On the menu today: If American consumer spending is still robust, despite widespread economic pessimism, is that a good sign for the economy or a sign that Americans are trying to maintain a quality of life during a really bad and lingering spike in oil prices? Read on.
Our Economic Uncertainty
The brilliant Noah Rothman — go buy his book, or even better, get a subscription to NRPlus and get a signed copy! — looks at polling data and economic data and observes a persisting disparity.
“Most indicators suggest that Americans were prepared to pare back their discretionary spending in advance of what they expect will be hard times to come. So far, however, those indicators have not given way to the kind of belt-tightening one might expect,” Noah writes. He points out that earnings reports at Uber, Disney, CVS, and McDonald’s all indicate that consumers are still going out and spending. “If American consumers do anticipate hardship, they’re not yet acting like it.”
But there are different kinds of spending, and I suspect that a significant portion of the increased spending we’re seeing is being driven by consumers’ expenses on their credit cards. We only have data updated to December, but those numbers indicate that Americans are paying for more and more with their Mastercards and Visas:
Americans’ total credit card balance is $1.277 trillion as of the fourth quarter of 2025, according to the latest consumer debt data from the Federal Reserve Bank of New York. That’s up from $1.233 trillion in Q3 2025 and is the highest balance since the New York Fed began tracking this data in 1999.
With this quarter’s increase, credit card balances have risen by $507 billion since Q1 2021, when credit card debt bottomed out at $770 billion during the pandemic. That’s a 66% increase in nearly five years. Americans’ credit card debt is $350 billion higher than the pre-pandemic record set in Q4 2019, when balances stood at $927 billion. (That’s a 38 percent increase.)
Keep in mind, the fourth quarter of the year includes the Christmas holidays, and most people increase their credit card debt while buying presents and traveling. So, some of this is a seasonal effect . . . but it’s not all a seasonal effect.
While touting the healthy jobs picture for the rest of the year, President Trump’ s director of the National Economic Council, our old friend Kevin Hassett, told Fox Business’s Maria Bartiromo Wednesday:
I had the head of one of the big five banks in my office yesterday going through the credit card data. And just as Secretary [Scott] Bessent said, credit card spending is through the roof. They’re spending more on gasoline, but they’re spending more on everything else, too. And so in terms of the jobs picture for the rest of the year, it’s really hard to see having the unemployment rate go up, for example. It’s probably going to drop a little bit, but it’s already very close to full employment.
Is credit card spending being “through the roof” good news? I suppose if you’re a credit card company. And yes, every company that relies on consumer spending would prefer that American households keep splurging rather than trying to cut back. But is that good news for an administration and its aligned slim congressional majorities who were elected to deal with frustration with the high cost of living?
Keep in mind, the average credit card interest rate in the U.S. as of April is 23.75 percent. Your debt can run up awfully high, awfully fast, if you don’t get into the habit of paying down what you owe each month.
In March, The Century Foundation and Protect Borrowers published an analysis concluding that “roughly 111 million people — half of all Americans with a credit card and over 40 percent of all U.S. adults — are unable to pay off their credit card bills each month. . . . More than 27 million Americans — over one in nine cardholders, and nearly a quarter of those unable to pay off their full balance each month — cannot afford to pay more than the minimum payment due.”
That is . . . not great.
With more reliance on credit cards, Americans aren’t putting much into savings. The personal savings rate in March (the most recent month available) is 3.6 percent. That’s not an all-time low, but that’s pretty darn low by historical patterns. Other than occasional savings blips and a very brief big surge during Covid-19, when Americans couldn’t spend their money normally, the personal savings rate of Americans has bounced between 5 and 10 percent since the 1980s.
The combination of higher credit card balances and less money put into savings would explain why people are still spending money at high rates and company earnings are up, while polling still shows widespread economic pessimism.
A few other economic factors that are probably under-discussed. . . .
Inflation: An inflation rate of 3.3 percent, like in March, is considerably better than the worst of the bad old days under Joe Biden, but it still doesn’t count as driving a stake into the heart of the problems driven by high inflation. Last October, the Wall Street Journal editorial page warned the Trump administration about the dangers of tacitly accepting a 3 percent inflation rate as the new normal.
At 2 percent annual inflation, the purchasing power of $1,000 shrinks to roughly $820 after ten years — meaning you’d need about $1,219 to buy what $1,000 buys today. At 3 percent inflation, that same $1,000 in today’s purchasing power would require about $1,344 to match in ten years, leaving your original $1,000 worth only around $744. That single percentage point difference results in approximately $125 more needed per $1,000 of spending.
I think when the year-to-year inflation rate is consistently closer to 2 percent than 3 percent, Americans will feel like inflation isn’t a major problem anymore. We aren’t there yet, and we may not get there for a while, because of. . . .
Gas Prices: This economic problem is obvious, but I don’t think the scale of the problem is fully appreciated. Earlier this week, the Financial Times reported that the world oil markets have lost 1 billion barrels of oil that they ordinarily would have received if the war against Iran had not disrupted shipping through the Strait of Hormuz. Global oil reserves are at their lowest levels in eight years; Goldman Sachs calculates that there are only 45 days’ supply of refined products — such as gasoline, diesel, and jet fuel — left worldwide, noting particularly large declines across Asia and Africa.
Yes, the U.S. produces a lot of oil, refines a lot of oil into gasoline, and exports a lot of oil. But oil is still traded on a global market; the U.S. is somewhat insulated from price increases on the global market, but not entirely.
Believe it or not, Americans have it pretty good when it comes to gasoline prices during the current spike. South Korea’s gasoline is priced at $1.52 per liter — about $5.75 per gallon, and this is with emergency measures including a maximum price cap due to the crisis. Gasoline in France is currently priced at $2.35 per liter — which works out to roughly $8.89 per gallon. Keep in mind that France, like most of Western Europe, taxes fuel very heavily. And Israel sits near the top of the Asian price list at approximately $2.83 per liter — roughly $10.71 per gallon. When global prices go even higher, our prices are likely to go higher.
Our current American political discourse includes a lot of talk about “$4 per gallon gas,” but judging from the national average at both AAA and the U.S. Energy Information Administration, we really should be talking about a national average of $4.50 per gallon gas, and we’re headed toward the summer driving season, where demand gets higher.
A recent study on the effect of the surge in gas prices this year by the Federal Reserve Bank of New York concluded, “Higher-income households have reduced real gas consumption only modestly and increased gasoline spending considerably compared with 2023. In contrast, lower-income households increased spending by much less and decreased real consumption by much more, potentially by carpooling or substituting to public transit where available.”
Tariffs: The situation with America’s tariffs seems to change every five minutes; yesterday “a three-judge panel of the U.S. Court of International Trade held that the president’s order imposing a 10 percent global tariff under Section 122 of a 1974 trade law was unlawful.”
The best updated list that I can find is here.
Our Dan McLaughlin did one of his trademark detailed deep dives into the tariffs and how Americans feel about them and concludes that no matter what you think of the tariffs, the price increases on imported goods is immediate and visible, and the benefits of greater domestic production are slower and harder to see:
With high tariffs, the pain is immediate and visible: The president is trying to raise prices, and when prices seem too high, he’s the obvious guy to blame. Even voters who aren’t specifically angry about tariffs aren’t sold that they are producing great economic benefits to make the interlude of higher prices justifiable. Even voters who don’t think that tariffs are the problem are still grumbling that the president seems to have the wrong priorities, when huge numbers of them want him laser-focused on the cost of living.
Repaying student loans: I am fully supportive of requiring people to pay back money they borrowed. But we should not be surprised that reinstating the requirement that people pay back their student loans, after a long hiatus, would lead to people feeling more pessimistic about the economy.
In March 2020, the U.S. Department of Education initiated temporary relief for federal student loans by suspending loan payments, stopping collections on defaulted loans, and reducing interest rates to 0 percent. That temporary relief lasted three and a half years. At the time payments resumed, roughly 43 to 45 million Americans held federal student loans and were affected by the repayment restart. The total outstanding debt was approximately $1.6–1.7 trillion.
Congress mandated that student and parent borrowers begin to repay their student loans in October 2023, but the Biden administration refused to lift the collections pause. The Trump administration did restart collections in May 2025 . . . and then in January 2026, the administration backtracked.
As of March, the average monthly student loan payment is approximately $434 based on the average student debt. A bunch of Americans got used to not having to make those payments, and knowing that if they missed some payments, the U.S. government wasn’t going to take much action to collect that debt. It is not surprising that the end of a nearly four-year vacation from monthly payments would make these Americans more pessimistic about the economy and their economic circumstances.
ADDENDUM: I try not to pay too much attention to those guys at The Bulwark, in part because their work often reflects the modern media incentives to write and say the most outrageous and outlandish statement possible and bask in the traffic and attention. And I realize that by even noticing it, much less making a quick comment about it at the end of this newsletter, I’m feeding the beast.
But Jonathan Last writes that he believes that Grähäm Plätnër, the all-but-certain Democratic Senate candidate in Maine this year, has a one-in-three chance of being the Democratic presidential nominee in 2028.
No, really. Today, Maine; tomorrow, the World!