A few primary thoughts from Up North

Made my annual trip to Vilas County on Wednesday to hang with family through Saturday. Good to check in with everyone and catch up.

Unlike Madison, its been stormy here, with the power knocked out twice this week. Not really something they're used to in these parts, but might be something that needs adjusting to in the 2020s.

I was looking for any indications on the primary election that's already having early voting for our state. Couldn't find much, including almost no yard signs or radio ads for any candidate from Wausau northward, despite it being in the 7th Congressional district, which has a multi-candidate GOP primary for Tom Tiffany's seat, in addition to the Dem primary for Governor.

Sure seems like a candidate could get a bit of boost in these parts with a few signs or billboards that give the impression to others on the road that they're someone with support and worth checking out. Since I've been away, did anything happen with the Governor's race in the last 2 days?

Silly goose, of course I know that Mandela Barnes pulled the plug right before a story was going to come out about him creeping on young Dem staffers. What an absolute dud of a campaign for that guy - spent the most money, had by far the highest name recognition, and Dem voters overwhelmingly turned him down and how he lacked the juice.

And now we find out Mandela had this time bomb of bad behavior towards women looming? Just underscores how this guy was up his own backside, and never learned the lessons of blowing that 2022 race vs Ron Johnson.

If there's a lesson to be learned from this bizarre primary, maybe the biggest is that high-priced Dem consultants are no substitute for getting in front of voters (both online and in person), and maybe that idea of "yard signs don't vote/professional organizations win campaigns" is also outdated in a time of an attention economy where voters don't trust the pros that have lost races for Dems too many times.

Weird and wild stuff. I'll have more to break down in both economy and the last week of this race when I get back to the big city.

Dem guv candidates have different specifics on budget surplus, while Tiffany has nothing

Ahead of tonight's debate, I wanted to draw your attention to a goosd rundown from the Wisconsin State Journal on what the various governor’s candidates say they would do. Among the list of questions given to each of the candidates for governor in this article was one that asked why each candidate had opposed the property tax and school funding deal from May that Tony Evers and GOP Legislative leaders tried to get through (click here if you want a reminder of what was in that). And the State Journal also asked what they’d want to do with the estimated $3 billion that would be in the bank for the state for the 2-year budget that would start next July 1.

Let’s start with the GOP Guv candidate Tom Tiffany on why he opposed the budget surplus deal and what he’d do with the money.

The last state budget increased spending by roughly 15%, exceeding $100 billion for the first time in Wisconsin history, so I believe the full surplus should be returned to taxpayers. The problem isn't that taxpayers aren't sending enough money to Madison. The problem is that government has drifted away from its core responsibilities. Government should focus on doing the basics well: keeping our communities safe, maintaining our roads and bridges, educating our kids and funding special education, caring for our most vulnerable citizens and protecting taxpayers. Instead, we've seen too much growth in bureaucracy, too many new programs and too little accountability.

These are a bunch of random words that add up to nothing. Where are the specifics as to how any of this will be done? HOW will the money be “returned to taxpayers”. HOW will our most vulnerable citizens be cared for or our schools and our roads and bridges be funded? What are these “basics” of government?

It’s not like Tiffany was asked off the cuff as part a video/radio interview for a 30-second answer. This is a written, allegedly thought-out response to the question! And that "$100 billion" comment on the budget isn't the total being paid in state taxes. It's the total over 2 years for ALL sources of funds, including $33.7 billion from the Feds, and another $31.4 billion is paid for by fees for services like campground admissions, UW sporting events, room and board fees, and licensing. The total over two years is $111 billion up front and another $3 billion being borrowed.

And a guy who has spent the last 2 years in Congress voting to explode our US budget deficit with tax cuts to the rich and major increases in funding for ICE and to give $1.15 trillion to our military next year has zero credibility on fiscal items.

Compare Tiffany's response with what the current leader in the polls for the Dems wants to do.

[State Rep. Francesca Hong:] The deal used a temporary surplus for one-time payments, new spending and permanent reductions in state revenue. It’s not fiscally responsible to make permanent monetary commitments without permanent revenue to sustain them. A recurring program funded only by one-time money creates the same structural problem as a permanent tax cut funded by a temporary windfall.

One-time money should pay for one-time needs; permanent commitments require permanent revenue. I would use surplus dollars to strengthen our reserves, pay down debt and deferred costs, repair public buildings, replace lead pipes, clean up PFAS contamination and capitalize revolving funds that finance affordable housing and infrastructure.

“One-time money for one-time needs” seems pretty fiscally conservative to me, doesn’t it? Hong also reminds us that the state package included an exclusion of income taxes on tips and overtime premiums that would have gone on beyond 2028, when those Trump/GOP tax cuts end at the federal level.

There is a guy in this race who oversaw the arranging of the state budget for Tony Evers for both the 2019-21 and 2021-23 budget cycles – Joel Brennan. So let's see what he would have done.

There was a better one-time option sitting right there. The Child Care Bridge Payments program was about to expire. Renewing it instead of letting it lapse would have been real, targeted money solving an actual crisis, not a check that skips over the families who need it most. And that commitment would cost the state a little over $100 million, not the entirety of the expected surplus. We must be cautious in a Trump economy, because we know that gas prices will continue to be volatile and that Trump tariffs have already cost Wisconsin families nearly $1,100 this year. More harm to our economy over the next year from Trump’s federal actions is a near certainty.

I like Brennan’s idea of bridging the funds on Child Care Bridge Payments to avoid long-term commitments. But I’m not a fan of banking the rest of the surplus, because additional funds will be needed to both reduce property taxes and reverse the damage to education and our economic competitiveness that we’ve had to deal with over the last 15 years.

That said, I also understand that there are a sizable number of unfunded mandates in Medicaid, SNAP and other federal programs whose costs are going to be shoved down to the State in the next 2 years due to the Trump/GOP Tax Scam 2.0 that Tom Tiffany voted for. So we won't have nearly the cushion that some may think we have.

As for the other candidates – Milwaukee County Executive David Crowley also uses Hong’s “one-time surpluses should be used strategically for one-time needs” theme, and goes on to say the surplus should be used for generic Dem priorities that he says improves the economy with investments in “education, workforce development, infrastructure, housing, and childcare.”

Mandela Barnes is relatively generic as to how he would use the billions at his disposal for 2027-29, but he does mention the need for Dems to win both houses of the Legislature to get “the deal Wisconsinites deserve”. Which I agree with, and I recall Crowley telling “Up Front” over the weekend about the need to be a Dem “team captain” as the nominee. Which makes it all the odder that Barnes has run such a sluggish campaign that isn't geared toward firing up Dems with the rare opportunity that is out there.

Barnes’ budget plans include

fully funded schools, make the wealthy pay their fair share, and cut taxes for middle-class families. We will do that by using the surplus responsibly—ensuring we do not create a structural deficit—alongside taxing the rich and closing the loopholes that let billionaires get away without paying their fair share.

Good themes to be sure, and I'd call it as a "less specific progressive" plan.

State Sen. Kelda Roys was one of the first legislators to publicly oppose the package, and reiterated to the State Journal about the structural deficit that would have loomed in the next budget had it become law. She follows with this explanation of what she would ask for as Governor.

One-time rebate checks do nothing to create long-term solutions to the state’s budgetary challenges or to reduce property taxes, but if we use the [surplus] balance as a bridge to help ease the transition to a functional school funding formula and a phase-out of the voucher program, we can actually improve the state’s bottom line.

Interesting connection between eliminating vouchers as a fiscally responsible move, and given how voucher funding has exploded in the 15 years that Republicans have been in power in the Legislature.

Clawing back that $394 million that was taken away from public schools (and added to in property taxes) to pay for vouchers in 2025-26 sure seems like a logical place to cut if you want to have real changes in where resources go in our state.

The state budget and the funding ideas behind it is likely the largest item the new governor of Wisconsin would do. And so ahead of tonight’s debate, I wanted to forward this thing so you can see what the Dem candidates would want to do with it, and also to note that Tom Tiffany either has no idea or is hiding his real plans about the state budget. It’s amazing that a guy who was in the majority party in the State Legislature for a decade seems to not know much about what he’d do in the Capitol should this state be dumb enough to give him the Governor’s job.

While that’s far from the only red flag you should have about Tom Tiffany, it really shows why Dems need to hammer that fool relentlessly and make him try to give some real answers. And to make our media ask him real questions.

Gas prices back up as July ends. And lower supplies will keep them high

As the US and Iran cranked up its military bombings in the Middle East this week, it drove up oil prices further, ending the week up more than 30% from where we were at America's 250th birthday.

But it’s not just speculation on fear of what might happen in the future that’s driving up those oil prices, as our real-life supplies are continuing to get more scarce today. We drew another 5.06 million barrels off of the US’s Strategic Petroleum Reserve (SPR) last week, bringing the total pull over 100 million barrels since the Trump Administration started using the SPR to try to stabilize oil and gas prices in April.

Not only are oil reserves shrinking, but so is the amount of gasoline that’s on the market in America. That’s a striking contrast to what was happening at this time in 2022, which was the last time pump prices were over $4 a gallon nationwide. 4 years ago, gas stockpiles were growing.

And unlike July 2022, gas prices have gone back on the rise in the US in July 2026, up nearly 15 cents in the last week. Given the short supplies, higher oil futures, and Trump/GOP’s inability to fold their losing hand, it seems likely that August 2026 will have higher gas prices than we saw August 2022.

In addition, Tropical Storm Bertha shut down production at a Chevron refinery for a while this week, so that cut another 2 million barrels of oil off the market.

The low supplies in the States and the need to replenish that low SPR amount sooner than later means it oil might well be taken off the market in the later part of this year instead of being added. So I wouldn’t count on gas prices going down any time soon, and with that in mind, I also can’t see Americans’ already-declining savings rate turning around for much of the rest of 2026.

Sure, we'll likely see an increase in savings for June when that gets reported next week due to that month's drop in prices. But we know prices are going back up for July, and I can't think there was a big boost in income to offset that.

So any improving feelings that consumers may have had when gas dropped down is likely to go away when they see that big 4 in front of the pump price again. And if it stays that way in August (as it likely will), they might be even more stressed than they were when consumer sentiment was hitting record lows in May.

Pt. 2 - Primary mess shows Wisconsin needs election reforms

To follow up on my thoughts about the state of the Dem Governor's primary, the way it has developed leads me to think there are 2 clear reforms to the primary system in Wisconsin that needs to happen, given how politics works in the mid-2020s.

1. There needs to be campaign finance reports in April for the 1st quarter of the calendar year before the primary. in 2026, there were no finance reports between Jan 15 and July 15, and it resulted in all of these candidates staying in and waiting to see where their money situation compared with everyone else. This led to a lack of direction as to who was up or down, and a lack of attention to the Governor’s race in general. This allowed the one candidate who was actively creating content through media and public events (Francesca Hong) to gain a following. It also allowed Sara Rodriguez’s fundraising and resource discrepancies to go unnoticed by both her and the general public until the verge of that July 15 report, when all of a sudden, she discovered that her campaign was out of money!

Yes, it is gross that money and resources are given such creedence in current-day politics over ideas and voter interest. But it’s also how media and donors measure candidates’ chances, and they slant their coverage and interest accordingly (because horse race stuff is easier to report and evaluate than actual positions). So why do we have to wait 6 months between reports to get an update on these things?

Why do we find out so late?

Our current campaign finance system in Wisconsin requires one large report with 6 months of data to collect vs 2 smaller reports that could come every 3 months. Quarterly reports allow any gaps in reporting, resources or infromation to be caught sooner to the time it hapens, and doesn't require so much staffing and campaign work for filing in July, which is one month before voters go to the polls - a time candidates and staff would rather be ramping up and meeting voters.

2. We need Ranked Choice Voting in Wisconsin, especially for primaries. In this Governor’s race, I think a lot of Wisconsin Dems are fine with most or even all of the candidates that have run. If we had ranked choice voting, voters could comfortably choose who they think is the best candidate, particularly if they thought no candidate would get 50% of the first-place votes (as will likely happen in the Dem Governor’s primary regardless of who wins). 15 miles from the Wisconsin border, the City of Minneapolis has ranked-choice voting for its mayoral elections and other local offices. And Minnesota Public Radio has a good explainer of how RCV works.

If there was a general consensus of 2-3 candidates that everyone could agree on, and those candidates were ranked 1 through 3 on most ballots, eventually an unacceptable 4th or 5th candidate would likely be eliminated, even if that 4th or 5th candidate had the most first-place votes.

Because Wisconsin only allows for first-place votes, many of us are trying to be strategic with our primary vote, choose a candidate that can win and/or defeat a certain other candidate (for a sizable group of Dems in Wisconsin in late July 2026, this means figuring out which candidate can get more votes than Fran Hong). What we don't want is to throw away our vote on a candidate that may end up at 4-5%.

My mother-in-law had voting deputies go around in her assisted living center to pick up her absentee ballot this week, and when she asked me my advice as to who to vote for, I told her to hold onto her ballot and wait until later. Because I didn’t want her to throw away her vote on a candidate that won’t be able to win, or worse, drop out before Election Day. I’m still waiting to fill out my absentee ballot for the same reason.

I know of people that have sent in their absentee ballot with a vote for the now-withdrawn Sara Rodriguez. As of today, those voters are screwed, according to a ruling from earlier this month by the Wisconsin Elections Commission.

Voters who cast their ballots early and want to change their vote – for example, if their chosen candidate drops out of the race before ] Election Day – can no longer do so under new guidance stemming from a recent court ruling.

The Wisconsin Elections Commission voted Thursday to issue guidance limiting voters' ability to "spoil" their ballots only in limited circumstances that do not include deciding to vote for another candidate….

Previously, Wisconsin voters had the ability to cancel their previously submitted ballot and request a new one for any reason, up to three times. That changed in October 2022 when then-Waukesha County Circuit Judge Brad Schimel ruled the practice, called "ballot spoiling," was illegal.

The 2nd District Court of Appeals then put the circuit court ruling on hold, and ruled earlier this year to reverse Schimel's decision. The appeals court's February 2026 decision did not address the merits of the case, but found the lawsuit was not properly served in the first place.

The Democratic Party of Wisconsin is now supporting a lawsuit to reverse that ruling, and given that absentee ballots are not opened or tallied until Election Day in Wisconsin, a successful suit by the DPW would allow those voters a second chance in this primary.

This is how the lack of RCV makes many votes worthless and often leaves voters stressed and forced to choose less-optimal candidates. In addition, because there have been so few polls and other indicators as to the state of the race, I and others are now waiting longer to make our choice as a result, in order to lessen the chances of having that vote not matter or be a regret due to later developments.

RCV may be less needed in General Elections, as it is rare that there will be more than 2 candidates that are viable or where voters are accepting of more than 1 of the choices given to them. But I'll add that RCV at least makes it worthwhile for some third-party or non-party candidates to pursue a run vs not even trying because of first-past-the-post. As long as Wisconsin would include a "sore loser" law to avoid having a candidate who loses a party primary get back in the general election.

If Dems do pull off the trifecta this November, we need to be pushing the new Legislature and Governor to get behind Ranked Choice Voting so we don’t end up in this kind of stressful mess of a primary again. There are significant flaws that the last month has exposed in our current system, and the lack of information and options that have been given to voters, media and candidates could lead to outcomes in 2 1/2 weeks that a majority of voters did not ask for.

And how does that help anyone beyond a few insiders, campaign consultants and douchebag MAGAts (who thrive on sneaking through with the support of a fraction-of-a-fraction that votes in primaries) that already have enough advantages?

A few thoughts on the Dem Guv primary race

2 weeks ago, the Democratic primary in the Governor’s race seemed to have come into focus.

State Rep. Francesca Hong had a solid group of support but a question as to whether she led and how many more voters she could attract.

Former Lt. Gov Mandela Barnes seemed to be stagnating and possibly fading out, and current Lt. Gov Sara Rodriguez was on the rise as the alternative to both of these candidates. I personally was behind Rodriguez and had the yard sign out.

Milwaukee Co Exec David Crowley had just dropped out and was endorsing Rodriguez, and State Sen. Kelda Roys and Joel Brennan were at the bottom of the pack and seemed to be on the verge of dropping out.

And now….here we are today. Rodriguez is out, the sign is out of our yard, Crowley is back in, and “undecided” is still winning this week’s Marquette Law School Poll of 414 Democratic primary voters.

With Rodriguez out and Crowley back in, this poll was already out of date by the time its results went public this Wednesday. As a result, Charles Franklin and company say there will be a do-over poll that will release its results next Wednesday, which makes me curious why our media and Wisconsin politics put so much creedence as the MU Poll being the voice of God in the first place.

Sure, I worry Hong might drag down some downticket Dem candidates if she was the nominee. She and Barnes are the Dem candidates that would trigger the most dumb white Wisconsinites and other low-info voters, and you’d see the most dishonest and racist GOP ads we have ever seen in this state (yes, worse than what was dumped on Barnes in 2022 vs Ron Johnson). I do think Hong or Barnes can win in November – but I also think they’re the 2 candidates that give Tom Tiffany his best chance to win.

What’s making me frantic about the situation is less the prospect of Francesca Hong having a base of strong support or Mandela Barnes slipping into a nomination despite having zero juice among anyone paying attention. It’s more than there is no indication whatsoever as to where this race is going, and who else can win.

It’s a simple math problem. If you think that Fran tops out her support at around 40%, then it becomes harder with 4 other candidates in the race to get one of them over 40% to beat her. But if there are 3 other candidates it’s easier to get one to 41%, with 2 others it’s very possible, and she’d likely lose a 1-on-1. But in the absence of polling or other signals that yes, THIS one person is the Fran Alternative, voters are left scrambling and confused.

Am I supposed to get behind Crowley because Governor Evers and some SE Wis local officials endorsed him, or is there a reason he didn’t catch on before he dropped out, and that he is being a self-centered fool that is wasting all of our time? And one that will be unfairly attacked for the budget deficits and many needs that still remain in Milwaukee County (much of which isn't Crowley's fault, but GOPs and some low-info voters won't care about that).

Should I get behind Roys, who is solidly progressive with experience in the Legislature, and is the type of candidate who Republicans have no game plan against – a smart white mother who doesn’t put up with their misdirecting BS. But Kelda can’t even get to 5% in almost any poll, and was at 1% in this week's Marquette Poll. So is there any point to getting behind someone that can’t win? She’s got 1 week – put up or shut up, Kelda.

Brennan is a different category, because his “more boring and corporate Evers” routine isn’t connecting, and the money he was supposed to get from the MKE corporates and other insider connections hasn’t really happened. Brennan also just angered the WisDems’ Black Caucus by running an ad saying that the Guv candidates Of Color couldn’t win, but say the same for the lower-polling Roys. SO WHY IS HE STILL IN THIS RACE? If there’s one candidate that should drop, it’s Brennan. He has no lane.

If you think that Fran Hong must be stopped in order to increase Dems’ chances of winning a trifecta in November and getting real change done in this state, I get that (I’m not terrified by Fran winning the primary, but it’s not my preferred outcome). But there doesn’t seem to be an agreed-upon strategy as to how to do that, and there is no one candidate that voters or other candidates are consolidating around to do that.

And that clarity of what would (or would not) happen by choosing a certain candidate is what we need. In the words of the late great Ric Ocasek - JUST TELL ME WHAT TO DO!!!

Odd and huge differences between household and payrolls surveys in Midwest over last year

Following up from last week's state jobs report, I noticed that Wisconsin has a disparity between their payrolls survey (which account for the number of jobs listed for a state) and the household survey (which is where the unemployment rate and labor force numbers are derived from). In our case, the household survey shows larger growth over the last year than the payrolls survey does.

June 2025-June 2026
Wisconsin
Change in Jobs +2,000
Change in Labor Force +25,900
Change in Employed +16,600
Change in Unemployed +9,300

Then I looked at the State-by-State jobs report from the Bureau of Labor Statistics today, and I noticed that other states have much larger disparities between these two surveys. Look at these two charts, and note how many states have slow or declining job growth while also having low unemployment, or have stronger job growth with higher unemployment.

You’ll notice Minnesota is an especially odd case – being 1 of 6 states nationwide with a growth of jobs of more than 1% in the last 12 months, but is also 1 of 8 states whose unemployment has gone up by 0.6% or more in the same time period. And its labor force numbers are especially weird in light of what the payrolls numbers say.

June 2025-June 2026
Minnesota
Change in Jobs +45,900
Change in Labor Force -39,100
Change in Employed -56,400
Change in Unemployed +17,300
Change in Unemployment Rate +0.6%

That all can’t be true, unless cities like Hudson and Superior have become the biggest commuter communities in America, and/or Minnesota has had a massive increase of people working second jobs while a lot of others have none.

Illinois is a more negative version of the same story - recession-level numbers in the household survey, but growth in payrolls.

June 2025-June 2026
Illinois
Change in Jobs +9,200
Change in Labor Force -57,000
Change in Employed -102,800
Change in Unemployed +45,800
Change in Unemployment Rate +0.8%

We will likely have to wait a couple of months where we find out what the “gold standard” Quarterly Census of Employment of Wages (QCEW) says, which will lead to preliminary benchmarking of jobs through this March, which will be announced at the end of August. That’ll give an indication whether Minnesota’s (and America’s) payrolls or household surveys are closer to reality.

On the other side, take a look at Iowa and Indiana, who are reporting losses of jobs while having unemployment go down.

June 2025-June 2026
Iowa
Change in Jobs -9,500
Change in Labor Force -6,100
Change in Employed 0
Change in Unemployed -6,100
Change in Unemployment Rate -0.3%

Indiana
Change in Jobs -4,000
Change in Labor Force -18,300
Change in Employed -2,600
Change in Unemployed -15,700
Change in Unemployment Rate -0.4%

I suppose those numbers could be true if there were a large-scale exodus of working-age people going on from those two (red) states, but I think it’s more likely that there will be changes to make these two bits of data have a closer correspondence once benchmarking happens. Yes, sometimes the numbers diverge, but it's really weird to see things be this far off from each other.

And until we get more clarity, it's hard to figure out if the Midwest jobs market is one where jobs are growing and things are OK, or if people are exiting the work force with few replacing them, or if it is an outright recession for everyday people that isn't showing up in the payrolls numbers supplied to various state Workforce Development departments.

June gains wrap up a good first half for jobs in 2026 for Wisconsin

After a tough 2025, Wisconsin has had a good recovery in the jobs market. That was retierated in the recent report for June from the Wisconsin Department of Workforce Development.

Employment – There were 3,030,100 people employed in Wisconsin, up 6,000 over the month and up 16,600 over the year.
• Labor Force – The state’s labor force participation rate ticked up to 64.5% which is 3.0 percentage points above the national rate of 61.5%.
• Nonfarm Jobs – The total nonfarm jobs in the state were 3,041,000, an increase of 2,400 over last month.
• Unemployment – The state's seasonally adjusted unemployment rate ticked down to 3.3%, which is 0.9 percentage points below the national unemployment rate of 4.2%.

That increase of 2,400 nonfarm jobs includes an increase of 3,000 in the private sector, which now puts Wisconsin at a new record high for private sector jobs.

Even the one area in Wisconsin that had significant seasonally-adjusted “losses” in June (Construction -2,100), was shown as a reflection of lower-than-usual Summer hiring (+3,200), and followed a May where 3,000 jobs were added on a seasonal adjusted basis and 9,500 added in raw numbers. Put those two months together, and Construction had a seasonally adjusted 900 jobs added, and it continues a good trend that we've had in that sector for the last 4 1/2 years in our state.

In another sector that has high levels of seasonal jobs, Leisure and Hospitality had a large jump in April, indicating that seasonal hiring started early. But it has stayed at that higher level in May and June, which isn't what you'd expect if it was merely Summer hiring being pulled forward.

Manufacturing also has had a rebound in employment reported so far for 2026, after consistent losses from 2023 through 2025.

For the household survey, the unemployment rate declined 0.1% in Wisconsin (from 3.4% in May to 3.3%in June) as it did in America as a whole (from 4.3% to 4.2%). But it was for very different reasons, as Wisconsin defied the national trends by growing its labor force by even more than it typically does at the start of Summer, up by 3,300 on a seasonally adjusted basis and 71,800 in reality. That was during a month where the US saw its seasonally-adjusted work force shrink by 720,000. Wisconsin also saw more people list themselves as employed (+6,000 on a seasonally adjusted basis) while the US had 507,000 fewer people say they were working.

Assuming these numbers hold up, that's a really good first half of the year in our state for both adding jobs, and adding work force in general. Both had been categories that the state had struggled with in 2024 and 2025, and it might explain why economic sentiment seems much worse nationwide than the conditions on the ground in Wisconsin might indicate.

"Good" June retail sales were only in a few places, and outlook for July getting worse

Saw this headline relating to an economic report from last Friday, and I thought it summed up a lot.

Retail sales increased 0.2% in June 2026, the weakest monthly gain since early in the year. This deceleration shows that headline spending cooled after a stronger May. The pattern also aligns with broader signals of moderation across goods categories.

Gasoline-driven drag on totals: Receipts at gasoline stations fell 5.3% as average pump prices dropped sharply. This decline reduced headline growth but did not reflect weaker demand. Instead, it was a price effect that temporarily pulled down top-line sales. The decline in pump prices echoed a fall from $4.61 to $4.18 per gallon during June.

Core categories point to resilience: Ex‑gasoline retail sales rose a much stronger 0.7%, with notable gains in autos, nonstore retail, and various discretionary categories. This indicates consumers were still spending, especially in areas less affected by fuel prices. The breadth of these increases suggests the underlying demand backdrop remains solid.

But then you look at the actual report, and the growth in non-gas sales doesn't happen for most of the retail economy.

Change in retail sales, June 2026
Motor vehicle/parts dealers +2.640 billion
Gas/gas stations -3.372 billion
Non-store retailers +2.699 billion
All other retail categories -0.290 billion

And "all other retail categories" accounted for 55% of all retail sales in May. If a majority of retail sales are going down in the aggregate, in a time when those prices outside of gasoline are still generally growing, that's not a good number.

But because gas prices declined through early July due to optimism (rolls eyes) about peace in the Middle East and resulting increases in oil supplies coming, consumers have been in a better mood.

The University of Michigan's Surveys of Consumers said on Friday its Consumer Sentiment Index rose to 54.4 this month, the highest reading since February, from a final reading of 49.5 in June. Economists polled by Reuters had forecast the index rising to 51.0. The survey was conducted from June 23 to July 13, with more than 70% of interviews completed before the collapse of the ceasefire between the U.S. and Iran last week, which pushed oil prices to a one-month high. Gasoline prices have risen in response.

Oh? So maybe things are different now because national gas prices are set to go back over $4 a gallon this week? And as UW-Madison's Menzie Chinn points out in Econbrowser, just because consumer sentiment was up in June and early July, it doesn't mean people think things are going well, and the trend is still negative over the last year.

Because of the contined consumer spending through June and the break in gas prices lowering inflation last month, it's likely that we see a solid GDP growth figure around 2% when 2nd quarter numbers are released in 11 days. But what seemed like a one-time annoyance of high gas prices is more likely to be several more weeks of gas prices exceeding or near multi-year highs. We also are now facing a food safety scare that will take produce off the market and likely suppress demand in general, and numerous weather events hitting before the main US hurricane season even begins.

It makes the "inflation has peaked and the economy will keep rolling" takes that I've been seeing following last week's CPI and PPI reports sound very premature, if not outright stupid. Q3 is not off to a good start, and the outlook seems more likely to be bad than good. So watch for June's optimism to quickly reverse as Trump's War cranks back up, health insurance costs are set to go up by double digits, and nothing better is coming along.

Trump/Tiffany FEMA help falls short, and state/locals pick up the difference

You may recall this from a couple of weeks ago.

When severe weather hit Wisconsin, I called the White House to help secure the federal support our state needs.

Thank you to President Trump and his administration for their partnership. We’ll keep working to ensure every Wisconsin community has the resources needed to recover. pic.twitter.com/KxJiTMnBhl

— Tom Tiffany (@TomTiffanyWI) June 30, 2026

Naturally, Trump and Tiffany left out that it was Tony Evers' Administration that gathered the information on the damage estimates and sent it on to FEMA. And now in typical Trump/GOP fashion, the reality of what this aid ends up being is short of what the social media posts claimed.

Sure, FEMA allowed for home and property owners to recover damages from the severe weather, and while that money will assist in paying for infrastructure and other public improvements in some of the affected areas, but others were left out.

The June 30, 2026, major disaster declaration FEMA-4923-DR authorized Individual Assistance for Bayfield, Brown, Buffalo, Jackson, Jefferson, Juneau, Kenosha, Manitowoc, Marathon, Milwaukee, Outagamie, Racine, Rock, Sauk, Vernon, Washington, Waukesha, Waupaca, and Winnebago Counties and the Oneida Nation and Public Assistance for Iowa, Jackson, Jefferson, Juneau, Kewaunee, Outagamie, Rock, Vernon, and Waupaca Counties and the Oneida Nation.

The impact to individuals and households and the infrastructure was significant in the areas designated for Individual Assistance and Public Assistance. However, based on the results of the joint, federal, state, and local government Preliminary Damage Assessments, it has been determined that the impact to the infrastructure in Bayfield, Manitowoc, Marathon, and Racine Counties is not of the severity and magnitude to warrant their designation for Public Assistance under FEMA-4923- DR. In addition, it has been determined that your request for the Hazard Mitigation Grant Program is not warranted. Therefore, your request for Public Assistance for Bayfield, Manitowoc, Marathon, and Racine Counties and Hazard Mitigation statewide is denied.

Evers says he will appeal that denial of public assistance, and while local GOP Assembly members expressed disappointment, I have yet to hear a word about this from the guy who wants to replace Evers as Governor, Congressman Tom Tiffany. That’s despite Marathon and Bayfield counties being in Tiffany’s district, in a job he is still pulling 6 figures and benefits for.

And in a matter of interesting timing, the Wisconsin Policy Forum released a report this week on disaster aids and payments in Wisconsin. First of all, the Policy Forum notes that while there is a minimum amount of damage that does have to be met for FEMA aid, there is also no requirement to give aid no matter how much damage happens.

There is no specific dollar threshold that must be cleared to guarantee a major disaster declaration. Instead, disaster recovery must be “beyond the combined capabilities of state and local governments to respond.” There are damage rates per capita that define the minimum thresholds for eligibility. For Wisconsin as a whole, the 2025 threshold was $11.4 million in damage to public property, while for Milwaukee County the minimum was $4.5 million. These are eligibility minimums, but federal law gives broad discretion over these requests to the president, who can decide which parts to approve. Once approved, these declarations make direct aid available to local individuals and governments.

The previous disaster declaration prior to this week was for the storms and record flooding in August, where the Trump Administration allowed aid for individuals in three counties in the Milwaukee metro area, similar to the individual assistance given out from the April floods. The Policy Forum says this has resulted in a large amount of help being sent over to southeastern Wisconsin.

According to FEMA data, nearly 46,000 residents of Waukesha, Washington, and Milwaukee counties applied for individual assistance from FEMA following the August 2025 floods. Milwaukee County residents accounted for over 91% of those requests. As of June 2026, more than $210 million in aid had been distributed to 36,800 eligible applicants across the three counties. Figure 3 shows that property damage was concentrated on Milwaukee’s northwest side.

B But there was nothing given out by the Trump Administration for streets and lands that may have washed away in those record rains of August, or to deal with tree removal or many of the other public needs that resulted from that severe weather event. This led to an additional $16.9 million in state funds being requested by the Evers Administration and approved by the Joint Finance Committee in May, for the amount of weather-related damage claims that had happened in the 2026 Fiscal Year.

However, there is only $3 million in state funds available for disaster assistance in the 2027 Fiscal Year, which started 2 weeks ago. And now there are at least four counties that need additional help to clean up from the tornadoes, floods and severe storms from this April. We also know that there were tornadoes and hurricane-level winds on the 3rd of July that killed 3 children in Lake Geneva due to a capsizing boat, and caused damage and destruction to numerous buildings in the southeastern corner of the state.

Evers has yet to send in a request for disaster aid from that set of storms, and while today’s historically bad air quality doesn’t do a lot of damage to buildings or infrastructure, it will limit a lot of activities around the state for the next couple of days, and does remind us that even weather in other parts of the world can have its effects on our economy. Which is also something that Trump and Tiffany do not especially seem interested in dealing with, and often outright deny is going on.

With property values and the costs of construction and repair continuing to go up, these weather disasters are likely to continue to cost more. That's not even accounting for the increase in intensity and frequency for these types of things (for example, Wisconsin has already had 2 of its top 6 years for tornadoes in 2025 and 2026). Which means that when the Trump Administration refuses to give full assistance to states like Wisconsin, it's the state and local governments that have to pay more. And that's not something Tom Tiffany wants voters to know, but it needs to be said.

No surprise that CPI fell in June, but PPI as well? Now that's interesting

We figured consumer inflation would show prices going down overall in June, due to a significant decline at the pump. But I don’t think we thought it would be this much.

The Consumer Price Index, released Tuesday, showed inflation declined 0.4% on a monthly basis in June, the largest single-month decline since April 2020. Annual inflation also eased to 3.5%, the government said, in the lowest yearly reading since March.

Economists surveyed by Bloomberg had expected inflation to fall just 0.1% from May and rise 3.8% from a year ago, a moderation from May's bruising report as gas prices eased thanks to a now-disintegrating ceasefire in the war with Iran.

Indeed, the index for energy prices tumbled 5.7% in June, while the gasoline index fell 9.7%, though both remain much hotter than a year ago. Food prices, meanwhile, ticked up 0.2%, with lettuce and fish costs driving higher.

"The renewed war in Iran will almost certainly push inflation back up. Relief could be short-lived. But this should give the Federal Reserve some time to see wait and see for awhile," Heather Long, chief economist at the Navy Federal Credit Union, posted on X.

On a "core" basis, stripping out volatile energy and food categories, price growth slid to 2.6% on an annual basis, and was flat for the month. Economists had seen inflation rising 0.2% from May and 2.8% from last year.

That core number will especially buy the Fed some time, since Fed Governor Christopher Waller indicated earlier in the week that stat would be a bigger guide into where things stood than the overall CPI number for June. And that flat reading meant that core inflation followed the overall CPI in having its rate go down vs May.

Digging into the CPI report, we see the moderating and declines in prices were in many areas.

The index for all items less food and energy was unchanged in June after rising 0.2 percent in May. The shelter index increased 0.1 percent over the month, the smallest 1-month change reported for that index since January 2021. The index for owners’ equivalent rent rose 0.2 percent in June, and the index for rent increased 0.1 percent. The lodging away from home index fell 2.3 percent over the month.

The motor vehicle insurance index declined 2.0 percent in June after falling 1.7 percent in May. The index for communication fell 1.5 percent over the month, and the index for apparel declined 0.6 percent. The used cars and trucks index fell 0.2 percent in June.

That was the surprising part, given that May’s core Producer Price Index rose by 0.8%. So are the businesses taking lower profits at this point? Or have those higher producer prices not made their way through, and July will see a return to the inflationary cycle?

Then the PPI report came out on Wednesday. We knew that gasoline fell significantly in June and that would show in the overall PPI number, but apparently the cost of other goods also were going down?

Final demand goods: The index for final demand goods moved down 1.4 percent in June, the largest decrease since falling 1.9 percent in July 2022. Leading the decline in June, prices for final demand energy dropped 6.4 percent. The index for final demand foods moved down 0.6 percent. Conversely, prices for final demand goods less foods and energy increased 0.2 percent.

Product detail: Nearly two-thirds of the June decline in the index for final demand goods can be traced to prices for gasoline, which dropped 12.0 percent. The indexes for diesel fuel, jet fuel, fresh vegetables (except potatoes), crude petroleum, and thermoplastic resins and materials also fell. In contrast, prices for plastic products advanced 1.6 percent. The indexes for residential electric power and for potatoes also increased.

The drop in wholesale food prices got extra attention from me – that’s not something we had seen recently, as the PPI for foods had gone up in 0.2% and 0.5% in April and May respectively. And as hinted above, there was a wide range of foods that had their prices fall at the wholesale level last month.

Change in PPI, June 2026
Grains -12.0%
Oilseeds -7.8%
Fresh/dry vegetables -6.0%
Fresh fruits/melons -2.2%
Processed chickens -2.2%
Processed turkeys -2.1%
Pork -1.9%
Eggs -1.7%
Beef/veal -1.5%

So we should see some relief in grocery prices for July and likely August. And if we don’t, we probably should be suspicious as to why not.

Intermediate producer prices also went down in June (-1.2%), their first decline since October, and a reversal from what we’d seen, as those had gone up by a total of 8.6% over the previous 3 months. It’s weird to me how those sizable intermediate increases from March through May didn’t translate into an increase in overall PPI in the final products for June, and I wonder who ends up losing as a result. Did we just have an odd blip before inflation comes back in July, especially with oil back up toward $80 a barrel? Or are there businesses that are losing out and will see their profits be severely reduced because they can’t pass on the higher costs from this Spring to their customers? I don't see a third option out there.

SThe declining prices of June will buy time for the Federal Reserve to figure out what things look like for the second half of 2026, so don’t count on any moves when the Fed meets on interest rates in 2 weeks. But June’s declines for both CPI and PPI leave me more confused than I was before this week, as this regression from the high inflation of the previous part of 2026 seems too good to be true (maybe literally?).

INFLATION WATCH - it'll be down for June, but likely not for July

Tomorrow, we are likely to find out that not only did we not have inflation for June, but we may well have had deflation!

The cost of living is all but certain to decline in June for the first time since the pandemic six years ago — entirely due to a sharp drop in gasoline prices. The cost of a regular gallon of gas tumbled 15% from mid-May to the end of June.

Economists predict the U.S. consumer-price index fell by 0.2% in June. The critical report for Wall Street will be released Tuesday morning.

The yearly rate of inflation should follow suit, slowing to 3.8%, from 4.2% in May. The May rate was the highest since April 2023.

So nothing but smooth sailing from here in! Prices should fall back, with no need to raise interest rates, because the war in Iran is done, and it only cost us 4 months of higher gas prices and...

Wait, what's that you're telling me?

The U.S. military said it carried out more strikes on Iran on Monday, hours after President Trump announced he would reimpose a blockade against the country and start charging tolls for other countries' ships to pass the Strait of Hormuz....

Earlier, Trump said the United States would not allow Iranian ships to move through the Strait of Hormuz. "We are reinstating THE IRANIAN BLOCKADE, so named because it is only stopping Iran's ships or customers from entering or leaving," he said in a post online.

CENTCOM said the blockade would begin on Tuesday at 4 p.m. ET. The U.S. military last worked to block maritime traffic to and from Iranian ports from April 13 to June 18.

OH COME ON! This is also why I filled up the car today.

As oil was spiking by more than $5 a barrel today, Federal Reserve Governor Christopher Waller was telling New York business leaders that inflation is definitely back in 2026

"We're building off of basically almost, you know, five to six months of 'higher, higher, higher, higher,' on inflation readings," Waller said. "If I get another higher one, I'm going to treat that as signal, not noise.".

Waller went on to say that inflation was widespread in several areas of the economy, beyond the gas price increases in the first half of this year.

In particular, he said he is worried that recent inflation reports have shown price pressures seeming to broaden throughout the economy, beyond the influence of ‌last year's import tariff increases or the recent jump in energy costs ⁠and potentially reflecting more systemic inflation that would require tighter monetary policy. Of the categories in core services, which account for 75% of core prices, nearly 70% have 3-month and 12-month inflation over 3%, he said.

While the situation is not comparable to the breakout of price increases that followed the COVID-19 pandemic, with the labor market not as tight, ⁠for example, Waller said the Fed has the benefit of anchored inflation expectations — an advantage the policy-setting Federal Open Market Committee should not squander by waiting too long to raise rates if inflation persists.

"I don't take the inflationary signals I have discussed today lightly. If we get another hot reading on core inflation this week, then the FOMC will need to consider tightening monetary policy in the near term," Waller said. He added that it would take "several months of lower readings to feel that inflation is finally moving in the right direction."

And that's why you should ignore what is likely to be an overall drop in inflation that's likely to be reported tomorrow morning. Because it'll be because of a one-month drop for gas prices that are likely to bounce back up in July and August. Look to the core rate beyond food and energy to see if that stays in the +0.2% to +0.4% it was in for the first 5 months of this year. Christopher Waller and the rest of the Fed certainly will.

And then watch out for the Producer Price Index report which will drop on Wednesday. Those prices paid by businesses went up by 1.1% in both April and May, and were up 3.5% in the step before final production, indicating that the increase may be even higher for June. If that comes in hot, we are likely heading toward a rate hike some time in the next 2 months, and boy will the Trump/GOPs, coked-up hedge bros and debt-needy AI types hate that!

Medicaid budget deficit is all the more reason it needs to be expanded in Wisconsin

I'd mentioned earlier that the state of Wisconsin was seeing its Medicaid expenses were running higher than expected. Last week, the Legislative Fiscal Bureau sent a note further explaining why the shortfall in Medicaid was happening, and what could be done about it.

First, the LFB mentioned the good news that Wisconsin’s attempt to grab more federal Medicaid dollars for hospital services has been okayed.

In a January 15, 2026, memorandum to you on the 2025-27 biennium general fund condition, it was noted that there was a possibility that the Act 15 [2025-27 state budget] hospital assessment and hospital access payment provisions would not be approved. This was based on preliminary guidance issued by the federal Centers for Medicare and Medicaid Services (CMS) regarding states' use of provider assessments in their Medicaid programs, which suggested that the Act 15 increase may not be granted grandfather status, and thus be could be disallowed under the federal One Big Beautiful Bill Act. Because Act 15 assumed that a portion of the assessment revenues would be used to offset GPR expenditures for the Medical Assistance (MA) program, a decision to not grant grandfather status would result in a GPR budget shortfall for the program of nearly $800 million over the biennium. However, CMS has now approved the Act 15 change, and on June 29, 2026, the Department of Health Services (DHS) published a notice in the Wisconsin Administrative Register indicating that the Act 15 assessment and related hospital access payment provisions are in effect.

You may remember these increased assessments and payments to hospitals were the reason that Governor Evers and the Wisconsin Legislature had to work through the night to get the state budget signed before GOPs in DC were able to formally pass Trump Tax Scam 2.0 into law. That situation also included the absurd series of events where Congressman Derrick Van Orden was telling Evers and the Legislature to increase the hospital assessment ASAP…. because Van Orden was going to vote for the GOP Tax Scam that would prevent them from raising it in the future!

But even though the hospital assessment is OK for RFK, Dr.Oz and company, the LFB says that there are hundreds of millions of dollars that have to be made up in the program.

Although the Act 15 hospital assessments received federal approval, DHS currently projects that the program will have a $322.4 million GPR budget shortfall for the 2025-27 biennium, due to factors unrelated to the Act 15 hospital provisions. Except for the number of enrollees in the elderly category, which are now projected to be modestly higher than budget estimates, enrollment in other groups is trending lower than projected. Consequently, the projected deficit is primarily the result of higher expenditures in certain service categories, despite the lower enrollment. In particular, the program is experiencing higher costs for prescription drugs, nursing homes, and federally qualified clinic services, among others. The following table shows the major service categories for which expenditures are projected to be above or below budget estimates. In addition to the dollar variance, the table also shows the percentage difference. Since only the service categories that show a substantial dollar variance from budget estimates are shown, the amounts in the table do not sum to the total projected shortfall.

The LFB goes on to note that because Medicaid expenses have to be paid for if someone qualifies for coverage of thosae services, there is likely to be a need for the new Governor and Legislature to have to figure out how to fill this budget hole when they take office next January.

….The Department [of Health Services] may have some ability to modify or delay healthcare provider or managed care payments in order to address the shortfall, although these measures would have negative consequences that would also need to be considered. Even if the Department does reduce the imbalance through payment changes, these measures may not be sufficient to fully resolve the shortfall, and budget adjustment legislation may need to be considered prior to the end of the biennium.

Given that Wisconsin is projected to have over $2 billion carried over into this next budget, it may be as easy as designating some of those funds to pay for the higher Medicaid expenses for the 2025-27 biennium. But it also shows that there may be a lot more funds needed to pay for Wisconsin’s health care services in the next 2 years, and unless Medicaid is expanded (which would cut over $1 billion in each of the next two years), it could cut into any chances of further tax cuts or property tax relief as well as investments into roads and education.

Of course, you know what could take care of all of this? Being one of the last 10 states in America to expand Medicaid under the Affordable Care Act, as Governor Evers has asked for in each of the last 4 budgets, and the GOP Legislature has refused to do. This would have the Feds take up almost 30% more of everyday Medicaid expenses than they do today, instead of having the State of Wisconsin pay for it, and when the Evers Administration asked the Legislature to allow Medicaid to cover Wisconsinites that make between 100% and 138% of the poverty line (between $33,000 and $45,540 for a family of 4 in 2026), they estimated over $1.9 billion in state tax dollars would be saved by doing so.

This amount of savings will likely be even larger today, given the increase in health care costs for services of people that currently use Medicaid for services.

In addition, Medicaid expansion would be a sizable benefit for those living just above the poverty line in Wisconsin. Trump/GOP Tax Scam 2.0 drove up the costs of being covered by policies purchased on the Obamacare exchanges - which is often how these folks end up getting insured because Medicaid hasn't been expanded, if they have any coverage at all these days.

Companies offering Obamacare health insurance plans next year are requesting payment rates representing a 14% median increase to premiums ​over 2026 rates, according to data from health policy research group KFF.

The proposed ‌rate for 2027 represents the second-highest increase since 2018, KFF said. Insurers must submit proposals to regulators by July 15, detailing expected costs and planned price changes ahead of the new year.

When insurance companies asked for a median rate hike of 18% last year, they pointed to an expected greater number of higher-risk, or sicker, patients enrolled in the plans ⁠that would not be offset by less costly, healthier enrollees....

Insurers expect the pool of patients with greater medical needs to increase premiums by 4% next year as healthy members continue to drop coverage in 2027. Wider economic inflation, rising costs of medications and increased consolidation of medical providers are also driving the increase in premiums, KFF said.

Obamacare enrollment declined 13% ‌in ⁠2026, from 22.1 million people in 2025, after the expiration of extra subsidies meant to help people keep coverage during the COVID-19 pandemic.

Seems like expanding Medicaid would both fill in the budget hole we have in Medicaid, and make health care more affordable not only for the hundreds of thousands of Wisconsinites that rely on Obamacare for coverage, as well as the many others who have seen their health care costs go up in the last year. I wqould think all WisDems should be running hard on this fact for November, as those health insurance hikes are going to be getting sent to a whole lot of voters in the weeks before they go to the polls this Fall. And there is no longer a GOP gerrymander in place to block Dems from taking over the Legislature and making this into reality.

And given that Tom Tiffany was a part of the group of GOP legislators that refused to expand Medicaid in Evers' first budget in 2019, and then moved onto Congress, where he signed onto the cuts in Obamacare subsidies that are driving up the costs of insurance for so many Wisconinites today. He has earned a hammering for this, and he should be allowed nowhere to hide from it.

Federal budget through June shows deficits, interest costs rising

The Congressional Budget Office gave an update on what the US budget looked like through June. And on the revenue side, there was less than what we had in June 2025. But it was for a one-time payback of an earlier move that boosted revenues.

CBO estimates that receipts in June 2026 totaled $495 billion—$32 billion (or 6 percent) less than the amount recorded last June. That decrease was driven by a sharp decline in net collections of customs duties because of tariff refunds required by the Supreme Court’s February ruling. In June 2026, refunds of customs duties ($50 billion) exceeded gross collections ($24 billion), producing a net outflow of $26 billion—$52 billion below the $27 billion collected last June.

As you will see, tariff revenue has turned negative in the last 2 months, on the heels of a Supreme Court ruling in February that the Trump Administration illegally imposed some duties. This led to a total of $50 billion in refunds being sent to US businesses and individuals in June following $20 billion in refunds for May.

Take away the tariff refunds, and tax revenues were up year-over-year.

Collections of income and payroll taxes rose by $18 billion (or 4 percent), reflecting higher wages and salaries and partially offsetting the decrease in customs duties. (The Treasury reallocated $13 billion from payroll taxes to individual income taxes in June to account for newly available tax information from prior years. That reallocation does not affect the combined increase for the two sources.) In addition, corporate income taxes rose by $2 billion (or 3 percent).

But let's not think that Trump Tax Scam 2.0 is paying for itself with economic growth, because most of the tax benefits came with this year's refunds this Spring. That's especially for corporations, who are paying much less in taxes in Fiscal Year 2026.

Receipts from corporate income taxes [have] decreased by $86 billion (or 24 percent) [compared to Fiscal Year 2025 through June]. The enactment of the 2025 reconciliation act allowed corporations to take larger deductions for certain investments, thereby reducing some payments and offsetting the increases in those receipts that otherwise would have been expected, given the rise in corporate income.

On the spending side, Social Security, Medicare and Medicaid is accounting for 46.2% of overall Federal spending, at $2.55 billion of the $5.52 billion spent so far in Fiscal Year 2026.

Those 3 programs account for $169 billion of the $178 billion in increased spending for FY 2026, which also means that the rest of federal spending hasn't gone up at all for those 9 months.

A big reason that other government spending hasn’t gone up with 2026’s inflation is due to a reduction in the amount of student loans that came from Tax Scam 2.0.

Outlays of the Department of Education decreased by $55 billion (or 55 percent), largely because the department recorded a net reduction of about $53 billion in the estimated costs of outstanding student loans. No annual reestimate of outstanding loans was recorded during the first nine months of fiscal year 2025. In addition, spending from the Education Stabilization Fund declined by $12 billion (or 89 percent). The total decline in education spending would have been larger if not for $11 billion in outlays stemming from the recording of the estimated costs of two administrative actions announced in 2026: one delaying collections on delinquent student loans ($4 billion) and the other providing a discount to borrowers who elect to have automatic monthly payments made from their bank accounts ($7 billion).

And another reason for limited expenditures is related to the Trump Administration picking and choosing which (red) areas get FEMA aid while denying other (blue) areas.

Spending by the Department of Homeland Security decreased by $13 billion (or 15 percent) mainly because the Federal Emergency Management Agency spent more in disaster response during the same period last fiscal year. Increased spending for immigration enforcement and border security this year offset some of that reduction.

At the same time, “on the books” military spending is up $30 billion so far in Fiscal Year 2026, and interest on our national debt is up $98 billion. Don’t expect either to be slowing down any time soon with Trump/GOPs in power.

It's not surprising that budget deficits keep climbing in 2026, but it does seem like the combination of higher prices and rising red ink for Uncle Sam sunk in a bit more in the last week, as interest rates on the benchmark 10-year US Treasury Bond has had a noticeable rebound in July.

Doesn't seem like a healthy situation to continue in, and the continued cutbacks in non-defense and non-entitlement spending can't be something that'll help consumer spending as we look at the second half of 2026. The higher interest rates aren't going to help all those AI firms that are strung out on debt, nor will it encourage the venture capital types to keep pumping their hopium dollars into these businesses. But because the economy allegedly keeps growing and job losses aren't rampant, it doesn't feel like an emergency today. Where this breaks and how it changes as a result is where the real interesting stuff will begin.

Services economy still growing for June, but so were prices.

It seems like the overall US economy was OK as the first half of 2026 ended. The Institute for Supply Management says that services were growing at a decent clip in June, with new orders still being added, and even employment was reported to be up after 3 months of declines.

“Economic activity in the services sector continued to expand in June, say the nation’s purchasing and supply executives in the latest ISM® Services PMI® Report. The Services PMI® registered 54 percent, the 24th consecutive month in expansion territory.

The report was issued today by Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee: In June, the Services PMI® registered 54 percent, a decrease of 0.5 percentage point compared to May’s figure of 54.5 percent. The Business Activity Index remained in expansion territory in June, decreasing 2.3 percentage points to 55.4 percent from May’s reading of 57.7 percent. The New Orders Index registered 55.1 percent, 2.2 percentage points below May’s figure of 57.3 percent. The Employment Index expanded for the first time in four months with a reading of 51.2 percent, a 3.3-percentage point increase from the 47.9 percent recorded in May. All of the four subindexes that make up the composite PMI® were above their 12-month moving averages,” says Miller.

“The Supplier Deliveries Index registered 54.4 percent, 0.8 percentage point lower than the 55.2 percent recorded in May. This is the 19th consecutive month that the index has been in expansion territory, indicating slower supplier delivery performance. (Supplier Deliveries is the only ISM® PMI® Reports index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.)

But check out this segment of the ISM report, where they ask the managers about what’s happening with prices in these industries.

And I noticed this comment from someone in Accomodation and Food Services.

“We continue to experience higher prices due to the Persian Gulf conflict through rising diesel fuel costs and increased input costs for resin-based packaging. The brunt of the impact will be experienced in the third quarter (Q3) of 2026, but we are feeling the impact now. Suppliers are aggressively attempting to pass through price increases.”

Then there’s this comment from someone in Wholesale Tade.

“We are experiencing continued sequential top-line growth driven mostly by increased prices.”

Which means they’ve been able to pass higher prices onto the stores, and the stores are likely passing it on to their customers.

So don’t count on consumers getting a price break on anything beyond what we’ve seen at the pump in the last month – and even with the recent declines, we’re still paying 20% more for regular gasoline than we were this time last year. And since we aren’t seeing major job cutbacks with the higher prices, there is no reason for the Federal Reserve to cut interest rates any time soon – if anything, they should be raising them.

Oh, and now Trump says war is back ON in Iran, oil futures are up 9% in the last 2 days and and probably headed higher than that. So don't expect inflation to be coming down any time soon, and in an honest world, rate hikes from the Fed are seeming more likely than not for this year.

That doesn't seem like a winning situation at all for the second half of 2026, does it?