Income, spending and profits explain why Americans see a two-sided economy

Thursday featured the release of the always-important income and spending report, and it’s what you likely imagined it to be. Year-over-year inflation still rising, and consumer spending barely growing beyond the price increases.

Inflation-adjusted consumer spending increased just 0.1% last month, while the personal consumption expenditures price index rose 3.8% from a year earlier, the most since 2023, a report from the Bureau of Economic Analysis showed Thursday. The so-called core PCE index, which excludes food and energy items, was up 3.3% from a year earlier.

The numbers suggest consumers are facing increasing pressures as uneven hiring trends and the rising cost of living erodes incomes and savings. The surge in prices for fuel and other materials sparked by the Middle East conflict is reverberating through the economy and has driven consumer sentiment to record lows.

While consumer spending did exceed inflation last month, income growth didn’t keep up with rising prices. That meant Americans continued to reduce their savings rates in April.

Personal income, a metric which is not adjusted for inflation, was flat in April, while wages and salaries advanced 0.2%. Inflation-adjusted disposable income fell 0.5%, marking the third straight monthly decline. The saving rate dropped to 2.6%, the lowest since 2022.

Retailers including Walmart Inc. have warned that high fuel costs are squeezing their bottom lines and may soon begin to show up in prices of products on their shelves. Higher tax refunds have helped support consumer spending in recent months, though they’ve been partly offset by prices at the pump rising to the highest levels in nearly four years.

UW-Madison professor Menzie Chinn has a telling graph at Econbrowser, where you can see how inflation-adjusted consumption has kept rising in the last year, while real incomes stayed around the same level for the rest of 2025, and are now declining in 2026.

And on a per-capita basis, inflation-adjusted disposable incomes in America have now fallen below where they were at in November 2024 – when Donald Trump was returned to power in large part because enough low-info American voters thought he would improve people’s economic situation.

Also notice that real per-capita incomes had gone up nearly 9% in the 31 months from that trough in June 2022 to Trump’s election in Nov 2024. And unlike 2022, there aren’t 2 years of stimmy payments in the bank to pay the higher bills in our inflationary times of 2026.

Another report that I was awaiting on Thursday morning was the updated figures for GDP growth for the first 3 months of 2026.

Separate BEA figures showed the economy expanded in the first quarter at a 1.6% annualized pace, slower than previously estimated after downward revisions to inventory investment and consumer spending. The initial estimate last month showed 2% growth.

A new item in the revised GDP report was the first look at what corporate profits were over the first 3 months of the year. And that showed a small increase of just over $40 billion (annualized) for Q1, but up more than $1.85 trillion since the end of 2020.

Along with the small boost in profits, I also see that post-tax corporate profit margins for Q1 2026 were at their highest levels since the end of 2023, maintaining their elevated post-COVID levels.

Let’s see where these profit and margin numbers go with the higher prices and higher costs that have and likely will see for all of the 2nd quarter of 2026.

Speaking of uses of excess profits, let's see what Jeff Bezos is pouring money into these days.

BREAKING: Blue Origin's New Glenn blows up at Launch Complex-36 while attempting to static fire.

[image or embed]

— AZ Intel (@azintel.bsky.social) May 28, 2026 at 8:12 PM

JOB CREATORS, BABY!

Put these obscenely high profits together with the dwindling savings amount and how non-executive Americans are seeing their wage growth falling further below the inflation rate with every month, and you wonder why consumer sentiment is at record lows? Because I don’t.

Stock market up, Americans still driving and spending. So why do consumers hate this economy?

Sign o' the Times from the end of this week.

The gulf between US stocks and Americans’ spirits keeps widening.

The Dow on Friday hit a record high — the same day consumer sentiment hit an all-time low. Beyond pressures from the Iran war, which stock markets have largely shrugged off, AI is a factor in the divergence.

Traders are all-in on AI, but Americans are fretting over its impact on jobs. “The stock market on the moon and households in increasing gloom are reflecting on the same thing,” an economist said: Reduced labor costs may be good for stocks but mean fewer jobs.

The stock market's reaction is noticeably different from the peak inflation times of 2022, when stocks were heading down and growth in jobs and (nominal) wages was much stronger than today.

The odd part about the rock-bottom consumer sentiment is that it isn't translating into an overall recession. New unemployment claims remain at or near multi-decade lows, and even with gas being at similar price levels to the same time in 2022, gas usage stayed elevated through April in 2026, showing little change in habits.

Inflation-adjusted retail sales for the non-car based economy may have dropped in March from February's highs, but they stayed relatively stable in April, even with gas prices going even higher.

But UW-Madison professor Menzie Chinn may have landed on a reason why everyday Americans think the economy sucks so much despite the not-so-bad macro data and the bomming stock market. Professor Chinn found a recent New York Fed survey that indicates that if you're not in the investor class (aka - the bottom 3/4 of Americans by wealth and income), then it probably does feel like a recession, with spending by those groups falling by much more than with richer Americans.

This coming Thursday, we are scheduled to get data that not only reveals April's income and spending for the US economy, but also a revised look at 1st quarter GDP. That GDP report will also include the first look at corporate profits for Q1 2026, which includes the initial rise in gasoline prices.

I suspect we will see a combination of real declines in income combined with contunued increases in profit. It'll be even more evidence of a two-tiered economy that may be giving big gains to a few with the money to gamble with and self-invest, but done at the expense of the typical American who is living paycheck to paycheck, and now has to spend more to get the same things.

Endangered GOPs ask for Dem Guv Evers to revive deal, careers

After the "blockbuster" deal between Gov Evers and GOP Legislative leaders collapsed last week in the Wisconsin State Senate, I noticed that 6 GOP members of the Wisconsin Assembly sent a letter to Governor Evers asking for work to continue on a deal.

We appreciate the progress made through those discussions, particularly efforts focused on returning surplus funds to taxpayers, providing property tax relief, supporting schools, and helping hardworking Wisconsinites manage rising costs. These are the kinds of issues where collaboration matters most. While we may not agree on every issue, we remain committed to working toward responsible outcomes and ensuring politics does not stand in the way of doing what is best for the people of Wisconsin.

Which is why, despite last week’s setback, we encourage you to call the Legislature back into Special Session to continue work on the common-sense reforms that received broad bipartisan support through months of negotiation. The failure of this legislation to advance does not change the reality that Wisconsin families are still facing rising costs and growing pressure on household budgets. We cannot allow political gamesmanship or ideological extremes on either side of the aisle to prevent meaningful progress on issues where common ground clearly exists. Our responsibility to do what is best for Wisconsin did not end with one vote, and our work is far from over.

It is no coincidence that the senders are the 6 GOP Assembly members remaining that will face the voters in districts where Kamala Harris got her highest percentage of votes in GOP-held Assembly districts.

Based on what I’ve been seeing in the Generic Ballot polls, the results from April’s Supreme Court election in Wisconsin, and the size of typical Dem overperformance nationwide, I’m going to assume a baseline case of Dems +8 for November in this state.

So if you look at this map from Marquette University professor John Johnson of the 2024 presidential election in Wisconsin by Assembly district, then move all of these results 9 points toward the Dems (GOP +1 to Dems +8), and let’s see which seats would be likely to flip.

Alternatively, we could go look at our last midterm electorate from 2022, where Governor Evers won by 3.5%, and push those numbers 5 points towards Democrats, that also could be a good base to go off of.

Same story, if not more so with a more-engaged midterm electorate (which trends Dem these days).

Now let’s look at the State Senate map from the 2022 Governor's race.

And lookie there! It’s Howard Marklein’s 17th District that’s very blue, among others! No wonder why he's getting the PAC run by Robbin' Vos' wife to run ads claiming how this guy gets along so well with Guv Evers!

I think the fact that this is shaping up to be a Dem year also explains why many Dems in the Legislature didn't want the "blockbuster deal" to go through. Yes, I think it is worthy to discuss having more fiscal cushion for the next 3 years - we've seen inflation go well past projections for this year, and it does seem like we are heading toward some kind of cutback in consumer spending and a pileup of job losses. And it becomes hard to do significant change to our failing K-12 financing system or transportation investment abilities if there isn't any money around to do so.

But there's also something to be said about sending a reminder to Governor Evers that sometimes you need to act politically to help your party, instead of talking them down when they don't follow along with a plan you and the GOP came up with. Winnebago County Executive and former Assembly Dem Leader Gordon Hintz made that clear in a response to Evers' complaints about Legis Dems earlier this week.

In other words, Dems chose you in the 2018 primary, Tony. Dems stood up for you and upheld all of your vetoes when the Legislature was gerrymandered in favor of tbe GOP throughout your governorship. Now why don't you do US a favor and not bail out these vulnerable Republicans before an election many of them are set to lose, and allow us Dems a better chance to win a trifecta and have the resources to clean up the mess they have left behind.

Yes, I know there’s a long time between now and November. We don’t know who will be the Dem candidate at the top running for Governor, etc. But you sure can see why Dems would be favored to win big, and why a lot of Republicans would want to be seen as independent and conciliatory toward Dems instead of telling people about all of the GOP BS they have supported over the years, and how they blocked most attempts at progress in this state by Governor Evers and other Dems throughout the last decade.

And so when Governor Evers tries to work out a deal that I believe would have helped Wisconsinites and schools in getting through the next year, the Dems in the Legislature that are likely to be in office (and power?) beyond January 2027 said "NOT SO FAST, MY FRIEND! We aren't letting the GOPs in the Legislature off that easy!"

It may not be great governing, but it might be good politics. And it might lead to a better payoff for both Dems and everyday Wisconsinites next year, to recover what has been lost over the last 15 years in this state, and restore some long-needed balance and fairness in our taxing and economic system, as well as the services and investments that WisGOPs have chosen to defund.

Fallout continues from failed "blockbuster" tax and K-12 deal, and why it went down

One week ago, we had a major announcement of a “blockbuster” deal between Governor Evers and top two Republicans in the soon-to-be completely ungerrymandered State Legislature. It was estimated to give income tax rebates to an estimated 2.1 million Wisconsin households, give $302.5 million in property tax relief for K-12 school costs, increase special education aids, and remove state taxes on pay beyond base wages that come from overtime and tips.

Then, by Wednesday, the whole deal had blown up, with all 15 Senate Democrats and 3 Senate Republicans defeating the bill 18-15. Which leaves a lot of fallout for today, and the coming 5 ½ months before a midterm election that will decide who replaces Governor Evers, and who controls each House of the State Legislature.

There is a good breakdown from Molly Beck and Jessie Opoien in Monday’s Milwaukee Journal-Sentinel on what went wrong with the budget deal, and where things go from here. Let’s start with Governor Evers’ fellow Democrats, who had almost 90% of their legislative caucus vote against the deal.

Democratic state Sen. Mark Spreitzer of Beloit said he wants the state to guarantee covering a higher percentage of schools' special education costs than the failed bill would have and doesn't oppose using state funds to pay for special education services and to drive down property taxes like the bill did.

"My biggest issue with this bill is the nearly $2 billion total price tag when we simply can’t afford it," he told the Journal Sentinel.

"Approximately half of the spending would go to a tax rebate that leaves out 1.36 million Wisconsin adults, including seniors and working families, while giving rebates to millionaires and billionaires," Spreitzer said, referring to the bill's proposed rebate checks for income tax filers.

What Sen. Spreitzer is referencing is that the rebate was set up to only be paid up to $300 for single filers and $600 for married couples if someone owed state income taxes for Tax Year 2024. And the LFB's analysis of the bill showed that a sizable amount of low-income Wisconsinites wouldn't get anything at all - especially seniors that might have Social Security as their only source of income, as Social Security is exempt from Wisconsin taxes.

On the Assembly side, Dem Leader Greta Neubauer said she didn’t think the bill did enough to solve the real problems in K-12 school financing.

“We want to pass a budget next cycle that really invests in our schools in a sustainable way and addresses the long-term cycle of referendums and lowers property taxes. It would have been great to get something done now, but we could have been in a position of cutting schools next year if we passed that bill yesterday,” she said.

Neubauer, D-Racine, said the majority of her caucus and Evers “did not see eye to eye about responsible use” of the surplus dollars.

Their primary concern, she said, was that it spent too much and could leave the state unable to adequately respond to future economic challenges.

I went off of the Legislative Fiscal Bureau's rundown of the deal, and then constructed numbers based on the budget update in that paper, and crossed it with the LFB's "structural budget" and related adjustments for the next budget. And I can see where LFB Director Bob Lang gave an estimate of $2.9 billion being neededin the next budget, as the base imbalance would have been over $1.55 billion in both years if the original Evers-Vos-LeMaheiu deal had become law.

But there are a few other variables to throw into when evaluating this bill and the overall fiscal situation. The first is that the Wisconsin Department of Revenue formally released the April tax revenue figures for the State, which includes the end of filing season for Tax Year 2025. And it shows why the Evers Administration believed there would be more funds available than what we’d seen in prior estimates for the rest of the 2025-27.

Even if you add the $200 million to the FY 2025 totals (as Note 1 mentions), that's still a nearly 4% increase in overall revenues in Fiscal Year 2026, well above the 1.4% increase that the Legislative Fiscal Bureau estimated in January. If that 4% increase holds over May and June, it would be well above the $300 million to $350 million in additional revenue that the Evers Administration estimated last week, and might be closer to $500 million.

But the state may also be seeing some expenses rise above what was budgeted for. The Wisconsin Department of Health Services has estimated that $263.5 million will be needed to cover a deficit in the state’s Medicaid program.

That deficit also seems likely to get larger in the coming months, as costs of care continue to go up and fewer Wisconsinites can access health insurance through the Obamacare exchanges, due to the Big Bunch of Bollocks that Trump/GOP pushed into law.

Let’s also point out that there is a structural deficit in the state’s Transportation Fund, which currently spends hundreds of millions of dollars more than it takes in for base revenues, and required $580 million of additional money from the General Fund to make ends meet for the 2025-27 biennium.

With road construction likely to cost more in two years and gas taxes being based on consumption instead of price, this Transportation Fund imbalance in Wisconsin is likely to grow. And they can't expect more infrastructure funds to be coming from DC with deficits continuing to climb and the Trump Administration showing no inclination to increase infrastructure spending beyond the boosted levels we have enjoyed in recent years (in fact, it's likely that Federal aids decline for the next budget).

Why Dems in the Legislature disapproved of the deal is very different to what GOP Guv candidate Tom Tiffany didn’t like about it. Tiffany apparently does want to give any additional money to schools, and would blow an even larger budget hole on more (unspecified) income tax cuts.

“Governor Evers chose to protect his 400-year property tax hike instead of the people of Wisconsin, and now we’re learning he didn’t even want to directly return any surplus money to taxpayers," Tiffany said in a statement to the Journal Sentinel. "As governor, I will repeal the 400-year property tax hike, return the full surplus to you, and deliver lasting property tax relief."

Tiffany was referring to a post on X from Evers spokeswoman Britt Cudaback, who said the governor agreed to include a tax rebate provision at the request of Senate Republicans in exchange for their support.

This is clown show stuff from Toxic Tommy.

1. HEY TIFFANY, Robin Vos, Devin LeMahieu and about 95% of the GOP caucus in the Legislature just showed that Evers did not do a “400-year property tax hike”. Because the deal that those people voted for WOULD HAVE REDUCED PROPERTY TAXES FOR K-12 AND KEPT THAT VETO IN PLACE.

The first part of that statement also makes Tom Tiffany today’s contestant on the longtime game show of “GOP, LYING OR STUPID?”

2. HEY TIFFANY, you got a way to “deliver lasting property tax relief” when your permanent income tax cuts would reduce the amount of money available from the state that could help local communities cut property taxes? The only mathematical way you’re doing that is by forcing massive service cuts on top of what Wisconsinites have already had to deal with over these 15+ years of GOP-imposed austerity.

Or, will you continue with the old WisGOP game of passing the buck to more referendums, while claiming you weren’t the ones that chose to raise property taxes, it was the voters? Good luck selling that as your strategy for the future when most Wisconsinites are already sick and tired of it.

I think the fact that we're still unpacking the numbers of the Evers-Vos-LeMahieu deal and Wisconsin's potential to afford it may be part of the reason it went down in the State Senate. It's clear that Governor Evers didn't talk to Dems in the Legislature about this before it became a bill, and some of the opposition could have been as simple as that turf war. But it does seem like the attempt to bum rush this through in 3 days was a bad way to do it, because there were some flaws that legislators brought up in the bill's debate.

On the other hand, while I understand that this wouldn't solve the real long-term issues of how we finance this state's K-12 schools, and the state's fiscal health would become more endangered if the $1.8 billion deal were to become law, that doesn't mean that waiting until next January is necessarily the solution in what are increasingly tough and frustrating times for a lot of Wisconsinites. And it's a big gamble by both Legislative Dems and Tom Tiffany to oppose this in the hopes that their respective sides win in November, and get to use a larger amount of money in the next state budget to impose bigger changes.

Legislature still paying millions for weather disasters, with more likely to come

While the daytime hours of Friday and Saturday were warm and sunny here in Madison, heavy storms hit overnight in both days. I had to haul quite a few thick tree limbs to the car to go to the city's drop-off site, and some of my neighbors have trees that were snapped and/or pushed over where limbs ended up on their gutters and roofs. Today had me gathering up the dogs to go to the basement as a tornado warning was issued, and it reminded me of the crazy stretch last month when there were multiple tornadoes and floods hitting in the same week.

The Wisconsin State Legislature was also thinking about storms and the cleanup from them this week, and the issue came up was in the same Joint Finance Committee meeting where the $1.8 billion budget deal was passed last Tuesday. In addition to the Big Bill, there also was an item that involved paying for storm damage that mostly came from the record rains that fell last August, as the Legislative Fiscal Bureau explained in their breakdown of the request to JFC.

On August 10, the Governor issued an official state of emergency declaration. On August 12, WEM staff, DMA's Incident Management Team, and the Department of Natural Resources conducted damage assessments. The next day, the Governor announced that he would submit a request to the Federal Emergency Management Agency (FEMA) to assist the state in conducting a formal federal preliminary damage assessment in relation to the flooding event. With the assistance of FEMA, WEM determined that 1,500 residential structures were either destroyed or sustained major damage, with a total estimated cost of over $33 million. It was further determined that more than $43 million in public sector damage had been incurred throughout Door, Grant, Milwaukee, Ozaukee, Washington, and Waukesha counties. Final joint damage assessments validated $26.5 million in eligible public infrastructure disaster costs. On August 27, the Governor formally requested a presidential disaster declaration from the President of the United States. The request included Milwaukee, Washington, and Waukesha counties for FEMA's individual assistance program, which provides assistance for housing or other needs to individuals and families who have uninsured or underinsured necessary expenses and serious needs resulting from a major disaster that cannot be met through other means of assistance. In addition, the request included Door, Grant, Milwaukee, Ozaukee, Washington, and Waukesha counties for FEMA's public assistance program, which provides assistance to state, tribal, territorial, and local governments, and certain non-profits to help communities respond to and recover from major disasters or emergencies.

On September 11, 2025, the Governor received notice that the President of the United States declared that a major disaster exists in the State of Wisconsin and approved the request for individual assistance to affected individuals and households in Milwaukee, Washington, and Waukesha counties.

The Federal Emergency Management Administration would end up giving nearly $196 million in help to property owners, which ended up being the 2nd largest disaster payment from FEMA for any disaster in 2025.

But the Trump Administration gave nothing toward repairing the millions of dollars in damage to roads and other public infrastructure.

On October 24, 2025, the Governor announced that the request to FEMA for public assistance for Door, Grant, Milwaukee, Ozaukee, Washington, and Waukesha counties had been denied. The letter from FEMA stated that, based on the preliminary damage assessments, "it has been determined that the public assistance program is not warranted." The Governor announced that he would file an appeal to receive funding for the estimated $26.5 million in public infrastructure damage. On February 9, 2026, the Governor announced that the appeal had been denied. FEMA's website lists the incident period of August 9 through August 12, 2025, as a disaster declaration for severe storms, straight-line winds, flooding, and mudslides. The incident includes Washington, Waukesha, and Milwaukee counties for individual assistance.

Which drops the next source of government assistance to the State of Wisconsin. And there is a program set up to help what the LFB describes as "local units of government, retail electric cooperatives, and federally-recognized American Indian tribes or bands in the state" to pay for disaster recovery with state dollars. The state's Department of Military Affairs (DMA) adminsters the program, but what was set aside in the state budget isn't nearly enough to pay for what happened back in August, or since then.

Three appropriations authorize DMA to provide state disaster assistance. A state disaster assistance GPR appropriation is funded at $0 annually in the 2025-27 biennium. Further, DMA has a SEG continuing state disaster assistance appropriation supported by the Petroleum Inspection Fund (PIF), funded at $0 annually in the 2025-27 biennium. Finally, 2025 Act 15 created a new SEG continuing appropriation for state disaster assistance, funded by the local government fund. Under Act 15, $3,000,000 SEG annually was provided to the appropriation in the 2025-27 biennium. The estimated closing balance of the local government fund under Act 15 is $53.7 million SEG in 2025-26 and $63.9 million SEG in 2026-27. Table 1 below shows SEG expenditure authority under the disaster assistance program since 2014-15. Note that, until 2025-26, the primary source of funding for the program was the PIF.

The state has already spent over $2.3 million of the $3 million set aside for disaster assistance to local entities with a couple of months left in the Fiscal year, and you can see the sizable amount of requests that were looming even before this weekend's storms.

At the same time, there were tens of millions of dollars estimated to be available in the state's Local Government Fund, which was created as part of the shared revenue reforms of 2023. That fund uses a portion of state sales tax, and pays for several programs.

So JFC agreed on Tuesday to use $16.9 million of the Local Government Fund to pay for these current and future disaster claims from local governments, which keeps some of the burden off of those counties and the municipalities below them.

As the State Assembly debated the special session tax rebate and K-12 bill the next day, disaster assistance came up again. It was in the form of a "sweetner" amendment by Washington County rep Dan Knodl. Knodl's amendment included $20 million for the Wisconsin DMA to oversee in a grant program to help recovery efforts from disasters.

...(a) The department of military affairs shall create a program to award grants to individuals who are adversely affected by a disaster-related state of emergency declared by the governor under s. 323.10 on or after January 1, 2025, for the purpose of meeting the individuals’ disaster-related expenses.
(b) The department of military affairs shall create a program to award grants to businesses that are adversely affected by a disaster-related state of emergency declared by the governor under s. 323.10 on or after January 1, 2025, for the purpose of meeting the businesses’ disaster-related expenses.

Businesses could get up to $50,000 under the disaster grant program and individuals could get $25,000 for recovery purposes.

This would have kicked in specifically in circumstances where the President did not give FEMA aid for a disaster that Governor imposed the state of emergency for. This amendment passed the Assembly on Wednesday night, but was defeated along with the rest of the $1.8 billion bill in the State Senate.

But if this weekend's weather is any indication, you can bet there will be more needs to pay for repairs in the wake of storms in Wisconsin over the next 13 1/2 months. And it might be another place where the funds required to take care of those needs keeps going up in the state for 2027 and beyond, along with the higher insurance premiums that Wisconsin's individuals, businesses and governments will have to pay.

INFLATION WATCH - getting higher ratings than ever!

Since war broke out in Iran and nearby parts of the Middle East, it's caused INFLATION WATCH to return with a vengeance. And what we saw from this week indicated we may be on the watch for a while.

The biggest number that typically gets attention on the inflation front is the Consumer Price Index, which kept pushing ahead for the second month where the effects of the “conflict” in the Middle East could be seen.

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.6 percent on a seasonally adjusted basis in April, after rising 0.9 percent in March, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.8 percent before seasonal adjustment.

The index for energy rose 3.8 percent in April, accounting for over forty percent of the monthly all items increase. The shelter index also increased in April, rising 0.6 percent. The index for food increased 0.5 percent over the month as the index for food at home rose 0.7 percent and the index for food away from home increased 0.2 percent.

The index for all items less food and energy rose 0.4 percent in April. Indexes that increased over the month include household furnishings and operations, airline fares, personal care, apparel, and education. Conversely, the indexes for new vehicles, communication, and medical care were among the major indexes that decreased in April.

The all items index rose 3.8 percent for the 12 months ending April, after rising 3.3 percent for the 12 months ending March. The all items less food and energy index rose 2.8 percent over the year, following a 2.6 percent increase over the 12 months ending March. The energy index increased 17.9 percent for the 12 months ending April. The food index increased 3.2 percent over the last year.

We knew that gas prices had moved higher, but notice the 0.7% increase in food at home – aka “groceries”, which are also up by 2.9% over the last 12 months. The last time groceries went up more than that in one month was the peak inflation days of Summer 2022, and the last time groceries were up by more than 2.9% in 12 months was in August 2023.

And the 0.4% increase in “core” inflation was the largest since the first month of Trump 2.0 in January 2025. Core inflation has never gotten down to the Federal Reserve’s alleged target of 2.0% in the last 12 months - and never has since Americans have been able to be vaccinated from COVID in early 2021. Also, the year-over-year increase in core prices is going up at the same 2.8% rate in April 2026 as it did in April 2025.

At the same time, we haven’t seen an increase in wages to go along with the increased costs that consumers are paying. Despite the kick up in inflation, average hourly wages only increased by 0.2% in both March and April, and average hourly wage growth over the last 12 months is less than it was in the 12 months before that.

Which means that real wages have had significant declines for March and April, and that followed 8 months of near-zero growth vs inflation.

From April 2025 to April 2026, real average hourly earnings decreased 0.3 percent, seasonally adjusted. The change in real average hourly earnings combined with no change in the average workweek resulted in a 0.2-percent decrease in real average weekly earnings over this period.

More alarming is that these CPI numbers and declining wagee growth are likely to get worse in the coming months. The next day there was another report that showed a big increase in April for the prices that businesses pay.

The Producer Price Index for final demand increased 1.4 percent in April, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices advanced 0.7 percent in March and 0.6 percent in February. The April increase is the largest advance since rising 1.7 percent in March 2022. On an unadjusted basis, the index for final demand rose 6.0 percent for the 12 months ended in April, the largest 12-month increase since moving up 6.4 percent in December 2022.

Nearly 60 percent of the April rise in final demand prices can be attributed to a 1.2-percent advance in the index for final demand services. Prices for final demand goods moved up 2.0 percent.

The index for final demand less foods, energy, and trade services increased 0.6 percent in April, the largest advance since rising 0.6 percent in October 2025. For the 12 months ended in April, prices for final demand less foods, energy, and trade services moved up 4.4 percent, the largest 12-month increase since jumping 4.5 percent in February 2023.

And if the increase in April’s prices for both consumers and producers is largely related to rising gasoline and transportation prices, that isn’t going to go bn away any time soon. Nationwide gas prices have gone up another 10% in the last month, and it’s even worse in our part of the country, with Wisconsin’s gas prices now exceeding the national average of $4.52 a gallon, and up by nearly 80 cents vs mid-April.

And the bond market has been taking notice. Take a look at these charts of the 10-year Treasury Note and 30-year Treasury Bond over the last month.

That’s what happens when the bond market doesn’t believe that prices are coming down any time soon, nor do they think that the doddering fool in the White House and the Fox News clowns that surround him will have a clue on how end hostilities in the Middle East, or do anything to get budget deficits under control.

And if the Fed gets the hint and raises interest rates in the coming months to try to slow down price hikes and rampant Wall Street Bubbling and gambling, watch for the heads to explode in TrumpWorld. But they’ll only have themselves to blame with an inflation that had been tamed by the 2024 elections, but now seems to be breaking containment in 2026.

So what's not to like in the tax cut, rebate and K-12 deal?

After Governor Evers, Assembly Speaker Robbin' Vos and Senate GOP Leader Devin LeMahieu announced a deal to increase funding for special education, cut property taxes for K-12 schools, $870 million in one-time tax rebates, and tax exemptions for OT premiums and tips, it seemed like this was all set. The Governor called a special session, the Joint Finance Committee set a meeting for Tuesday, and the Assembly and Senate would pass it on Wednesday. Easy peasy!

And then I saw this press release from Dem Guv candidate, State Senator and Joint Finance member Kelda Roys. And she was NOT happy about the deal.

“Robin Vos has controlled Wisconsin like a puppeteer for a generation. In his final ‘screw you’ to working families, he’s trying to set the state’s projected surplus on fire – all in a desperate and irresponsible gambit to rescue Howard Marklein and other vulnerable GOP legislators from their coming defeat in November.

The callout of JFC co-chair Marklein is noteworthy, and Roys brought up the prospect of her and a possible incoming Dem majority in the Legislature being handcuffed by the tax cuts and spending that are part of this deal.

“For decades, whenever Democrats win power, we have to fix the fiscal messes and economic calamities Republican politicians created – remember 1992, 2008, and 2020? Hell, go back to the Great Depression….

“This latest deal is the height of fiscal irresponsibility. It spends a projected ‘surplus’ before it’s in the bank, even though that projection was estimated before Trump’s attack on Iran that disrupted our economy and caused gas prices to skyrocket. It gives a little one time money to public schools while permanently cementing unfairness in our tax structure. Worst of all, it blows nearly a billion dollars on an election year gimmick to send out rebates, squandering the ability of a new Democratic majority to make the long-overdue investments in our kids that they deserve.

“Vos knows it’s a win-win for him – maybe this election year bribe can save a few Republican seats from flipping, and if not, he creates a budgetary crisis that Democrats will have to fix next year. The surplus – if there will even be one – rightly belongs to our kids, not Vos and the departing leaders who want to destroy it on their way out the door.”

I don’t think Sen. Roys is off-base here. As mentioned before, this deal would certainly cut into how much would be carried over into the next budget.

LFB Director Bob Lang went on to say during the JFC meeting that the $532.5 million a year in increases in K-12 aids and $50 million in Technical College funding would continue into the next budget, as would the $12.0 million in additional funding for charter and voucher schools. We’d also see most of the $232.8 million a year in the deductions for tips and OT premiums continue for the next 2 years.

Combine that with the fact that we were already set to spend more than we take in for 2026-27, and Lang told the JFC that there need to be an additional $2.9 billion to come in and/or be cut from the 2027-29 budget to keep the budget in balance. Yes, some of that would be offset by the increased revenues that the Evers Administration reported for Fiscal Year 2026, so there wouldn't be as far to go to hit the target for Fiscal 2027. But the package would certainly reduce flexibility for 2027-29, and that would frustrate Dems should they win a trifecta.

I was still surprised to Senate Dem Leader Dianne Hesselbein echo Sen Roys' thoughts, and indicate that another item of contention is that Dems in the Legislature weren't even part of the discussions.

"From my perspective, there is no deal: Three men who will not be in elected office next year have come up with this proposal which Senate Dems will be reviewing," Senate Minority Leader Dianne Hesselbein.

"Any proposal must pass both houses of the legislature and no one knows if Republicans have the votes to pass it."

Given that outgoing GOP Senator Steve nASS has already said he will vote NO (because he hates giving any money to schools, and because there is a structural deficit left in the budget), and GOP Sen Chris Kapenga also said he would vote against the deal. Which means at least some of Hesselbein's Senate Dems are needed to pass the bill, as they were needed to pass the state budget last Summer.

So Dems could get some concessions or tank the whole thing. If they win the Governorship, Senate, and Assembly this Fall (and signs are definitely pointing that way), they understandably want more fiscal cushion to work with, whether it's to help the state stay afloat during another GOP president’s recession by that time, or to make for larger changes in what our state government pays for should there be a sizable surplus.

Then the Republicans' candidate for governor decided he couldn't avoid commenting on this deal, and threw another wrench into things.

Today, Congressman Tom Tiffany announced on the Benjamin Yount Show that he opposes Governor Evers’ so-called “relief deal,” calling it another Madison gimmick that fails to deliver lasting tax relief for Wisconsin taxpayers.

“Governor Evers is acting like the arsonist who wants praise for spraying a drop of water on the fire he started.”

“This backroom ‘relief deal’ does nothing to repeal Governor Evers’ 400-year property tax increase. It does nothing to stop Madison’s addiction to taxing and spending. And after Governor Evers’ PSC approved billions in utility rate hikes, a one-time $300 check barely scratches the surface.”

“When I am governor, the gimmicks stop and lasting relief begins. The 400-year property tax increase will be repealed. Madison’s addiction to overtaxing families will be dismantled. Surplus funds will be returned to the taxpayers where they belong, and Wisconsin workers will keep more of what they earn from the very beginning.”

In addition to the generally lame and off-base talking points, Tiffany also apparently dislikes a deal that lowers property taxes on schools and tech colleges and has tax rebates because... it adds funding to schools and doesn't give corporations and others even more tax cuts that drives the price tag higher?

You run on that, Tom.

Tiffany's blabbering is likely is part of the reason that Vos and LeMaheiu can't round up enough Republicans to get this package passed on its own, with the situation complicated because fair maps lessened the GOP's margins in the Legislature. Then add in the fact that Dems in the Legislature don't want to go along with this because they think they'll be in charge in the next session, and all of a sudden, this isn't the sure thing that Evers, Vos and LeMahieu figured it would be when they worked out their compromise.

Evers doesn’t seem too concerned about telling the GOPs in the Legislature "you had your chance, now you deal with the voters", and I think he genuinely wants to improve things for the typical Wisconsinite before he leaves office. I get it, and I see where this package is an improvement over where we stand today. It adds state funding to schools and lowers property taxes, which GOPs in the Legislature has been refusing to do, and basically pays for the property tax increases that many had to deal with last Winter with the rebate checks.

But that might not be enough for legislators and candidates that have other incentives and interests. Suppose we will find out soon. Looks like the Senate is finally on the floor as I write this, so maybe there's....something?