Concerned consumers keep on spending

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I got inflation, tariffs, and the politics of this economy.

What do you got?

From American Public Media.

This is Marketplace.

In Los Angeles, I'm Kyle Rizdahl.

It is Friday today.

This one is the 15th of August.

Good as always to have you along, everybody.

Geopolitics is in the headlines today.

We will touch on that at the end of the program.

But allow me to remind you here that the economy works 24-7 no matter what else is going on, and we are here for it.

Greg Gibb is at the Wall Street Journal.

Rachel Siegel is at the Washington Post.

Hey, you two.

Hey, great to be here.

Greg, I would like to start with you, and I would like you to explain for me and for the listening audience what happened with the Consumer Price Index and the Producer Price Index this week.

The CPI came in, you know, steady, but a little higher than everybody was hoping.

And then the PPI came in and blew it out of the water really, really high.

Discuss and explain, please.

Sure.

Well, everybody's been watching the inflation data carefully to see if there are any signs of the tariffs that President Trump has imposed coming through to the consumer.

Now, in these reports, we saw some evidence of that.

For example, prices of some household goods going up in price, but not that much evidence.

But we did see worrisome signs that prices of services, things like, you know, going to the dentist, those seem to be, you know, gathering steam again.

And the overall picture we see, Kai, is that inflation, which seemed to be like nice and gently cruising downwards towards that 2% target that the Federal Reserve wants, has started to move back up again.

And it's kind of stuck around 3%.

And that's kind of a problem, right?

Because people want the Federal Reserve to cut interest rates.

And the Fed's saying, well, how can we cut interest rates when inflation seems to have stopped dropping and seems to be moving up again?

So Rachel Siegel, take it from there and tell me what this means for consumers in this economy who are,

as we well know, all important.

They're all important and they're also exhausted, right?

They're on years of rising prices and wondering if their grocery bill is going to keep creeping up or if their rent is going to keep creeping up.

We've seen a lot of instances of businesses still being able to absorb some of those prices.

So, I think there's still an element of waiting to see how much ends up on that sticker price, how much consumers are facing.

But we know that they don't have all that much room to give and they don't necessarily have a lot of patience with the price hype that will still be coming.

Greg, that's the key, right?

The company is absorbing because we saw, you know, a month-ish ago, whatever it was, when GM and the big car companies came out and said, tariffs have cost us a billion dollars.

There's not a company in the world that's going to be able to keep absorbing that, right?

Well, that's right.

I mean, so your choice is basically you absorb the price, but eventually it no longer makes sense to your shareholders and to your company to keep absorbing that cost because, you know, that's not what you're in business for.

You're in business to make a profit.

So you do one of two things.

You stop carrying that product,

you raise the price to the consumer, or you start sourcing it elsewhere.

So far, we haven't seen those things happen.

But it's actually early days, Kai, if you think about it.

I mean, the president only finalized, quote-unquote, and as final as anything that can be said to be final under this administration, tariffs with major trading partners.

And there are some still, like China, Kennedy, Mexico, that aren't done.

So bottom line is the kind of certainty that businesses have been waiting for has only just

started started to arrive and we may not know the full effect of these tariffs for some months.

Well, let's keep going there, Rachel, because

early days sounds painful because we've been dealing with tariffs now, or at least the substantive talk of them since January.

But it occurs to me that there's a parallel here.

Work with me on this one.

With monetary policy, which works, as we all know, with a long and variable lag.

It's possible that tariffs and the way this is going to roll out through the economy is going to have some kind of long and variable lag, and it could be like Christmas before we really start feeling the squeeze.

What do you think?

So draw the direct line to the Fed that they are trying to be patient.

They're trying to

tell you what, Rachel, we're going to try to reconnect with you because you kind of went away.

And Greg, I'm going to ask you to pick up that same question, the long and variable lag thing.

So what the Fed has to now weigh is that it has two things to think about.

They have to think about inflation, which is a little bit high, but they also have to think about the job market, right?

And the last report told them that the job market looked quite weak.

Now, I'm of the view that they don't have to worry too much about the job market.

Look, the stock market just hit a record.

Wait, wait, hold on, really?

Yeah.

You know, the unemployment rate's not going up that much, so the weak job growth seems to be maybe because there's fewer people looking for jobs.

You know, a lot of immigrants have been forced to leave the country.

Also, the stock market just hit a record about a week ago.

The stock market doesn't normally hit a record right before you go into a recession.

But it looks kind of like the Fed's going to have to split the difference.

Maybe cut interest rates a little bit, you know, to recognize the fact that they don't want the job market to get any weaker than it already is, but not cut them so much that it basically allows inflation to take off back to those troubling regions that we were in a year ago.

So let me ask you, actually, since you brought it up, the stock market, people,

and this is a true story, and it actually happens, I'm in the vegetable aisle at the local Piggly Wiggly, and people who know me say, what is going on with the market?

Because there's tariffs and people are nervous and all this jazz, and yet the market keeps hitting record highs, Greg.

What's going on?

Kai, did any of them ask you for stock dips?

Because if they did,

we know what that means.

It's time to sell, right?

Okay.

Well, there's actually kind of two stock markets going on right now.

There's what we call the Magnificent Seven, or broadly anything connected to tech, anything connected to AI.

That's the one that's been carrying the big broad market like the S ⁇ P 500 to record highs.

Everything else is doing kind of okay.

Better than it was in April at the height of the panic over Liberation Day tariffs, but really not that great.

I think investors are in some sense in this mode of thinking, well, the economy's kind of like been mushy and the job numbers don't look good, but hey, that means Fed's going to cut interest rates.

So you're in that kind of weird scenario right now where bad news is sort of good news because bad news means the Fed will cut interest rates, which means growth will be stronger and interest rates will be lower and that means stocks look better.

Right.

Okay.

Last thing for you, Greg, and I'm not sure we're going to get Rachel back at all.

So we're just, you and I are just going to run with this one.

The changing nature of American capitalism.

We have now a president of the United States who is extremely personally involved in this economy.

He has the government taking shares,

taking 15% of NVIDIA's chip sales, some of the chip sales to China, talking about a stake in Intel.

It's different now.

Well, it really is.

I mean, 25 years ago, we thought China would become more like the U.S.

economy.

Now it feels like the U.S.

is becoming more like China's economy, right?

It's not socialism, but it's certainly not pure free market capitalism.

It feels to me a little bit like state capitalism, where the government doesn't own the companies, but it kind of tells the companies what to do.

And you can sort of see the argument for this that actually began under Joe Biden saying, hey, things like semiconductors, they're really important for national security.

The government has to have some say in where those things are made.

So there is some kind of bipartisan consensus that more government involvement in important some sectors might be okay.

But I think the president's going a lot further than this, making it a lot more personal, and also doing so without clear constitutional or legal ground rules about how this is done.

And I think it raises some question marks.

How far does this go?

Yeah, and talk to me about that.

We got 45 seconds left.

The net effect on the economy.

What do you suppose happens?

Well, to the extent that perhaps some wise government guidance gets companies to invest in things that they haven't invested in enough before, like semiconductor manufacturing, maybe that's a good thing.

But there's a reason why Americans kind of like free market capitalism, which is that the history of the state out-guessing private investors about how to invest is not good.

And if you look at the countries that have done state capitalism, like Russia or Brazil, and even China to a certain extent, they have not been as successful economically as the United States.

Greg Ipp at the Wall Street Journal on this Friday, we had Rachel Siegel from the Washington Post for a little bit before technical difficulties got in our way.

Thanks, Greg.

We'll talk to you soon.

Thanks for having me.

Wall Street headed into the weekend.

Traders were of mixed minds.

Not a whole lot of enthusiasm or conviction.

Either way, details, numbers, when we get there.

We got two readings on the state of the so-far-resilient American consumer, as Rachel was alluding to this week.

But they were a little bit at odds.

Consumer sentiment was down in early August, down a whole lot, to be honest with you.

That's according to the University of Michigan's regular index.

Retail sales, though, not how consumers are feeling, but what they are actually buying, they were up in July, just as much as everybody had been guessing.

Less up than June, but you know, up.

Marketplaces: Kimberly Adams sorts that one out for us.

With the half a percent rise in retail sales in July.

The underlying picture, I believe, is consumers are cautiously spending on things.

Sharmila Chatterjee teaches marketing at MIT's Sloan School of Business.

That cautious part is key.

July had a lot of big sales.

Prime days, Walmart discounts, other retailers copying those sales.

And so consumer responding to, you good value for money.

So they are responding to those promotions.

So the spending bumps in June and July show consumers are game to shop.

But carefully, says Shika Jane, lead partner for consumer retail with business consulting firm Simon Kucher.

And we have to remember that a lot of folks are also using debt, so credit cards and other means to finance their lifestyles.

Jane also pointed to a pullback in restaurant spending in July as consumers focus on core needs and again, value for their money.

Restaurants used to be and especially fast foods used to be you would be able to get a lot of bang for your buck, but that's changed.

A lot of folks are no longer finding quick service restaurants or fast food a viable option.

Another reason consumers keep spending despite everything,

says Katie Thomas, who leads the Kearney Consumer Institute.

It's retail therapy.

She points to the uptick in spending on clothes and other small luxuries.

So despite the fact that they're well aware of all the uncertainty and the tariffs and economic struggles, they're really using spending as a control mechanism.

You may not be able to control what's happening in politics or the rest of the world, but you can buy a cute new top.

In Washington, I'm Kimberly Adams for Marketplace.

Debt is something of a recurring theme on this program.

Personal debt, corporate debt, also, and specifically for us right now, government debt, of which we have a lot.

Of course, we're not the only country in the world in that specific pickle.

Over in the UK, as a result of all their debt, there's a push for something called a wealth tax, a modest tax, experts over there say, modest is their word, not mine, on assets over £10 million, a bit more than $13 million.

They say it would raise a ton of money.

A wealth tax here is becoming, if not popular, popular, then more popular than it once was, especially as the wealth gap in this economy grows.

But actually getting it done?

As our special correspondent Stacey Vanning Smith explains, that's complicated.

The U.S.

has been home to some very weird taxes.

There have been taxes on tattoos, playing cards, wild blueberries, hot air balloons.

Missouri even tried out a bachelor tax on single men in the 1820s.

But the federal government gets most of its money from the income tax, administered by the IRS.

I'm one of the few people out there who is a fan of the IRS.

This is Janet Holtzplatt, Senior Fellow at the Urban Brookings Tax Policy Center.

Do you get like excited during tax season or?

Oh my God.

You know, I used to coincide doing my taxes during Oscars.

So two of the biggest thrills in my life.

Wait, really?

Yeah.

Holtzplatt gets excited about all the good her taxes will do for society.

Recently, there has been a lot of discussion about a different kind of tax, a wealth tax, that is essentially a tax on property instead of income.

After all, a lot of the wealthiest people don't make a big income.

Their money is tied up in houses or stocks or super yachts or art collections.

That's got politicians like Bernie Sanders and Elizabeth Warren calling for a tax on wealth.

There's just one problem.

A wealth tax is essentially banned in the U.S.

Constitution.

When we think about how the Constitution came to be, there was a long struggle.

Beverly Moran is a law professor emeritus at Vanderbilt.

North Carolina, South Carolina, Georgia, Virginia.

What did all those states have in common?

They were slave-holding states.

They were agricultural states.

What they were afraid of was taxes on land and taxes on slaves,

both of which would be wealth taxes.

To get the southern states on board to join the Union, the northern states agreed to essentially ban federal taxes on property in the Constitution with this line: quote, representatives and direct taxes shall be apportioned among the several states.

So, this does not sound like much, but it essentially means that if the government were to collect a wealth tax, it would have to make sure the amount collected from each state from that tax was in exact proportion to the population of that state relative to the national population.

If California has 50 50 representatives and Wyoming has one representative, the people in California have to pay 50 times more than the people in Wyoming.

Like the math just has to come out to that.

Yes.

I mean, except it's even worse than that because it has to come out person by person.

So it's like impossible.

It's impossible.

It's impossible.

States and localities can tax wealth, and they do.

Property, cars, boats, business equipment, but nationally, no can-do.

Moran says the Constitution would have to be amended, or a Supreme Court ruling would have to allow it.

But even if that happened, Janet Holzblatt of the Urban Brookings Tax Policy Center isn't convinced it would work.

It's really, really difficult to administer.

And that's been the challenge for many European countries.

that have tried to do wealth taxes in the past.

In 1990, 12 European countries countries had a wealth tax in place.

Only three of them still do.

Holzblatt says one reason for this is the countries that put a wealth tax in place, even a really small wealth tax, saw people's reported wealth drop off a cliff.

Take Switzerland.

We found a 1% wealth tax was associated with a 43% reduction in reported wealth.

Some ultra-wealthy people just moved countries to avoid paying.

That's part of what prompted France to cancel its wealth tax.

Also, figuring out how much people should pay isn't easy.

Income tax is very straightforward.

You take a percentage of somebody's paycheck.

But how do you figure out the value of a Rembrandt or a wine collection or a Louis Couture's footstool?

It requires specialists and time.

But that raises both policy and administrative issues.

Issues that require manpower, which is a tall order these days.

The IRS has just had its budget cut by about 20%

and its staff reduced by about 25%.

In New York, I'm Stacey Vanix-Smith for Marketplace.

Coming up.

He must not have needed gas.

The limo stopped him a driveway.

That time Vladimir Putin went for a drive in New York City.

But first, let's do the numbers.

Dow Industrials cruised up 34 points today, 8 tenths percent, finished at 44,946.

The NASDAQ gave back 87 points, about 4 tenths percent, 21,622.

SP 500 gave up 18 points, 3 tenths percent, 6, 4, 4, 9 there.

For the week, the five days gone by the dow jumped one and three quarters percent the nasdaq was up eight tenths percent s p 500 climbed nine tenths percent consumers as kimberly was telling us continue to buy buy buy walmart the undisputed champion of in-store sales shrugged off six tenths percent today amazon stock was stuck kind of in neutral basically no change target sank one and two tenths percent today united healthcare got some welcome relief after losing close to half its value over the past year.

Warren Buppets, Berkshire Hathaway, bought 5 million shares of the healthcare company, investment of around a billion and a half dollars.

Chump change

for ticker symbol BRK.

Bonds down, yield on the tenure, T-Note rose 4.32%.

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This is Marketplace.

I'm Kai Rizdahl.

The arts are a tough business, even in the best of times.

All the time, really.

And it's especially difficult now as the White House demands alignment with President Trump's priorities.

Three months ago, the National Endowment for the Arts pulled grants from hundreds of organizations across the country without warning.

The president's budget for fiscal year 2026 strips NEA funding completely.

Republicans in the House want to cut it almost in half.

Marketplace's Nova Sappho has more now on how arts groups have been coping over the summer and what they are planning to do in their uncertain future.

In mid-July, the literary-focused organization Youth Speaks held its annual Poetry Slam Festival in Madison, Wisconsin, despite a last-minute funding cut from the National Endowment for the Arts.

Show some love to these poets, everybody!

Yes!

The festival was supposed to get $45,000 from the NEA.

Then came a letter in May canceling the grant.

Joan Osado, one of the leaders at Youth Speaks, says they scrambled to trim their budget.

They sent fewer permanent employees to work the festival and relied more on temporary staff.

We are hopeful that the cuts did not impact the quality of the program.

If we were to ask folks like who were in this festival, they did not go without.

Arts organizations have employed a mix of strategies over the last several months.

Youth Speaks tightened its budget.

The Denver theater group Suteatro looked for private funds.

Tony Garcia, the group's executive artistic director, says they lost a $15,000 NEA grant earmarked for a play.

Just a sliver of their $2 million budget, but important for the performance.

And our community responded, we had an individual donor covering the $15,000, and then there were a number of individual donors who were like, yes.

Garcia says they raised more money than they lost, and they still intend to present the play this fall.

They saw, our community saw this as an opportunity for resistance.

Arts leaders say foundations and donors are stepping up, but private funding won't be an option for lots of other arts groups around the country.

The impact of the cuts is most felt by small and mid-sized cultural organizations.

Claire Rice heads the advocacy group Arts Alliance Illinois.

Especially in rural areas, in smaller towns, this public funding is one of the most equitable sources of funding and folks are just more heavily reliant on it.

With the loss of federal funds, Rice's group has focused on local government money.

In late May, Arts Alliance Illinois scored a victory at the state legislature, getting a substantial increase in state arts funding to help offset NEA cuts.

City leaders in Chicago also announced new arts funding.

Other states, Blue and Red, have done the same.

Chris Kiley is the executive director of Texans for the Arts.

I'm very proud that we were able to secure an additional $7.9 million for the Texas Commission on the Arts, which is our state arts agency.

And while new state funding will help, Kiley says the NEA cuts will still have significant impacts.

Arts groups estimate the rescinded NEA grants total about $27 million across the country.

So what we're seeing is you may not lose an entire program, but you may have to drastically cut the number of teaching artists you have, or you may have to drastically cut the number of opportunities to engage in an arts program that you provide.

The NEA gave organizations which lost funds the chance to appeal.

Many did, including Tony Garcia's group, Suteatro.

He says he's still waiting to hear back.

The trust that we had in the government in that part of the government is gone.

And to me, that's the hardest thing to replace.

Joe Nosato of Youth Speaks also appealed their funding cut.

No response yet for her group either.

Osato told me she's written off the NEA, at least for the time being.

I'm Nova Safo for Marketplace.

We rarely, and I mean rarely, rerun stories on this program.

And when we do, it's because there's news-specific relevance, or sometimes because we just really like the piece.

This one is both.

There's that meeting happening up in Alaska today, as you know.

It'll be Vladimir Putin's eighth trip to the United States, his first in 10 years.

We, though, are going to take you back today to 2003, a visit to see then-President Bush with a detour to New York City.

Here's one-time marketplace great Bob Moon with a story that shows once again, the more things change, the more they stay the same.

When a public relations agency told us to show up at a Westside gas station at noon today, if we wanted to meet the President of Russia, how could we resist?

And sure enough,

the Navy Blue Limousine pulls up and out steps Vladimir Putin.

What was he doing there?

He must not have needed gas.

The limo stopped in the driveway.

He was quickly ushered inside and we pressed our noses to the window.

Did you win to the men's room?

Not the men's room, really.

That photographer was just joking.

Actually, the Russian leader was grabbing coffee and a donut.

He's got a Krispy Kreme donut.

He's got a Krispy Kreme donut.

New York Senator Charles Schumer confirmed it.

When I showed the president of Russia a Krispy Krem donut, and he ate it and said it was good, that was one of the more surreal moments that I've had in politics.

Who could doubt that?

But let's get down to business.

Putin was really there helping launch 1,300 new Luke Oil gasoline stations, which a Russian oil firm bought from Getty Petroleum.

Putin didn't speak, but Schumer was more than happy to offer his thanks.

New oil from Russia, he says, can only help give OPEC a run for the money.

At a gas station in New York, I'm Bob Moon for Marketplace.

This final note on the way out today, which might, depending on how you feel about it, it might be this week's sign the apocalypse is upon us.

Sam Altman, the CEO of OpenAI, the company behind ChatGPT, did an interview with journalists this week in San Francisco.

Lots of interesting stuff about artificial intelligence and what he said, where Altman thinks it's going, whether he thinks AI is a bubble right now.

He does, by the way.

But then he said OpenAI is likely going to spend trillions of dollars on data centers in the not very distant future.

And then he went on, and this is a direct quote.

You should expect a bunch of economists to wring their hands and be like, oh, this is so crazy.

It's so reckless.

And we'll just be like, you know what?

Let us do our thing.

I don't know.

I don't know.

Our theme music was composed by B.J.

Leonerman.

Marketplace's executive producer is Nancy Fargalli.

Joanne Griffith is the chief content officer.

Deal Scarborough is vice president and general manager.

And I'm Kyle Risdall.

Have yourselves a great weekend to everybody.

We will see you right back here on Monday.

All right.

This is APM.

Bubba Wallace here with Tyler Reddick.

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