Q&A of the Day – Are We on the Verge of a Booming Economy?
Each day I feature a listener question sent by one of these methods.
Email: brianmudd@iheartmedia.com
Social: @brianmuddradio
iHeartRadio: Use the Talkback feature – the microphone button on our station page in the iHeart app.
Today’s entry: Brian, Thank you for always answering my emails. Many times, my questions are based on discussions with cynical friends, and you are the tie breaker. About the economy, I agree with you that its about to boom but my cynical friend sent me this article about household credit debt increasing: https://www.reuters.com/markets/wealth/us-household-credit-troubles-worsened-end-2025-new-york-fed-says-2026-02-10/
From the article: "US household debt rises to $18.8 trillion in Q4, up $191 billion from 3Q
Mortgage delinquencies grow in lower-income areas despite overall low rates
Student loan delinquencies elevated at 9.6%, serious delinquency rate at 16.2%
Fourth-quarter auto loan balances were $1.7 trillion, up $12 billion from the third quarter."
Can this exist in a booming economy, or are these two unrelated, independent stats?
Bottom Line: Appreciate both the note and being a tiebreaker in your debates... This is a great debate topic. Before diving into any macro-economic information in addressing the overall economic state-of-play... I’ll start with something I’ve long said and will forever remain true. Politicians can lie about what policies will do, and those who’re inclined to believe them will, but you can’t lie to people about what is or isn’t in their wallet because they know.
My point referring to that saying in the context of today’s conversation is this. Any conversation about what’s a good economy or a bad economy is inherently subjective. Even in the best of economies there are people who fall on hard times and struggle (just fewer of them). That is to say that there will never be unanimity within this conversation and regardless of circumstances there will always be people struggling that one can point to as a counter point if they want to. Consider that in history of Gallup’s polling, for example, regardless of the economy at least 9% of the population said the state of the economy was the “The Nation’s Most Important Problem”, and on the other side during the greatest time of economic duress 14% of people said the economy wasn’t the biggest problem. Related, in Gallup’s Economic Confidence Index – which asks of our view of current economic conditions on a scale from –100 to +100 (meaning zero is parity) the highest recorded number is positive 56. In other words, on a fully adjusted basis, in the best economy ever sampled according to most Americans there were still 28% of people who said it wasn’t a good economy.
What most commonly happens is that when politics enters the equation, we seek confirmation of our bias. As I’ve established, regardless of the economy – if you’re looking for data to support your view – you'll be able to find it. The Reuters story shared with you is an example of this. Is household debt and credit a legitimate economic issue? Absolutely. Is student loan debt, for example, representative of a good or bad economy? Hardly. Consider that only 12.5% of adults have student loan debt, and that only 16.2% of them are in serious delinquency. Or in other words only 2% of the American adult population. This is how economic data can be used for manipulation. What’s more is that many of the 2% are delinquent by choice, not true economic duress, as many were sold a bill of good by the Biden Administration that they’d never have to pay back their student loans and have chosen not to repay what they owe.
So, the bottom line for me is this when evaluating whether an economy is good or bad. Is the average person getting ahead or falling behind? It’s an apolitical thing. If the average person is getting ahead, we’re in some state of a good economy. If the average person is falling behind, we’re in some state of a bad economy. On that note consider this:
- During the four years of the Biden administration real earnings (meaning average household incomes net of inflation) dropped by 1.6%
It is a matter of fact that the average person, that the average household, was worse off economically in their day-to-day life at the end of the Biden administration (and all throughout it as well), then they were at the beginning of it. Now consider this:
- During the four years of the first Trump administration real earnings rose by 5.9% during his first three years (pre-COVID) and 7.1% cumulatively
This means that the average household was significantly better off during the first Trump administration prior to COVID and actually a even a bit more so with the COVID year factored in.
- During President Obama’s eight years real earnings rose by 5.3%
In other words, the average American was better off at the end of the Obama administration than at the onset of it, however – Americans made more progress during President Trump’s first three years in office than occurred in all eight Obama years. That takes us to today.
With this week’s jobs report we now have the first full year’s data in and the survey says...
- Through the first year of the Trump administration real earnings are up 1%
So, the average American is once again seeing an improving quality of life. There are two sides to stories, one side to facts, these are the facts. And my argument for the economy going from one that’s improved for the average American to one that could boom by next year is predicated on my belief that that most who will benefit from the additional tax cuts in the Trump tax policy (Social Security recipients, those who earn tips, and those who earn overtime) will only start to realize those benefits as tax season unfolds and they commonly will receive either big refunds or much lower tax liability than planned. Research shows negligible numbers of Americans adjusted their federal withholding to reflect the Trump tax cuts which were made retroactive to January of last year. Those additional cuts in addition to lower borrowing costs (which will assist with the debt concerns btw), will likely create additional economic momentum throughout the year. Effectively a repeat of 2018 into 2019.