Trump Economy Defies Doomsday Predictions

Many so-called experts predicted that President Donald Trump’s economic agenda would usher in an inflationary Armageddon. This projection was so often repeated in the media that many Americans, especially Democrats, believed a depression was imminent. Yet the economy is thoroughly beating expectations and consumers’ expectations are becoming increasingly optimistic.

Upon taking office again, Trump reiterated the economic policy goals that he laid out during the campaign: reductions in excessive taxation, burdensome regulations, and government spending, coupled with increases in tariffs and energy production.

This was labeled as some kind of toxic mixture. Thus far, though, it’s been an elixir for the American economy, which was suffering from inflation and a general malaise.

Consider that when Trump took office in January, inflation (as measured by the consumer price index) was running at an annualized rate of 5.7%, at which pace prices double in less than 13 years. With Trump back at the helm, however, inflation has averaged an annualized rate of just 1.4%.

The lower inflation means people’s income isn’t being so quickly eroded by lost purchasing power. Under President Joe Biden, the average American’s weekly paycheck grew almost 20% but they bought 4% less because inflation so outpaced wage growth. Conversely, under Trump, the average weekly paycheck buys 1% more today than when he was inaugurated in January.

This is precisely the opposite of what many analysts and so-called experts predicted would happen. Of course, the same folks who said Trump’s tariffs would cause runaway inflation also said Biden’s profligate spending wouldn’t cause inflation. They’re perpetually wrong, but never in doubt.

Simultaneously, the labor market is quickly transitioning off its dependence on government and back to the productive private sector. During Biden’s tenure, job growth was disproportionately the result of increasing government payrolls and burgeoning bureaucracy—a completely unsustainable, and expensive, pattern.

But what a difference a president makes. Every month of 2025 has seen a reduction in the federal workforce as the Trump administration takes steps to make the government more efficient. Far from crashing the labor market, these public-sector layoffs have coincided with the private economy adding many more jobs than expected this year.

This good news probably comes as a shock to the average American consumer, and certainly to the average Democrat, who earlier this year thought Trump would usher in America’s Dark Ages. A variety of consumer surveys beginning in January showed many people souring on the economy, particularly their economic outlook for the year ahead.

For example, the University of Michigan’s consumer sentiment survey, which oversamples Democrats, showed the worst inflation expectations in the survey’s history, coupled with the economy falling off a cliff. On the other hand, Republicans largely ignored the so-called experts quoted in the press and expected inflation to be low.

The latter were clearly correct and were wise to ignore the hyperbolic predictions of politically motivated pundits. With each month that goes by, all Americans, regardless of party registration, are becoming increasingly optimistic about the economy. Survey data from the regional Federal Reserve Banks confirms this, as well as private sources like the Conference Board.

That’s not to say everything is sunshine and rainbows, however. Many American families are still hurting.

Having just experienced the fastest rise in both inflation and interest rates in over 40 years, many people are drowning in debt with punitively high interest payments on that debt. 

American families are paying over $300 billion annually just in finance charges on their credit cards from the deadly combination of large outstanding balances and high interest rates.

The current cost-of-living crisis didn’t arise overnight, and it won’t disappear that quickly either. But the nation has course-corrected and is once more heading in the right direction. As Trump continues shrinking the government, leaving room for the private economy to grow, folks will work, spend, save, and invest more, and things will keep improving—including people’s expectations.

EJ Antoni is a public finance economist and the Richard F. Aster research fellow in The Heritage Foundation’s Grover M. Hermann Center for the Federal Budget.

Reprinted with permission from The Daily Signal by EJ Antoni.

The opinions expressed by columnists are their own and do not necessarily represent the views of AMAC or AMAC Action.