Campaigns access funds from three principal sources: direct contributions, funds from party committees and the efforts of political action committees. When it comes to money raised directly by candidates (which is limited to $3,500 per person for primaries and another $3,500 per person for general elections), Democrats are in the lead. As of June 30, Democratic House candidates had a total of $438 million on hand, compared to $386 million for Republicans. Similarly, Democratic Senate candidates had $210 million in the bank compared to just $121 million for Republican candidates. Democrats similarly lead in funds amassed by traditional political action committees, where donations are limited. But when it comes to party committees, where effective donation limits are in the hundreds of thousands per year, and super PACs, which operate with no limits, the picture is reversed.

Donations to candidates are generally more valuable because they can buy television time at discounted rates whereas traditional PACs can accept money while coordinating directly with candidates. In addition, until the recent Supreme Court decision, neither party committees nor super PACs could freely coordinate their activities with those of the campaigns. But now party committees can do so without spending limits, which makes their ability to receive almost unlimited donations more valuable.

When it comes to the most closely fought Senate races, Democrats are generally excelling. Jon Ossoff, a Georgia incumbent, had $42.6 million on hand on June 30, compared to just $2.1 million for his Republican challenger, Mike Collins. Similarly, James Talarico, a Texas challenger, reported $21.5 million of cash while his opponent Ken Paxton (who fought a tough primary with incumbent John Cornyn) had just $1.8 million. Likewise for Roy Cooper in North Carolina and Sherrod Brown in Ohio.

The disparity in funds on hand is largely made up for by the huge amount of cash reported by the Republican National Committee compared to just $16 million for the Democratic National Committee. In addition, the DNC had $18.5 million of debt while the RNC was debt free. The DNC has become an object of scorn among party regulars, in part because of its botched “after action” report. When it comes to the House and Senate committees, Republicans also lead, although by relatively modest margins.

As for Super PACs, the money race isn’t even close, in large part because of the huge war chest amassed by Donald Trump (part of why so many Republican candidates kowtow to him). Trump controls more campaign money than the House and Senate Republican Super PACs combined. But even putting Trump aside, Democrats still trail. (Democracy PAC II is George Soros’s Super PAC.) Note that the Supreme Court decision did not change the requirement that campaigns not coordinate with Super PACs.

Putting it all together, the 50 biggest donors have donated a total of $1.6 billion into these various buckets. Among those donors, the vast majority of the money has gone to Republicans, $1.05 billion compared to just $362 million to Democrats.

That disparity is even more pronounced among the very biggest donors. While George Soros was the biggest single donor at just over $100 million, nine of the 10 largest individual donors directed their money toward Republicans. Interestingly, half of the 10 largest contributors earned their fortunes in the technology or cryptocurrency industries. Some, like Marc Andreessen, had been major contributors to Democrats in past cycles.

At 2pm today, the Federal Reserve will announce the results of a particularly closely watched meeting to deliberate a possible change in interest rates. While the central bank is likely to leave rates unchanged, that outcome is not foreordained. And economists and financiers will be equally interested in what the new chairman, Kevin Warsh, says at the second press conference of his short tenure. While President Trump lambasted his predecessor, Jerome Powell, for not cutting rates, Warsh has been known for favoring a tough stance against inflation, which has now been running above the Fed’s 2% target for 63 months. Even if the Fed leaves rates unchanged, there could well be dissents among the 12 open market committee members.

Earlier this year, financial markets were expecting rates to continue to decline this year by as much as 0.75 percentage points, as the Covid-related inflation surge ebbed. But that trajectory has flipped around and in just the past week, markets have raised the probability of an increase today to just over 30%. Even if the Fed holds rates constant today, traders expect two hikes (a total of 0.5 percentage points) by the middle of next year. That would take rates back to where they were last October.

Why? In large part because of the upsurge in inflation since Trump began the war against Iran at the end of February. Last December, the Fed believed that inflation would ebb significantly in the course of this year. Even in March, after the war began, it expected the rate of price increase to ebb rapidly. But in its June forecast, as the war continued to grind on, it projected inflation remaining above 3% into next year. That was a month ago and with the war showing no sign of ending, expectations of future inflation have continued to deteriorate.

The Federal Reserve only controls short-term interest rates. Long-term interest rates are principally a function of inflation expectations and the real returns investors demand, so no surprise that those have also been increasing. The rate on the 30-year Treasury bond has been above 5% for about 30 days, the longest such stretch since 2007. For now, mortgage rates, which are currently around 6.6% have not fully reflected the increase in Treasury rates but that could be coming. In any event, Fannie Mae expects mortgage rates to still be at 6.4% at the end of the year, which obviously has negative implications for potential homebuyers.

Adjusting for inflation, rates are even higher relatively, at nearly 3%, the highest in at least 15 years. Inflation-adjusted rates at this high a level has significant negative implications for both consumers and businesses.

Why are “real” interest rates so high? It’s a particularly negative signal about how the bond market is feeling about the state of government finances. Because short-term interest rates are almost always lower than long-term interest rates, a succession of administrations have been borrowing to finance deficits for shorter and shorter periods of time. That means more refinancing – an estimated $8.3 trillion over the next year. And because much of the earlier borrowing was done when rates were lower, it means higher interest costs for the federal government.

That comes at a time when deficits are still increasing (Trump’s claims to the contrary notwithstanding). The deficit this year will be $1.9 trillion, roughly 6% of gross domestic product, a level traditionally only seen in war or recession. And the Congressional Budget office projects that by 2036, under current policy, the deficit will reach $2.5 trillion and the national debt will be $46 trillion in today’s dollars (or 120% of U.S. GDP).

Promises made, promises not kept. President Donald Trump returned to office 18 months ago with a commitment to improve the economy in a variety of ways, from sharply curbing the deficit to getting the price of gasoline down to $2 per gallon. While the economy continues to grow and (most months) add jobs, all of that is happening more slowly than Trump promised and has been significantly aided by the artificial intelligence boom that the president has had virtually nothing to do with.

Start with the deficit. When Trump arrived, the deficit was $1.8 trillion (modestly lower than it had been the previous year). Now, even after adjusting for inflation, it is up to $1.9 trillion and projected to remain there for a few years until rising steadily to $2.5 trillion in 2036 (also after adjusting for inflation). As a share of the size of the economy (gross domestic product), the gap is projected to hover at or above 6%, compared to 3.4% in 2017. How did this happen? Mostly via the One Big Beautiful Bill, which extended many of the tax cuts passed in 2017 during the first Trump administration.

Not surprisingly, the continued high (and rising) deficits has pushed the national debt upward. It has already passed 100% of GDP and is projected to exceed the 1946 post-World War II record of 106% of GDP around 2030. That is two years sooner than what the Congressional Budget Office projected before the OBBB passed last year. By 2035, this important ratio could reach 120%.

Among Trump’s promises was that he would sharply cut federal spending via the now famous (or infamous) Department of Government Efficiency, run by Elon Musk. DOGE was tasked with cutting federal spending by “at least” $2 trillion without any specified timeline. But when DOGE essentially shut down, it only claimed $215 billion in savings. Even that was suspect as a compilation of the “receipts” that DOGE offered only totaled around $35 billion according to third-party analysis.

Another promise that hasn’t worked out for Trump was that his tariffs would generate “literally trillions of dollars” of revenues. For that, Trump can thank the Supreme Court, which struck down many of his levies. Now the government has to provide refunds, which some experts have estimated could add up to nearly $200 billion.

On another front, Trump’s promise to bring back manufacturing jobs and increase factory construction has also not unfolded as promised. Indeed, the number of manufacturing jobs has dropped by 75,000 since Trump took office. Some of that reflected a continuation of a trend that began in early 2023. But it also resulted from the effect of Trump’s tariffs, which raised the cost of key inputs like steel and aluminum, causing U.S. manufacturers to cut back.

Similarly, the dollar value of factory construction has dropped to an estimated $175 billion on an annualized basis as of May of this year from $250 billion in November 2024. Again, policy changes ranging from tariffs to sharp cuts in clean energy subsidies played an important role as did the tailing off of the effects of the CHIPS Act, which stimulated construction of semiconductor plants. Trump likes to cite the upsurge in data center construction, but his policies had little, if anything, to do with this increase and in any event, that increase doesn’t come close to offsetting the drop in new manufacturing facilities.

Tuesday’s inflation reading came in a bit better than expected, but for individual Americans, the challenge of higher prices remains, in part because the renewed closure of the Strait of Hormuz has already started to push oil prices up again. And the persistent high inflation risks an increase in interest rates, as the new Federal Reserve chairman Kevin Warsh intimated in Congressional testimony this week. Among the few winners from the Iranian crisis has been the oil industry, whose profits and stock prices have been soaring.

Wednesday’s June inflation reading can be read two ways: Compared to May, prices declined because of the fall in oil (and derivatively, gasoline) prices. But compared to a year ago, prices were still 3.5% higher. That is the same amount by which wages are higher than a year ago, meaning that consumers have not achieved any “real” growth in the purchasing power over the past year.

Of course, those are averages and there is much data that shows how consumers further down the economic ladder are enduring more hardship than those at the top. For example, a recent study by the Federal Reserve Bank of New York found that higher income motorists have maintained their purchases of gasoline at roughly pre-war levels while those in the middle and – even more so – those further down have curbed their driving. Something similar happened when oil prices rose in 2022 due to the war in Ukraine, but the disparity is significantly greater this time around.

Gasoline prices rose in tandem with crude oil prices when the war started, but they have been coming down more slowly. Today, crude oil prices are about 18% above where they were at the end of February ($85 per barrel compared to $72 per barrel back then), but gasoline prices are 31% above where they were on February 27. That means the average price for a gallon of gas is $3.86 a gallon, compared to $2.94 per gallon before the war and a high of $4.50 a gallon.

Why is that? A mix of reasons. Speaking generally, prices sometimes “rise like a rocket and fall like a feather.” In other words, retailers try to hold the higher prices as long as possible. More specifically to the oil situation, inventories remain tight, particularly for refined products like gasoline, and refinery disruptions caused by the war have made it harder for oil companies to ramp up gasoline production.

But the oil companies have also been enjoying robust profits, which in turn has filtered through to their stock prices. An index of oil and gas companies is up nearly 28% this year, compared to less than 10% for the S&P 500 and just 2.7% for the “magnificent 7” technology companies. Meanwhile, the average worker’s wages are up just 1.3%.

The prospects for oil prices and inflation remain, at best, uncertain. The Strait of Hormuz never really reopened during the short truce that the two sides negotiated, and now it is closed again. Global oil inventories remain low and a number of countries, including the United States, have drawn down significant amounts of their strategic petroleum reserves.

That has led financial markets to once again revise expected oil prices. Before the war, crude oil averaged $72 a barrel. It then surged to $118 per barrel before declining all the way back down to $72 a barrel. Now a barrel fetches $85. More concerning, the market does not expect oil prices to decline to prewar levels for the foreseeable future. That’s because the Iran War currently seems to have no durable offramp, and even once the conflict is resolved, it will take months to rebuild transportation and energy infrastructure in the Gulf region.

Seemingly with each passing day, more revelations emerge of the extraordinary financial “success” of the Trump family. We shouldn’t be surprised. Donald Trump and his sons have been clear that the more traditional approach to avoiding conflicts of interest that marked the first term was not going to be maintained during the second term. “The first term, we did everything imaginable to avoid any appearance of impropriety, and frankly, we got crushed anyway,” Eric Trump told The New York Times in late 2024. “We can’t just sit out in perpetuity, and I won’t,” he said.

Last week, President Trump released his 2025 financial disclosure, and Forbes estimated that his net worth had more than doubled, to $6.5 billion from $3.1 billion in 2019. How did Trump achieve such remarkable success? Not in his traditional stomping grounds of hotels and hospitality but in the new territory of cryptocurrencies and social media. After having disparaged crypto since it emerged as a new financial instrument, Trump embraced it, to the point of now having $2.1 billion of holdings. And he launched a public company, Trump Media, on the back of Truth Social.

That’s just the president. His sons have been busy following Eric Trump’s signal. Donald Trump Jr. joined a venture capital firm, 1789 Capital, whose assets quickly jumped to $1 billion from $150 million. The firm then invested in a number of companies that quickly garnered federal money – a total of more than $800 million. The biggest piece of this was a $620 million Pentagon loan (the largest ever from the Office of Strategic Capital). ProPublica reported that the White House initiated the request to the Pentagon.

Much of the family’s success came at the expense of the public. Reuters calculated that the Trump family garnered $2.3 billion from four crypto ventures while individual investors lost almost exactly the same amount. Each followed a similar pattern: The family launched a coin or token and sold them to the public, pocketing both the proceeds and an additional fee every time one of the tokens changed hands. More than $600 million came from $TRUMP, a token with no intrinsic value or use purpose.

The flagship token has been $WLFI, which also has no use case (other than some theoretical governance rights). The coin, which was launched last August, quickly jumped to 31 cents each and then fell steadily, to less than 6 cents, a fall of more than 80% -- a classic “pump and dump” scheme. That alone put $1.1 billion into the Trump family coffers. “Fun fact”: Two days before the inauguration, the national security adviser to the United Arab Emirates bought 49% of the venture for $500 million.

Trump’s family has also used the presidency to garner an estimated $13 billion in foreign investment capital. The biggest piece came from Qatar, a $5.5 billion commitment to a golf resort. Meanwhile, Jared Kushner’s Affinity Partners, which raised almost $3 billion after Trump’s first term from Persian Gulf countries, raised another $2.7 billion from these same investors, much of it while Kushner was serving as a principal Middle East negotiator.

Then there’s clemency, which turns out to have a price. Many of the happy recipients of pardons from the President provided him with substantial financial benefits. Some sent money to his inaugural committee. Others contributed to his Super PAC. But crypto pardons appear to have yielded the biggest rewards to the family; Binance’s CZ Zhao parked $2 billion in another of the family’s tokens, USD1, to receive clemency. It was estimated that the pardons cost the U.S. Treasury and victims at least $1.5 billion in forgone penalties and restitution.

As the United States and Iran arm wrestle toward an agreement to end the war, the current state of play suggests an outcome that will deliver more financial and other benefits to Iran — and do so sooner — than did the Barack Obama deal (the JCPOA) that Donald Trump has been deriding for years.

For starters, Iran has already been relieved of the sanctions on its oil sales, a move that is expected to provide Iran with an extra $6 billion of revenues just during the 60-day negotiating period. And Iran will have $12 billion of its frozen assets released before a final deal is agreed to. (Neither of these happened before the JCPOA was signed.) Then, over roughly the next two years, Iran would garner an estimated $66 billion of additional revenues as well as about $66 billion in unfrozen assets. Unresolved is who specifically would contribute to the $300 billion fund for reconstructing Iran that has been floated. (The Trump administration claims it has identified private donors in the U.S., Gulf States, and other countries, but no specific entities have been identified.)

All told, by having sanctions lifted on its oil sales, Iran could receive anywhere from $47 billion to $96 billion in extra oil money, roughly comparable to what it received during the 2.3 year life of the JCPOA.

A side by side comparison of the two deals shows stark differences. Obama did not afford Iran any sanctions relief until the JCPOA was signed; some of Trump’s relief has already occurred. Obama ultimately unfroze about $50 billion of “usable” Iranian funds; this time, because the amount of their frozen assets has grown, Iran could receive nearly $80 billion. On top of all that, Obama released a small $1.7 billion of Iranian claims that were frozen at the time of the Iranian revolution in 1979; this was the planeload of cash that Trump loves to talk about. As for the current negotiations, we don’t know yet what else Trump may do, particularly about the $300 billion reconstruction fund. Lastly, Obama’s deal was enforced by international inspectors; Trump officials have talked without specificity about linking release of Iranian assets to compliance with a nuclear deal.

Adding it all up, Obama provided Iran with $117 billion in return for agreeing to the JCPOA; Trump is offering at least $150 billion and possibly more depending on the fate of the $300 billion reconstruction fund.

Two important collateral effects of Trump’s war on Iran. In order to maximize oil supplies, the president relieved Russia of the price cap that had been imposed on that country’s exports as punishment for its invasion of Ukraine. That has provided Russia with an estimated $22 billion in oil revenue just during the 98-day period the price cap was suspended.

Lastly, there is the cost to the U.S. of the war. While the Pentagon has pegged this number at $29 billion, it has asked Congress for a special appropriation of $80 billion, tacitly acknowledging the irrelevance of the lower figure. Meanwhile, one private forecaster — Moody’s Analytics — has put the likely total at $132 billion while two other experts think the tab could ultimately reach as much as $1 trillion, once costs like veterans’ benefits and rebuilding damage to American bases are incorporated.

President Trump wanted a new Fed chairman who would cut interest rates. He does not appear to have gotten his wish. On Wednesday, Kevin Warsh presided over his first meeting as the new chairman of the Federal Reserve Board facing a variety of pressures, in addition to what may come from Trump. Warsh is facing an economy that has recently shown some signs of strength, a significant increase in inflation and suggestions from other members of the Fed’s rate setting committee that the next change in interest rates may be an increase. As expected, the Fed left interest rates unchanged but signaled in smaller ways that change is coming to the Fed.

The Fed has two responsibilities: controlling inflation and maintaining full employment. On the inflation side, the news has not been good. While inflation has been declining gradually from pandemic levels, the war in Iran has caused a surge, particularly – but not exclusively – in the cost of gasoline and other petroleum products. Even if those costs are excluded, prices – using the Fed’s preferred measure – still rose in April by 3.3% over the past year. That represents a reversal from the decline in the inflation rate following the pandemic. But the rate never got down to the Fed’s 2% target before the war began.

On the other hand, job growth – which had been a noticeable weak spot in the economy – has shown surprising life. Over the past three months, job creation has averaged 190,000 additions per month, compared to 46,000 per month since President Trump returned and 122,000 per month during the last year of the Biden administration.

Given the strong economy, it shouldn’t be surprising that the Fed has now fully backed off the notion of interest rate reductions for the medium term. Indeed, the consensus among members of the Federal Open Market Committee was that rates are likely to increase before they fall. Moreover, the financial markets are expecting higher rates for longer than the Fed is anticipating. This is not going to make President Trump happy.

A Warsh footnote: The Fed’s outlook is derived from anonymous submissions from each of the 19 members. Warsh has been a critic of this “forward guidance” and so declined to submit a set of dots.

Even with higher rates, the Fed does not expect inflation to decline at all in 2026 nor does it forecast it reaching the 2% level by 2028. This is also a significant shift from the Fed’s view before the war began.

Two other noteworthy aspects of the first new Fed chairman in eight years:

First, Warsh will be inheriting the highest inflation of any Fed chairman since Alan Greenspan took over in 1987. While that’s still a far cry from the inflation of the 1970s, it still makes for a tough assignment for the new chair and even tougher because the Fed essentially reversed policy at his first meeting, moving from a bias toward lower rates toward an outlook that suggests higher ones. (Interestingly, Mr. Warsh’s two predecessors inherited inflation running below the Fed’s target.)

And second, Warsh has lost no time in making clear that change is coming to the Fed. As part of his criticism of “forward guidance,” Warsh pared down his committee’s traditional statement following Fed meetings to just 132 words. That compares to an average of 372 words under Warsh’s immediate predecessor, Jerome Powell, and a whopping 604 words under Janet Yellen.

By now, the impact of inflation and the weak job market on the “affordability” problem has become well known. What’s perhaps less well known is the deterioration of Americans’ savings and obligations to lenders as they try to maintain their standards of living.

The pressure of trying to maintain their standards of living has had a dramatic effect on Americans’ propensity to save. Since the beginning of 2024, Americans have gone from saving an average of 6.4% of their post-tax incomes to putting aside just 2.6% of their earnings. This stands in stark contrast to historical measures. During the decade of the 2000s, the average savings rate was 4.2%. In the 1990s, it was 7.2%. And in the 1970s, it was a whopping 12.2%.

That has already had noticeable, deleterious effects. Almost 30% of Americans say they have less emergency savings than a year ago, versus only 21% who say they have more. Another 17% had no savings either then or now. Just 29% reported about the same amount of emergency savings.

Another indicator of the cash crunch that many face has led to a sharp increase in the number of hardship withdrawals from 401(k) plans, even though those withdrawals bring penalties and added taxes. As reported by Vanguard, that percentage has risen to 6.0% from 1.7% in 2020. This signals that more households have exhausted their cash cushions.

Not surprisingly, the financial challenges are greater for those further down the economic ladder. Consider, for example, mortgage delinquencies. In the lowest income ZIP codes, the delinquency rate had climbed back to roughly its 2016 level of 3%. But in the wealthiest zip codes, the delinquency rate is just 0.7%. (The dip in 2021 resulted from a Covid-era forbearance program.)

Mortgages are far from the only obligations burdening Americans. Delinquency rates on almost every other type of loan have also been rising and are higher than those on mortgages. Credit card debt is the most distressed; 13.1% of balances are 90 days or more in arrears, the highest reading since 2011. A higher percentage of auto loans are delinquent than during the financial crisis. And since relief provided by the Biden administration lapsed, delinquencies on student loans are back to prior high levels.

When Americans face unmanageable student loan problems, they are more likely to have other financial problems. For example, among borrowers who have defaulted on student loans, the percentage of those delinquent on credit card debt has risen to 57%, up from 37% in 2019. On autos loans, the percentage rose to 40% from 29%. And on mortgages, to 21% from 14%.

As data released earlier this week reinforced, American consumers continue to grow ever more concerned about the state of the economy, particularly as the war in Iran drags on with no relief in sight from high energy prices and overall inflation continuing to mount.

The latest reading of consumer sentiment showed Americans’ views of their own financial situation has just hit an all-time, 73 year low, well below even financial crisis and Covid levels. Interestingly, since the pandemic, consumer sentiment has diverged from another, seemingly similar measure, consumer confidence, which has also dropped about 10% since Trump took office. Why the difference? For one thing, consumer sentiment is focused on the individual situation of respondents, including with respect to inflation. Consumer confidence is more oriented toward views of the broader economy and doesn’t ask about inflation.

But inflation is clearly on the minds of Americans. When Donald Trump was again elected in November 2024, expectations for price increases over the coming year was down to 2.6%, a sharp recovery from Covid levels. It shot up following the Liberation Day tariff announcement but never fell back to pre-election levels before jumping again, to 4.8%, after the war with Iran began and oil prices rose. Meanwhile, actual inflation has begun to accelerate, reaching 3.8% last month compared to a year earlier, versus 2.9% at the end of 2024.

Different groups of Americans have fared differently, leading to what has been named the “K-shaped economy,” one in which those at the top do far better than those at the bottom. Compare, for example, the performance of the stock market relative to consumer confidence. The two historically have moved, in broad terms, together. But since Covid, they have diverged to an unprecedented degree. In contrast to lagging consumer confidence, the stock market continues to notch record high after record high. (The top 1% of Americans own roughly 50% of all shares.)

Another way to see this disparity is to compare the growth of corporate profits to the increase in wages. Corporate profits have been rising at a double digit rate, including a stunning 28% increase in the first quarter of this year for companies in the S&P500. Meanwhile, wages have been increasing at less than 4% a year. (And after inflation, wages are now declining.)

The disparity in wealth creation -- 87% of shares are owned by the top 10% of Americans by net worth -- has helped fuel dramatically different consumption patterns. The share of consumer spending by the top 10% reached 46% in the fourth quarter of 2025, leaving 40% for the bottom 80%. The stress on the wallets of lower end consumers has been noted repeatedly by companies in their earnings reports.

One example of this stress is with respect to gasoline purchases. In the past, the behavior of various income groups has tended to move together (with the exception of following an earlier run up in gasoline prices in 2023). But in March, after the war against Iran began, the level of purchases across incomes diverged widely). Americans earning $125,000 or more kept their purchases at roughly the same level. However, those earning less than $40,000 reduced gasoline usage by 7%, and gasoline buying by those with incomes between $40,000 and $125,000 fell by about half that rate.

For starters, the rate of job creation has declined sharply over the past 16 months. In 2024, for example, the economy added an average of 122,000 jobs a month, above the number needed to take account of increases in the size of the labor force. By the end of 2024, the unemployment rate was down to 4.1%. But since the beginning of 2025, the average number of additional workers employed each month has fallen to just 26,000, causing the unemployment rate to rise to 4.3% from 4.1% in December 2024. In six of those 16 months, the economy shed jobs.

As a consequence, the balance between job openings and job seekers has shifted dramatically. For several years after the economy reopened following the Covid shutdown, the number of jobs available was substantially higher than the number of Americans seeking employment. At the peak in 2022, there were two open jobs for every American looking for one. But as the number of available jobs began to fall in early 2025, that balance swung the other way. By March of this year, there were 6.9 million available jobs but 7.2 million people looking for one.

Men have been disproportionately impacted by the changes in the job market. Over the same 16 months, the number of employed men has fallen by 155,000 while the number of women at work has risen by 559,000. That’s a reversal of the preponderance of history, when men typically captured the majority of new employment.

That has occurred in large part because women have higher educational attainment and are more heavily represented in fast growing service sectors of the economy. The sector most responsible for job growth in recent years has been healthcare, where women make up 78% of the employment base. At the other extreme, job growth has been particularly weak in manufacturing, transportation, mining and oil & gas. (Construction is the only male dominated sector that has added jobs.)

Another particularly hard-hit group has been young Americans. Until the pandemic, the unemployment rate for recent college graduates was below the national average. Now those newly minted graduates have a higher jobless rate – and the gap is widening. This 1.4 percentage point gap (5.6% versus 4.2%) has not only been growing, it is the largest it has been since at least 1990.

That makes for a tough job market for new entrants. As recently as 2022, there were just over 100 applicants for each entry level job opening. As the labor market has loosened, that has steadily increased and last year reached 300 applicants per available job. Moreover, as the impact of artificial intelligence begins to be felt, it appears that the job market for white collar entrants is at least as difficult as for those further down the economic ladder.

While Americans’ discontent tends to focus more on inflation, housing and general affordability, health care may also be playing a role in their unhappiness. Last fall, Senate Democrats forced a government shutdown that would become the longest in history, largely over the question of whether to extend expiring health care tax credits that had been instituted as part of a Covid relief package. Democrats lost that fight and the consequences of that loss are now becoming clear. (Note that these tax credits – and the resulting impact – relate to Americans who purchase their health care on the exchanges set up via the Affordable Care Act.)

First, as experts warned, the cost of insurance bought on the exchanges, after accounting for tax credits, has been rising sharply, to $178 a month from $113 a month last year. That’s an increase of 58% in a single year. That’s also higher than the average premium back in 2021, before the credits were instituted.

But those costs are not evenly distributed. Those further down the economic ladder have smaller increases in dollar terms, although substantial as a share of their income. A 60-year-old individual making $65,000 a year would see their premium rise by $920 a month, which is $11,040 a year, an unaffordable amount for someone with that level of pre-tax income.

The expanded tax credits, which were passed in 2021 were designed in part to eliminate a design flaw in how the original Obamacare subsidies worked. Under the ACA, once an individual’s income passed 400% of the federal poverty line, or $62,600 in 2025 – just below the median income of $63,360 for full-time, year-round workers – their entitlement to tax credits went away, causing premiums as a share of income to shoot up (as explained above). As incomes rose, the impact of the lost subsidies diminished. The enhanced premium tax credits capped the share of income that anyone would have to pay in the marketplace at 8.5% of their income. For 60-year-olds, for example, these tax credits generated savings for incomes up to $180,000.

The sharp increase in premiums for so many are expected to result in between 17% and 26% of marketplace participants dropping out. While definitive data won’t be available until summer, of those who enrolled in January 2026 alone, 14% didn’t pay their first premium. Not surprisingly, those who drop out first are often among the healthiest, which means premiums rise even more for those who remain enrolled.

The expiration of the enhanced tax credits is not the only change that Republicans made last year to the health care system. They also put a variety of new limits on Medicaid, which were (cleverly) designed not to take effect until after the 2026 midterm election. The expiration of the tax credits is expected to result in 4 million Americans giving up coverage; the Medicaid changes could add another 6.5 million to the rolls of the uninsured. In other words, half of those who gained coverage since the passage of the A.C.A. will now lose it by 2034.

While we don’t have national data, data for a few states have been trickling in, and it suggests that the estimates are directionally correct. In Georgia, 37% fewer residents bought insurance in the marketplace than they did a year earlier. That brought the number of Georgians buying insurance through the exchanges back to where it was in 2023.

Just hours before the attempted shooting at the White House Correspondents Dinner last Saturday, President Trump met with the 297 largest buyers of his meme coin at his Mar-a-Lago club, just one of many crypto-related activities that Trump has undertaken to reel in billions of dollars of profits for himself and his family. In addition to purchasing $TRUMP coins, attendees were selected based on their purchases of other Trump merchandise, including sneakers, watches and fragrances.

During Trump’s first term, his net worth dropped from $4.5 billion to $2.4 billion, partly due to limitations he voluntarily put on his business activities and partly due to the impact of Covid. Not so during Trump 2.0. No more guardrails helped Trump increase his net worth to an estimated $6.5 billion, with almost all of the increase due to a vast array of crypto activities undertaken by Trump and his family. Forbes, which tallies the fortunes of the ultra-wealthy, called crypto Trump’s “primary vehicle for enrichment.” (Note that in his first term, Trump was hostile to crypto.)

All told, according to figures compiled by David Kirkpatrick for The New Yorker, Trump’s profit from his second term as president has totaled more than $4 billion. His former communications head, Anthony Scaramucci, called it “Idi Amin-level corruption.” More than a billion dollars of his gains came from crypto purchases by Trump Media, the company controlled and largely owned by Trump that was initially launched to operate the Truth Social service. Then came nearly $400 million in profits from selling $TRUMP and $MELANIA meme coins. (They aren’t actually cryptocurrencies; they’re simply a kind of collectible with no intrinsic value.) Other profits came from ventures including new real estate deals, many of them with Middle Eastern partners.

The $TRUMP meme coin has functioned as a particularly egregious form of grifting. The coins were launched three days before the inauguration at about $7 and quickly traded up to $45.47. Then they began a dizzying descent (slowed only by Trump’s first summit for its largest holdings) and are now down to $2.38.

But in the course of all that volatility, there were both winners and losers. Various investigations found that there were 45 “whale wallets” – large purchasers who bought at or even before public trading began and sold at substantial profits, a total of $1.2 billion for the group. But an estimated two million retail purchasers weren’t so fortunate; they ended up losing more than $4 billion. As for the Trump family, it appears to have earned between $400 million and $600 million in trading fees and still hold 80% of the tokens.

One notable feature of Trump 2.0 has been its entanglement with foreign entities. An estimated 76% of the top purchasers of $TRUMP coins have been foreigners. Similarly, about 72% of the leading buyers of coins issued by World Liberty Financial, another Trump affiliate, have been foreigners. (Notably, the U.A.E. national security adviser bought a 49% stake in World Liberty Financial for $500 million four days before the inauguration; $187 million of that went to the Trump family; months later, the Trump administration approved the sale of 500,000 advanced semiconductors to the U.A.E., a sale that the Biden administration had blocked.)

Perhaps not surprisingly, crypto enforcement collapsed in 2025. Leading crypto companies (including Coinbase, Gemini, Robinhood, Ripple and Kraken) all had federal investigations quietly terminated after Trump took office. In addition, Trump pardoned one of the leading crypto entrepreneurs – Changpeng Zhao – after his company, Binance, financed the aforementioned U.A.E. investment in World Liberty.

The war against Iran remains unresolved, with the Strait of Hormuz still closed. Inflation is on the rise. The job market is soft. And yet the stock market seems to rise inexorably, notching records with unusual frequency. What gives?

The stock market has defied not only the war against Iran but also “Liberation Day,” when Donald Trump imposed the highest tariffs in nearly 100 years. And it has defied the seeming constant commotion and uncertainty of Trump’s second term. Indeed, with the exception of two lurches — around Trump’s tariff announcements and the start of the Iran war — it has mostly marched upwards.

All told, the market is up almost 17% since the start of Trump 2.0. That is almost exactly equal to its increase over the same period in Trump’s first term and faster than during the initial 15 months of Joe Biden’s tenure. (In fairness, Biden had to contend with the lingering effects of Covid and then interest rate increases imposed by the Fed to counter growing inflation.) The strongest stock market performance was under Barack Obama, but he benefited from the recovery from the financial crisis.

The biggest reason behind the market’s strong performance is the equally strong rise in corporate profits. They rose by double digits every quarter of last year and are on track to rise by even larger amounts this year. The unusually good performance of corporate profits derives from a number of factors, ranging from tight expense management by CEOs to early productivity improvements from the adoption of artificial intelligence. (Goldman Sachs believes that AI will contribute about 40% of the growth in 2026.) Not only are profits strong, analysts have been raising their estimates of what they are likely to be in 2026. As recently as last December, Wall Street firms were projecting profits for the S&P 500 of about $310 a share. Now the consensus is for profits of almost $325 a share.

While AI is helping companies across the spectrum improve their profitability, it is also responsible for a surge in capital expenditures, another source of profits for companies in the supplier ecosystem. The five “hyperscalers” — Amazon, Google, Meta, Microsoft and Oracle — will spend an astonishing $675 billion this year on data centers and related facilities. That is more than 8 times what they spent as recently as 2020.

Of course, not all sectors and companies have participated equally in the stock market run up. The war against Iran, in particular, has created its own set of winners and losers. In the latter camp are some energy-intensive sectors, like airlines and utilities, that use large amounts of increasingly expensive oil and natural gas. Luxury goods have suffered from the decline in travel, and “materials” companies, which buy significant amounts of other commodities, have also weakened. On the other end of the spectrum, not surprisingly, oil and gas exploration companies have benefited.

In addition to the war causing some losers among stock market investors, it has also created a significant headwind for consumers, no doubt contributing to the country’s sour mood about the war and Trump’s overall job performance. While incomes rose modestly faster than inflation last year, since the war began, Americans’ growth in purchasing power has halted. Overall inflation last month accelerated to an annual rate of 3.3% while gasoline prices have risen by 27%, to a national average of more than $4 per gallon.

As if President Trump doesn’t have enough political problems as evidenced by his terrible polling results, the White House recently handed Democrats yet another issue to use in the approaching mid-term elections: the federal budget. The Trump administration recently proposed the most dramatic restructuring of the nation’s spending in memory and while it is unlikely to achieve passage, it could nonetheless be well utilized by Democrats as the campaign season begins.

On one side of the ledger, Trump is proposing to slash deeply a broad array of domestic programs as well as our non-military international expenditures on foreign aid and the like. For example, the Labor Department would lose more than 25% of its funding, taking its budget back to its lowest level since at least 1976, the first year in the Office of Management and Budget historical dataset (after adjusting for inflation).

A number of other departments and agencies, including Agriculture and the Environmental Protection Agency, would also be reduced to pre-1976 levels. (In 1976, the nation’s population was only 2/3rds of what it is today.) All told, non-defense domestic discretionary spending (so not including Medicare and Social Security) would be cut by 10%; a cut that size has not been implemented in modern budget history.

Headcounts would be reduced commensurately; for example, employment at the Department of Agriculture would be cut to the lowest level on record.

On the other side, defense spending would grow by 44%, while a few domestic-oriented departments would get small increases to deal with specific issues. Urgently needed funds would be allocated to the Department of Transportation to modernize the air traffic control system, and the Justice Department would receive more money to support drug and immigration enforcement efforts.

The scale of the military build up — a proposal that predates the outbreak of the war against Iran — is unprecedented even in wartime. Defense spending would rise to $1.5 trillion, above World War II levels, even after adjusting for inflation. The Korean, Vietnam and Iraq wars never came close to this level of spending.

The dramatic shifts would upend the historic balance between defense and non-defense spending. Under an informal understanding between the two parties, until Covid, defense and non-defense spending as a share of GDP tracked closely. During Covid, domestic spending jumped, but the two buckets continued to move in tandem. The Trump proposal would allocate twice as many budget dollars to defense than would go to non-defense items.

Trump is likely to argue that his budget will significantly address the nation’s mounting debt load as share of the size of the economy, turning it steadily downward for the first time in decades. In reality, his budget would likely exacerbate the problem of rising debt.

Why the disconnect? Because the Trump administration is using economic projections wildly more optimistic than those put forward by private forecasters and even by other arms of the government. Trump is claiming that economy will expand by 3.1% a year in 2026 and the two following years. Other forecasters suggest a figure of around 2% is more plausible. In the first quarter of this year, the economy is estimated to have expanded only at a 1.3% annual rate, making a 3.1% result for the full year highly unlikely.

President Donald Trump can continue vacillating to his heart’s content about the conditions under which he is prepared to end the war against Iran, but one truth remains: There is no plausible way of leaving without reopening the Strait of Hormuz so that shipping can resume through that narrow corridor. Otherwise, the world – including the United States – will be facing continued high oil prices as well as the possibility of shortages like we endured in the 1970s.

Before the war began a month ago, about 20% of the world’s oil (and a significant amount of liquified natural gas) passed through the Strait, including most of the oil produced by Saudi Arabia, Iraq and the United Arab Emirates. While there are pipelines across Saudi Arabia and the U.A.E. to help mitigate the Strait of Hormuz problem, these pipelines are now being fully utilized and don’t have nearly the necessary capacity.

So while we’ve long known about the risks posed by the Strait, this is the first time that a closure has occurred, which makes the current disruption the largest ever. All of the prior oil supply interruptions – including even those of the 1970s – curtailed less than 10% of the amount of oil that the world then used. Developed countries have responded by taking oil from their strategic reserves, but this only covers a portion of the lost supply and only for a limited period of time.

Even though the U.S. is a net exporter of petroleum, oil is freely traded around the world so prices also rise here, as $4 per gallon average gasoline prices indicate. Apart from gasoline, higher oil prices filter through to many other products, some obvious (like airline fares) and some perhaps less obvious (like food because of higher fertilizer and diesel costs). That has caused economists to start raising their inflation forecasts for this year, to as much as 4.2%.

Higher inflation, in turn, has significant implications for further interest cuts by the Federal Reserve. Before the war began, the central bank was expected to reduce interest rates by at least twice by the end of the year. Now rates could be almost a half percentage point higher than the market had anticipated.

Part of the growing pessimism about inflation and interest rates stems from the belief that even if the war ends, oil prices are unlikely to revert to previous levels anytime soon. For example, two years from now, oil prices are forecast to be $5.99 per barrel higher than was expected before the hostilities commenced. With 42 gallons in a barrel, that translates into gasoline prices that could be 14 cents a gallon higher than previously projected.

One other consequence of the administration’s failure to anticipate the effects of a closure of the Strait of Hormuz: To keep prices from escalating even more, Trump granted Russia partial relief from the sanctions that were imposed after the Ukrainian invasion. A combination of that relief plus the benefits of higher energy prices are likely to increase Russia’s energy revenues threefold each month.

On Saturday night, President Donald Trump threatened to intensify his bombing of Iran. Early Monday morning, he reversed course and announced that he was having “very good and productive conversations” with Iran and would postpone until Friday his threats to attack Iranian power plants and energy infrastructure. While course reversals by Trump are hardly unusual, the speed of this one was perplexing. What happened? Hint: Bill Clinton’s campaign manager, James Carville, famously said in 1994 that he’d like to be reincarnated as the bond market so he could “intimidate everybody.”

Trump is nothing if not attuned to the stock and bond markets. And since the war began, these have not been his friends. The S&P 500, for example, fell by 4.3% from February 27, the day before the attacks began, until Friday. Just from its closing level on March 17 until last Friday, it declined by 3.1%.

Then, starting on Sunday night East Coast time, Asian markets opened and immediately went into a near freefall. By the end of trading, while Americans were still sleeping, most major markets had fallen by around 3.5%. That’s the equivalent of a 1,600 point drop in the Dow Jones Industrial Average.

When American traders began waking up, at around 5am, they began selling U.S. Treasuries. Yields on Treasuries had already been rising as the war started to raise fears of higher inflation and quickly jumped to their highest levels since July. Shortly after 7am New York time, Trump reversed course. (Trump had behaved similarly when his Liberation Day tariffs also sent the bond market plummeting.)

Both stock and bond markets are highly sensitive to inflation. Last week, the Federal Reserve issued its latest set of quarterly projections. Unlike three months earlier, when the Fed projected that inflation would decline significantly in the course of this year, the central bank now expects only a small drop, to 2.7%, materially above the Fed’s target of 2%.

Until the war began, the market was expecting at least two 0.25% rate cuts this year. But over the past month, the market had become steadily more pessimistic about the prospects for future rate cuts and prior to Trump’s Monday morning announcement, it was even displaying a small bias toward rates rising by the end of the year.

While the deterioration in market conditions reflected a fear that higher prices are spreading across the economy, one of the major concerns of Americans is higher gasoline prices. Nationally, the average cost per gallon has risen to $3.96 from $2.94. In California, the most expensive state for gasoline in the country, the average price of a gallon is now $5.79, up from $4.63 before the war started. Even in the least expensive states – clustered in the Midwest and Southwest, some gasoline prices have jumped by nearly 40%.

What’s almost as concerning is that the market is not expecting prices to return to pre-war levels anytime soon. While Trump’s Monday announcement caused a significant drop in current crude oil prices (to $100 per barrel from $112 per barrel on Friday), it still expects the price of a barrel to be around $78 a year from now, compared to its expectation of less than $68 before the war began. (Every dollar per barrel is 2.5 cents per gallon.)

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While the risks from President Donald Trump’s decision to attack Iran have rightly focused on the strategic and human risks, another important concern is the potential impact of the war on the world’s energy supplies, principally petroleum.

We’ve known for decades that a war involving Iran could result in the closure of the Strait of Hormuz, a 22 mile or so chokepoint with just two shipping lanes, each about two miles wide. As its northern neighbor, Iran is well positioned to use its weaponry to endanger ships attempting to traverse it. Consequently, maritime traffic through the Strait has essentially ceased.

That is hugely consequential. About 20% of the world’s oil (and a significant amount of liquified natural gas) passes through the Strait, including most of the oil produced by Saudi Arabia, Iraq and the United Arab Emirates. While there are pipelines across Saudi Arabia and the U.A.E. to avoid the Strait of Hormuz problem, these pipelines are already being partially utilized and in any event, don’t have nearly the necessary capacity.

As a result, storage is filling up throughout these countries and Iraq has already begun reducing production.

These realities have already caused oil prices to jump, to $81 a barrel for Brent crude, the benchmark grade, from $72 before the attack began. And gasoline prices, which had already begun to increase as the summer driving season approaches, also rose meaningfully. The American Automobile Association pegged the average price of gasoline at $3.11 per gallon, up from $2.98 last week. As there are 42 gallons in a barrel, each $1 per barrel increase in the price of crude oil translates into about 2.5 cents a gallon.

Not only will gasoline prices be higher but so will other petroleum products, such as home heating oil and jet fuel. Natural gas prices will also rise.

To be sure, the United States is in a far better position to weather this storm than it was during some past supply disruptions. Until just six years ago, the U.S. was a net importer of oil. Now we are the world’s largest oil producer and a significant exporter. That means that our overall economy benefits from higher oil prices. But that benefit is enjoyed by oil companies while consumers pay higher prices. (Because oil is easily transported, prices are similar around the world, after adjusting for transportation costs.)

Although it recovered from its lowest point during the day, the stock market still closed 1% below its Monday night level. Certainly the heightened geopolitical risk played a significant role. But at least as importantly, the prospect of higher oil prices adds to inflation concerns. Inflation expectations had already been generally rising since the beginning of the year; in the past two days, they rose by another 0.1%.

This has led financial markets to raise their forecasts for interest rates. While the Federal Reserve had been expected to cut rates by another 0.5% this year, now the odds are closer to assuming just a 0.25% reduction. Higher interest rates are the enemy of stock prices so that shift contributed to Tuesday’s weak market.

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As has become his norm, President Donald Trump laced his record-long State of the Union address with numerous falsehoods, exaggerations and distortions. It’s extraordinary that his speechwriters cannot manage to rein in at least some of his remarkable statements – like his claim that $18 trillion of new investments were secured in the first year of his presidency when even the White House website only claims $9.7 trillion (which is itself impossible to believe).

“When I spoke in this chamber 12 months ago, I had just inherited a nation in crisis, with a stagnant economy, inflation at record levels… Today our border is secure, our spirit is restored, inflation is plummeting, incomes are rising fast, the roaring economy is roaring like never before”

This can almost not be further from the truth. For starters, the economy was hardly stagnant. In fact, it had grown faster in each of the two years before Trump took office than it grew in 2025: 3.4% in 2023 and 2.4% in 2024. Why the slower growth in 2025? A mix of factors, including reduced immigration, Trump’s tariffs, slow hiring and the government shutdown in the fourth quarter. Consumer spending increased but that was principally driven by Americans in the upper income brackets.

Nor did Trump inherit “inflation at record levels.” Indeed, inflation had already fallen sharply from its Covid-era highs and was around 3% when Trump took office. And while the rate of increase in the Consumer Price Index was down to 2.4% by year end, a more accurate measure of price increases favored by the Federal Reserve – the Personal Consumption Expenditures index – had risen to a 2.9% rate from 2.6% when Trump arrived. Fed chairman Jerome Powell has attributed most of the excess above 2% to the Trump tariffs.

“More Americans are working today than at any time in the history of our country.”

Well, that might be technically true but it’s highly misleading. Job growth during Trump’s first year fell markedly from the prior year, an average of just 15,000 jobs a month, compared to 122,000 jobs a month the prior year. The number of manufacturing jobs fell while healthcare employment accounted for more than 100% of the jobs that were created. Meanwhile, the unemployment rate rose to 4.3% from 4% when Trump took office. Lastly, long term unemployment increased; a quarter of those unemployed have been out of work for more than 26 weeks.

“Moving forward, factories, jobs, investment and trillions and trillions of dollars will continue pouring into the United States of America because we finally have a president who puts America first.”

Nor are factories “pouring into the United States of America.” Spending on manufacturing construction declined steadily during 2025 as Trump imposed tariffs (which increase uncertainty around input costs) and moved to halt Biden-era investment programs, like the poorly-named Inflation Reduction Act.

Tariffs increase uncertainty around input costs for manufacturing, which delays investment. Biden-era investment includes CHIPS and the IRA.

“And as time goes by, I believe the tariffs, paid for by foreign countries, will, like in the past, substantially replace the modern-day system of income tax, taking a great financial burden off the people that I love.”

The idea that tariffs could “substantially replace” – or anything like it – the income tax is laughable. Washington collects about $2.7 trillion a year in personal income taxes. By comparison, last year all of Trump’s tariffs amounted to $264 billion of revenue. Indeed, the total amount of U.S. imports is not much more than the amount of income tax that is collected. (And now, of course, even the current level of tariff revenues is in doubt.)

Nor are the vast bulk of the tariffs paid by “foreign countries.” A recent study by the Federal Reserve Bank of New York found that nearly all of the tariffs are paid by U.S. importers, much of which is passed on to consumers in the form of higher prices.

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While Congress continues to wrangle over funding for the Department of Homeland Security, it has completed the rest of its budgetary work for the current fiscal year (which ends September 30) with President Trump getting almost none of the massive spending cuts that he proposed. But as a result, federal spending will continue to rise, keeping deficits high and adding significantly to the national debt.

In his budget request, Trump asked for $163 billion in cuts to what is known as discretionary spending – everything from education to the national parks but excluding Social Security, Medicare, Medicaid and of course, interest on the national debt. However, when the dust settled, Congress had decided to keep this spending essentially unchanged, at roughly $1.6 trillion . (Adjusting for inflation, that does amount to a slight cut.)

Among Trump’s notable requests for cuts were reductions in funds for scientific research, housing (Congress increased it), environmental protection, small business and on and on. Many of Trump’s proposed cuts related to his contention that the money was being used for diversity, equity and inclusion initiatives.

The only significant set of cuts that Congress approved (and even these were less than half of what Trump requested) were to the Treasury department for the Internal Revenue Service and community development programs. (Ironically, additional funding for the I.R.S. reduces the deficit because the agency receives more in unpaid taxes than it spends to collect them.

Roughly a year ago, the Congressional Budget Office projected that Washington would incur $21.8 trillion in budget deficits over the coming decade. Now it estimates that total deficits over the same period of time will be $1.4 trillion higher. That is principally due to the massive tax and spending package approved last year, the cost of which will only be partially offset by the president’s signature tariffs. Higher interest costs and other economic changes will add another $700 billion to the deficits.

On an annual basis, the deficit in 2025 was modestly lower than originally projected because tax revenue (including from the tariffs) came in higher than expected. But that improved result is projected to reverse this year and for the coming decade. By the end of the decade, the deficit as a share of the gross domestic product could reach 6.6%, its highest level in at least 50 years outside of covid and the GFC.

The deterioration in the fiscal outlook is not unusual; it has been occurring since the aftermath of the financial crisis. Back in 2007, a few years after the federal government last ran a surplus, the Congressional Budget Office believed the strong fiscal picture would cause the debt to GDP ratio to decline. In 2010, it projected that it would remain stable. By 2016, it recognized that the trajectory would be sharply upward.

The challenge for the budget is that even with large deficits, the amounts available for discretionary spending (including defense) are being squeezed by other costs. The fastest rising category of spending is for government-sponsored health care, principally Medicare and Medicaid and for Social Security. But interest costs are also rising sharply and now exceed expenditures for defense. An 18^th century thinker postulated that when that occurs, a great power risks ceasing to be a great power.

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ICE is winding down its Minneapolis operations but the debate over the role of immigrants in America continues. While it does, we should remember the important role that new arrivals have historically played in American society and the economy – and continue to play. Most immediately, Congress needs to agree on rules for enforcement of immigration regulations or the Department of Homeland Security could shut down as early as this weekend.

As is well known, this is the second great wave of immigration in modern American history. The previous wave, in, the late 19^th and early 20^th centuries, took the percentage of foreign-born Americans to roughly 15% at its peak. But in the 1920s, we imposed severe restrictions on immigration, which led to the percentage of foreign born falling to as low as 5% in the 1970s. In 1965, we overhauled our immigration rules and, combined with increased numbers of undocumented immigrants, the percentage of foreign-born began to rise and has now just reached the peak of just over a century ago.

Immigration is particularly central to the United States at the moment because without it, our falling birthrate would result in a falling population around the end of this decade. A birthrate of 2.1 children per couple is required to maintain a stable population; our birthrate is currently running at 1.6 from as high as 3.7 in 1960. If we were to maintain immigration at about 0.4% of the population level, we could keep growing until at least the middle of this century. A falling population is generally viewed as problematic because it is difficult for a country to sustain a large elderly population without a commensurately large working age population.

Before we completely shut our doors, note the dependence of our labor force on immigrants. While one might guess that just over half of our farm laborers were foreign-born, would most Americans know that 40% of home health aides, 30% of construction workers and – remarkably – 27% of doctors were born elsewhere?

Immigrants also constitute a disproportionately large share of the most accomplished Americans. Almost half of the founders of startups worth $1 billion or more were born elsewhere. Interestingly, the top countries of origin of these founders were India, Israel and Canada, with China contributing a perhaps surprisingly small share. Some familiar names of highly successful foreign-born founders include Elon Musk, Jensen Huang of Nvidia and Sergey Brin of Google/Alphabet. Interestingly, almost the same percentage of chief executives of Fortune 500 companies were either immigrants or the children of immigrants.

Contrary to the impression left by the Trump administration, immigrants are more law-abiding than U.S.-born citizens and undocumented immigrants commit many crimes at an even lower rate (presumably because at least in part, they don’t want to risk being deported). That dovetails with statistics from the current round of deportations: Less than 14% of ICE arrests involved those accused or convicted of violent crimes.

And apart from the most successful immigrants, the success of new arrivals and their children is remarkable. While immigrants have modestly lower average incomes than native born Americans, their children typically out-earn those born here by 9%. Moreover, immigrants and their offspring use less welfare than native-born Americans and contribute more in taxes than they receive in services.