending were part of a necessary transition that in the short term could cause problems for the world’s biggest economy.” MarketWatch

AtlantaFedGDPNow

I find it laughable that President Trump is now saying the ‘R’ word on a Sunday talk show, when one of his most famous campaign promises was that “Starting on day one, we will end inflation and make America affordable again, to bring down the prices of all goods.”

So the question to ask is, what happens next when and if he succeeds in enacting his agenda? We should know by now it isn’t words but his administration’s actions that will determine (or hinder) how much the economy and prices will grow (or shrink) this year.

In fact, Trump has inherited a fully employed and still growing economy. Prices and inflation can’t come down in such a situation because there is more demand (i.e., money in circulation) than goods available. It’s good old Economics 101 that is taught in business classes.

But economists do agree on what would bring prices down, a recession. Many economists and pundits have been looking at the Atlanta Fed’s estimates of first quarter GDP growth, and been seeing the possibility of the ‘R’ word.

Why? It’s mainly because consumers have been spending less since the holidays, in part because they are losing confidence that they may even have a job, or the ability to change jobs in the future. Why wouldn’t they lose confidence when “chainsaw Musk” cuts federal jobs with abandon and the newly jobless federal workers competing in the private sector?

That why first quarter growth estimates, such as the Atlanta Fed’s GDPNow estimate have fallen.

“The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2025 is -2.4 percent on March 6, up from -2.8 percent on March 3,” is their latest

That’s also why the stubbornly high inflation and interest rates are making creation of a new fiscal budget so difficult. Republicans want the tax cuts they promised to spark more spending, which is inflationary, but need Democrats to agree. Yet Democrats don’t want the cuts to social security, Medicare, and Medicaid that Trump said would never happen, but must happen for any preservation of the tax cuts enacted during Trump’s first term.

Hence there will probably be a so-called continuing resolution to keep the existing budget until end of the fiscal year in September. This will avoid a possible government shutdown, but what then?

This week’s news will be mostly about inflation, since February’s Consumer Price Index and wholesale Producer Price Index will come out that may paint a clearer inflation picture, and whether the Fed might resume cutting interest rates.

And we need not only to be talking about the prospects for higher prices from tariffs, but also the trade disruptions that tariff wars cause, because President Trump will antagonize both friend and foe in his flailing (and counterproductive) attempts to decree rather than negotiate a new foreign trade policy.

There is something seductive to many voters about a new foreign trade policy that promises to bring more jobs home. But firstly, it’s more expensive to make things in the U.S., which is why we import more than we export. And with Trump making enemies of our friends and closest allies, they will be sure to reciprocate with higher tariffs.

Trump has to know that is no way to do business from his history of bankruptcies and lawsuits. He has always chosen confrontation over cooperation to get what he wants, and the financial markets as well as consumers will soon figure this out. The only question is when, and what happens next.

Harlan Green © 2025

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