The National Debt Tops $37 Trillion
Happy Tuesday! The White House celebrated a new report today that showed overall inflation held steady at 2.7%, just below economists' expectations - though the underlying data offered reason for concern.
President Trump, meanwhile, continued his efforts to dictate reality and take on anyone who might contradict his preferred spin on the state of the nation. Days after Goldman Sachs analysts forecast that consumers will soon face tariff-driven price increases, Trump lashed out. "Tariffs have not caused Inflation, or any other problems for America, other than massive amounts of CASH pouring into our Treasury's coffers," Trump wrote in a Truth Social post.
Trump also lashed out at Goldman CEO David Solomon, who formerly had a side gig as a DJ, and the bank's chief economist, Jan Hatzius: "I think that David should go out and get himself a new Economist or, maybe, he ought to just focus on being a DJ, and not bother running a major Financial Institution."
Here's what you should know.
Headline Inflation Holds Steady in July, but a Key Measure Moves Higher
Headline inflation held steady in July, beating expectations, but a notable measure of the underlying trend suggested that inflationary pressure is increasing in the economy, the Bureau of Labor Statistics reported Tuesday.
The overall Consumer Price Index rose 0.2% in July on a monthly basis, a downtick of a tenth of a percentage point from June, while the annual overall inflation of 2.7% matched the June number, beating expectations by a tenth of a percentage point. A 2.2% drop in the price of gasoline played a major role in the decrease in the monthly rate, BLS said, with the overall energy index falling 1.6%.
At the same time, the core CPI rate, which strips out volatile food and fuel prices to give a better sense of the underlying trend, rose 0.3% from June to July. On an annual basis, the core CPI index rose 3.1% in July, above expectations, while topping the 2.9% rate recorded in June.
A glass half full: Stocks surged to record highs on Wall Street as investors bet that the inflation report would help spur the Fed to cut interest rates in September. Even though the core CPI inflation rate of 3.1% was a tenth of a percentage point higher than expected - potentially a worrying sign of growing inflationary pressure driven by President Trump's tariffs - the headline inflation rate was seen as giving the Fed some room to cut rates.
Trump jumped on his social media platform to call for interest rate cuts, returning to a theme he had hammered in recent weeks. "Jerome 'Too Late' Powell must NOW lower the rate," Trump wrote. "The damage he has done by always being Too Late is incalculable."
Once again directing personal insults at Powell by calling him a "loser," Trump threatened to allow "a major lawsuit against Powell to proceed" based on "the horrible, and grossly incompetent, job he has done in managing the construction of the Fed Buildings." Although he provided no details about a potential lawsuit, Trump has loudly complained about cost overruns during the renovation of the Fed's headquarters in Washington and has discussed firing the Fed chief, a move that would raise serious legal and ethical questions.
A glass half empty: Some analysts focused more on the bad news in the report: the acceleration of core inflation. The trend is likely to continue, many economists believe, as Trump's latest tariffs, which took effect just last week, begin to be felt throughout the economy.
"Inflation inside the core gained steam in July as goods prices continued to increase," RSM Chief Economist Joseph Brusuelas said in a research note. "Given that the current effective tariff rate will rise to 17.6% from 9.14% by early October, investors and firm managers should prepare for thinner margins and rising inflation."
Brusuelas added that he still thinks the Fed will cut rates this year, but only one time.
Alan Detmeister of investment bank UBS said the consumer categories that saw bigger price increases last month, including furniture, tires and pet products, are exposed to higher import taxes. "That's definitely a sign of tariffs passing through," he told The Wall Street Journal.
The upward pressure on prices will likely continue as companies run out of ways to avoid or absorb the effects of the tariffs. "Those cost increases will be passed on to the consumer in some way, shape, or form," Boston College economist Brian Bethune told the Associated Press.
Gus Faucher, the top economist at PNC Financial Services Group, told CNN that while lower gas prices helped offset the inflationary effect of Trump's tariffs, consumers probably won't be able to rely on that dynamic for long. "Gas prices are down, but we can't count on that to keep inflation low," he said. "So, even if energy prices stabilize and gas prices are just stable, then that means that overall inflation is going to be higher, and that is going to put more pressure on consumers."
The bottom line: Inflation held steady in July overall but also showed signs of some underlying acceleration. The big question for American consumers and Fed officials is just how strong the two trends turn out to be relative to each other in the coming months.
National Debt Tops $37 Trillion; Tariff Revenues Jump
The national debt topped $37 trillion for the first time, the Treasury Department reported Tuesday, even as customs duties soared to $28 billion in July due to President Trump's increased tariffs on trading partners around the world.
Compared to July a year ago, customs duties were $21 billion higher, a 273% increase. Nevertheless, the monthly budget deficit rose to $291 billion, a 19% increase compared to a year ago. Receipts for the month were up 2% to $338 billion, while outlays rose 10% to $630 billion, a record high for July.
Treasury said there were significant calendar differences between 2024 and 2025 (i.e., the number of weekdays), and without those anomalies, the relative increase in the deficit would have been a bit smaller.
Over the first 10 months of the fiscal year, which began in October 2024, the deficit was $1.63 trillion.
Debt climbing faster: Five years ago, the Congressional Budget Office estimated that the national debt wouldn't hit the $37 trillion mark until after 2030, but the emergency spending during the Covid-19 pandemic greatly accelerated that timeline. A new round of tax cuts from Republicans this year will only speed the growth of the debt.
Trump and various White House officials have spoken about their intention to use tariff revenues to help reduce the debt, but even with the big jump in revenues recorded over the last few months, it's unlikely that tariffs will do much to alter the trajectory of debt growth.
Wendy Edelberg of the Brookings Institution told the Associated Press that the new Republican tax bill signals "that we're going to borrow a lot over the course of 2026, we're going to borrow a lot over the course of 2027, and it's just going to keep going."
Trump Picks Conservative Loyalist to Head Bureau of Labor Statistics
President Trump on Monday evening announced that he will nominate E.J. Antoni, an economist at the conservative Heritage Foundation and contributor to Project 2025, to lead the Bureau of Labor Statistics, replacing Erika McEntarfer, who the president fired on August 1 after the release of a dismal July jobs report that included sharply lower revisions to job gains in May and June.
Antoni's selection has quickly drawn intense criticism from mainstream economists who question his qualifications and worry that Trump will politicize government data on employment and inflation as part of a larger campaign to push back on facts that don't reflect well on his administration or comport with his view of the world.
"Our Economy is booming, and E.J. will ensure that the Numbers released are HONEST and ACCURATE," Trump wrote in a post on social media announcing the pick. "I know E.J. Antoni will do an incredible job in this new role."
Who is E.J. Antoni? He's a familiar name to people who consume conservative media. Antoni got his Ph.D. in economics in 2020 from Northern Illinois University and was an economist at the Texas Public Policy Foundation. He now serves as chief economist at the Heritage Foundation's Hermann Center for the Federal Budget. Heritage Foundation President Kevin Roberts called Antoni a "stellar choice" by Trump. "EJ Antoni is one of the sharpest economic minds in the nation-a fearless truth-teller who grasps that sound economics must serve the interests of American families, not globalist elites," Roberts said in a statement.
Criticisms of BLS: Antoni must still be confirmed by the Senate, and he is likely to face intense grilling about how he would lead the agency and handle its highly important and sensitive data, and in particular any numbers that might anger the president or conflict with White House messaging.
The Trump administration has criticized the Bureau of Labor Statistics for large revisions in monthly jobs data, and the president has claimed without evidence that the numbers were "rigged" against him. Antoni also has a history of criticizing the bureau he now stands to lead. In an appearance on Steve Bannon's podcast after the July jobs report came out, Antoni called McEntarfer "incompetent" and agreed with the suggestion that having a Trump loyalist at the Bureau of Labor Statistics would help address problems that have resulted in large revisions to the data.
BLS survey response rates have fallen since the Covid-19 pandemic and economists have called for investments to improve and modernize the government's data collection. But they dispute the suggestion that the data is rigged or manipulated for political purposes.
"There are better ways to collect, process, and disseminate data-that is the task for the next BLS commissioner, and only consistent delivery of accurate data in a timely manner will rebuild the trust that has been lost over the last several years," Antoni wrote in a post on X last week.
In another recent interview, he called for suspending the monthly jobs report until it can be made more reliable and persistent methodological flaws can be addressed. "Until it is corrected, the BLS should suspend issuing the monthly job reports but keep publishing the more accurate, though less timely, quarterly data," Antoni told Fox News on August 4, adding, "Major decision-makers from Wall Street to D.C. rely on these numbers, and a lack of confidence in the data has far-reaching consequences."
Economists slammed the idea of suspending the monthly report - and Antoni reportedly has backed away from the suggestion, according to CNN. But independent economists of various political stripes also savagely criticized his qualifications to head the federal agency.
- "He's utterly unqualified and as partisan as it gets," Stan Veuger, a senior fellow at the conservative American Enterprise Institute, told The Washington Post. Veuger told Axios that Antoni's "work at Heritage has frequently included elementary errors or nonsensical choices that all bias his findings in the same partisan direction."
- "I don't think I have ever publicly criticized any Presidential nominee before. But E.J. Antoni is completely unqualified to be BLS Commissioner. He is an extreme partisan and does not have any relevant expertise. He would be a break from decades of nonpartisan technocrats," Jason Furman, a Harvard economist who led President Obama's Council of Economic Advisers, posted on X.
- Another left-leaning economist, Justin Wolfers of the University of Michigan, wrote on X that Antoni "is disastrously terrible" and has "few credentials beyond a long history of misrepresenting or misunderstanding basic economic statistics," with no demonstrated commitment to truth. He added that Antoni's background as an economist "would be insufficient to earn a job as a junior staffer at BLS."
Fiscal News Roundup
- US National Debt Reaches a Record $37 Trillion, the Treasury Department Reports – Associated Press
- Pentagon Plan Would Create Military 'Reaction Force' for Civil Unrest – Washington Post
- Inflation Held Steady in July as Tariffs Ripple Through Prices – Washington Post
- US Core CPI Picks Up at Fastest Pace Since January – Bloomberg
- US Treasuries Rally as July Inflation Data Boosts Rate-Cut Bets – Bloomberg
- Trump Nominates Bureau of Labor Statistics Critic to Replace Fired Agency Head – Washington Post
- Trump's Pick for BLS Commissioner Floated Suspending the Monthly Jobs Report Before Apparently Backing Off – CNN
- 'Crazy!!': How Labor Statistics Staff Reacted to Trump Firing Commissioner After Dismal Jobs Report – Associated Press
- Trump Calls on Goldman to Replace Economist Over Tariff Stance – Wall Street Journal
- Trump Admin Claims Social Security, Medicare at Risk if Tariffs Blocked – Axios
- Trump Is Considering Suing Jerome Powell, White House Says – CNN
- Bessent on Tariffs, Deficits and Embracing Trump's Economic Plan – Bloomberg Businessweek
- Harvard and White House Move Toward Potential Landmark Settlement – New York Times
- Second MAHA Report's Release Delayed – The Hill
- Judge Tells Trump Officials to Release Funds for Democracy Group – New York Times
Views and Analysis
- Trump Appointments Could Spell Breakdown of Economic Trust – Courtenay Brown and Emily Peck, Axios
- The Lines Between Monetary and Fiscal Policy Have Blurred – Duncan Weldon, Financial Times
- The 'Chicken Tax' Offers a Scary Lesson About Trump's Tariffs – Eric Boehm, Washington Post
- The Case for Fed Cuts Suddenly Has Some Holes – Jonathan Levin, Bloomberg
- Now Trump Wants an Export Tax – Wall Street Journal Editorial Board
- No Help Wanted, No Economic Growth – Marc Sumerlin, Wall Street Journal
- What if Trump Picks an Inflation Nutter for Fed Chair? – Chris Giles, Financial Times
- NIH Director: Why We Are Pivoting Away From mRNA Vaccines – Jay Bhattacharya, Washington Post
- Kennedy Is Gutting Health Advisory Panels to Weaken the Affordable Care Act – Miranda Yaver and Elixabeth Jacobs, The Hill
- Social Security at 90: Where the Program Stands and How to Fix It – Andrew Dorn, The Hill
- There May Be a Hefty Price for Hurting Small Businesses – Patricia Lopez, Bloomberg
- Democrats Delivered Millions to Texarkana. It Didn't Matter One Bit – Thomas B. Edsall, New York Times