What's happened
Economists and political figures forecast a positive economic shift in 2026, driven by tax refunds, lower inflation, and policy reforms. Despite recent consumer concerns, experts believe inflation will decline significantly in the first half of the year, boosting real incomes and growth prospects.
What's behind the headline?
Economic Outlook and Policy Impact
The forecasts suggest that 2026 will be a pivotal year for the US economy, with substantial improvements expected due to recent policy changes. Bessent predicts a drop in inflation within the first six months, supported by falling rents and energy prices, which are partly attributed to stricter border enforcement and reduced immigration.
The focus on tax refunds and increased capital investment indicates a rebound in real wages and growth, with GDP expected to reach 3.5% by the end of 2025. This aligns with the belief that deregulation and supply-side policies will curb inflation, contrary to the Federal Reserve's view that growth fuels inflation.
However, consumer sentiment remains fragile, with many Americans still feeling the pinch of high prices, especially for groceries and housing. The recent polls highlight a persistent negative outlook, which could influence political dynamics and policy priorities.
The debate over tariffs remains central, with some voters skeptical about their long-term benefits despite the administration's claims of strategic gains. The broader economic narrative is intertwined with political narratives, especially as inflation continues to affect everyday expenses.
Overall, the outlook hinges on policy effectiveness and consumer confidence, with the potential for a more stable and growth-oriented economy if inflation declines as predicted and consumer spending stabilizes.
What the papers say
The New York Post reports optimistic forecasts from economic analyst Bessent, emphasizing tax refunds and policy reforms as drivers of growth. Conversely, the NY Post article by Ariel Zilber highlights ongoing consumer struggles, with half of Americans finding it harder to afford holiday gifts and essentials, reflecting persistent inflation effects.
Politico's coverage underscores the widespread affordability crisis, with nearly half of Americans skipping medical appointments and unable to afford leisure activities, illustrating the deep economic strain despite positive forecasts. The contrasting narratives reveal a complex picture: while some experts see a promising economic trajectory, many Americans continue to grapple with high costs and economic uncertainty, which could influence political and policy developments in 2026.
How we got here
Recent economic data reveal mixed signals, with ongoing inflation and consumer concerns about affordability. The political landscape is influenced by debates over policies like tariffs and immigration, which impact inflation and housing costs. The current outlook is shaped by recent policy shifts and economic indicators, including job growth and inflation rates.
Go deeper
More on these topics