To help you understand what is going on in the economy and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here's the latest...

Social Security’s cash shortfall is nearing, according to government accountants. The point at which the program’s trust fund of prior tax revenue runs out and legally triggers a 22% drop in payments is now estimated to hit at the beginning of 2033.

What can Congress do to head off disaster and keep the immensely popular program solvent? We expect lawmakers to find some solution. But anything they choose will be painful. The gap between what the Social Security Administration takes in taxes and what it pays out as benefits has been growing for decades. But before that, when the program was running a surplus, Congress spent the extra cash, leaving IOUs in the trust fund. Now, the Treasury is repaying those IOUs via money from general taxation and mounting debt issuance. Once the IOUs have been repaid, though, the feds can no longer pay more in benefits than they take in from Social Security’s dedicated payroll tax. Any fix will require more taxes, more debt or lower benefits.

Let’s look at some of the options on the table. Congress could let the Treasury sell more bonds to fill Social Security’s shortfall. That would sidestep the need for new taxes, but further blow up the deficit, which is already running at $2 trillion a year. Bond investors may balk at adding to it. Other common proposals get Congress partway to a solution. Among them:

• Lifting the full retirement age by a year eases the program’s tax gap by 12%.
• Raising the cap on earnings subject to the payroll tax would cover 26% of it. That’s assuming the cap rises from the present $184,500 of earnings to $330,000. Hiking the payroll tax one percentage point for everyone also yields 26% of the money Congress needs to find to keep scheduled benefits intact after 2033.
• Other options include reducing annual benefit increases and similar tweaks.

None solves the funding gap on its own, and all will be wildly unpopular among whichever voters find themselves paying more, getting less or doing both.

Given the difficult politics involved, we look for Congress to drag its feet and put off any solution for as long as it can. Social Security has long been known as the third rail of American politics. Calling for less-generous benefits or higher taxes is a surefire way to not get reelected. But the funding crunch can’t be wished away.

Ultimately, expect a mix of benefit cuts and tax increases, as lawmakers try to minimize the ways in which they antagonize voters. It’s too early to predict just how the pain will be distributed, but we would guess that upper-income folks will bear more of it than those lower down the income ladder. That may mean means testing for benefits, smaller annual increases, a higher cap on payroll taxes, etc.

This looming battle figures to dominate U.S. politics in the coming decade.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

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Americans will celebrate the 250th birthday of the country this July Fourth, but some families may also be celebrating something else: the launch of the Trump Account, a new, tax-advantaged investment vehicle for children.

Essentially a starter IRA, the account can help build long-term wealth for children, with some kids qualifying for free seed money from the federal government, employers and philanthropists.

"The main idea is to give kids a head start on retirement savings," says Judd Meinhart, director of financial planning at Modera Wealth Management in Winston-Salem, N.C. Unlike IRAs, Trump accounts, which were created under the One Big Beautiful Bill Act of 2025, don't require a child to have earned income.

Any child younger than 18 who is a U.S. citizen and has a Social Security number is eligible. Parents, grandparents, and other relatives and friends can collectively contribute up to $5,000 a year (the maximum will be indexed to inflation starting in 2028), and babies born between 2025 and 2028 get an additional, one-time deposit of $1,000 from the U.S. government to help kick-start the account. (You can sign up at TrumpAccounts.gov.)

Contributions, which must be invested in low-cost mutual funds or exchange-traded funds that track a U.S. stock index, grow tax-deferred and typically can't be withdrawn until the year the child turns 18. Earnings on money taken out after that point will be taxed as ordinary income, with a 10% penalty on withdrawals made before age 59½, unless they're used for qualified expenses such as education or a first-time home purchase. Intrigued?

Whether the accounts make sense for your family depends on your goal for the money and personal circumstances. Here's how experts suggest you make the call.

Open a Trump account if…

You can get free money to fund it. "If you qualify for free seed money, the decision is a no-brainer," says Marianela Collado, a certified financial planner with Tobias Financial Advisors in Plantation, Fla.

There are no income limits to get the $1,000 contribution from Uncle Sam to accounts opened for children born between 2025 and 2028, nor do you need to contribute yourself. Meanwhile, some big companies have pledged to match the federal gift or otherwise contribute to the accounts on their employees' behalf (maximum contribution: $2,500 a year per employee). Among them: Bank of America, Intel and Uber.

A few philanthropists are offering help with funding as well. For example, Michael and Susan Dell will donate $250 to each account opened for children 10 and younger who live in areas where the median household income is below $150,000 (see whether your neighborhood qualifies at ), and similar initiatives have been announced for Connecticut, Indiana and San Francisco. (Find a list of corporate and philanthropic programs here.)

Skip the Trump account if…

Your primary goal is to pay for college. Trump accounts work best as lifelong wealth-building tools, meant to compound for decades. Although you can withdraw money for higher education without penalty, you'll pay taxes on earnings, and it's not yet clear how these assets will impact financial aid.

For education funding, 529 accounts remain a better choice for most parents. Contribution limits are significantly higher and investment earnings and withdrawals are tax-free as long as they're used for qualified education expenses.

Your investment options are broader too, typically including target-date portfolios that shift to a more conservative investment mix to minimize losses as college approaches. "With a 529 account, you're not as limited," Meinhart says.

Consider a Trump account if…

You can afford to set aside money for your child's or grandchild's future after saving for retirement, college and other goals. The extra decades of compounding mean that even small contributions to Trump accounts could create significant wealth.

If you contribute just $1,000 a year from birth to age 18, on top of the $1,000 seed money from the government, for example, the balance could grow to nearly $1 million by the time the child reaches age 59½, assuming an 8% average annual return, according to Adam Bergman, founder of IRA Financial in Sioux Falls, S.D. Increase those contributions to $5,000 a year and the account could be worth more than $4.5 million.

Says Bergman, "It's an unbelievable golden ticket for the families who are able to make contributions consistently."

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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To help you understand what's going on in the economy, domestic and global, our highly experienced Kiplinger Letter team keeps you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…

The Persian Gulf will eventually reopen to shipping and allow the region’s vast energy exports to resume flowing. But the world energy market will never be the same after months of severe disruptions from the war and blockade.

Oil and gas

Security of oil and gas supplies will assume much greater importance for both producers and consumers. By some measures, the loss of exports from the Persian Gulf has been the largest disruption to energy supplies in history. The economies that rely most on Middle Eastern energy, especially those in Asia, will be looking to diversify their supply options. Meanwhile, the oil and gas exporters that line the Persian Gulf will be working on alternate ways to get shipments out. No one is going to want to risk another closure of the narrow Strait of Hormuz, the passageway for a fifth of the world’s oil and vast supplies of gas before the war.

The war has shown a need for greater reserves of oil and refined fuels in parts of the world that depend heavily on imports. At the beginning of the conflict, China had a massive 1.4 billion barrels of strategic reserves, but many other Asian countries lacked much of a buffer when Middle Eastern barrels stopped arriving. Going forward, expect a race to refill existing storage with crude oil, jet fuel and other products, and then to add additional storage tanks, to guard against future supply disruptions.

The oil-rich U.S. will need to be part of this trend of boosting stockpiles. The Strategic Petroleum Reserve has played a key role in making up for lost output, but it was already heavily depleted in 2022, when Russia invaded Ukraine. Now, it has only about half its long-term storage level, and needs to be refilled eventually.

In the Middle East, expect a scramble to build new pipelines as alternatives to shipping via the Gulf, which Iran showed it can shut down. Saudi Arabia’s pipeline to its west coast proved a vital lifeline for energy markets during the war. The UAE (United Arab Emirates) is rushing to build another pipeline that bypasses Hormuz, which it plans to finish in 2027. Iraq will likely try to hike pipeline exports via Turkey. Meanwhile, the region faces a hefty repair bill for its existing energy infrastructure, more than $50 billion, per one industry estimate. When the war is truly at an end, the Persian Gulf region will see an explosion in energy-related repair and construction.

For oil-producing nations elsewhere, the war spells potential new exports. Places that can boost supply and face lower geopolitical risk stand to be rewarded. Among them:

• Canada, whose hefty output was already gradually rising
• Argentina
• Brazil
• Guyana
• Venezuela, home to the largest oil reserves in the world by many estimates.

Venezuela's industry needs major investment after decades of mismanagement by its socialist government. But already, exports to the U.S. are up in the wake of the capture of former President Nicolás Maduro. The only American firm operating there now is Chevron. But others may cautiously join it in the coming years.

Note the geographical shift here: More oil output in the Western Hemisphere, far from the war-torn Persian Gulf. The U.S. will remain the world’s top oil producer, though it is unlikely to grow much more as our most productive oil fields mature and investors press energy firms to keep drilling costs down. But our huge production and extensive refining sector will anchor the growing energy industry in the Americas.

Natural gas

Lost oil exports have received most of the attention during the Iran war. But don’t overlook natural gas.

Prior to the war, about one-fifth of LNG (liquefied natural gas, superchilled for shipping) came from the Persian Gulf. The conflict halted that trade, and some LNG export facilities are badly damaged.

America, already the largest gas exporter, stands to grow in importance as it builds more LNG export terminals and continues pumping more gas to sell in overseas markets. With Middle East gas supplies in doubt and Russian LNG under sanction from Western governments, U.S. gas will be in even higher demand. While America’s oil production shows signs of flattening, gas output is growing. Nine LNG export facilities now operate in the U.S., with several more coming. America is becoming the Saudi Arabia of gas — a prolific supplier of a commodity that is vital for everything from power generation to space heating and fertilizer.

Being the world’s gas supplier is an economic boon, but one with caveats: How much of our gas bounty to export could become a political football, particularly as voters see their power bills soar and worry that exporting more gas will lead to still-higher utility costs. Energy-intensive industries will feel likewise. These debates are not new, but look for them to take on more urgency before long.

Petrochemicals

The Iran war will help prolong North America’s petrochemical cost advantage, which had been narrowing amid lower oil prices and global overcapacity. Due to America’s abundant natural gas, U.S. chemical makers use ethane as a feedstock instead of the oil-derived naphtha that dominates in Europe, Asia and Latin America. With global oil prices up almost 50% since before the war started and U.S. natural gas still at low prices, ethane now has a clear cost advantage over other countries’ naphtha.

Still, expect the industry to be cautious about ramping up domestic capacity, given the prewar state of the market, in which many older and higher-cost producers were under pressure. About 10 million tons of ethylene capacity was slated for closure, a number that could rise to 20 million tons, or 10% of global capacity, by 2028. An effort to increase domestic fertilizer production is already under way. The Department of Agriculture expects capacity to increase by more than 4 million tons, thanks to a revived and revised Fertilizer Product Expansion Program (FPEP). The FPEP will help fund new production facilities in Iowa and Washington.

The Trump administration has also focused on streamlining other requirements for fertilizer producers. Officials aim to complete the permitting for a new CF Industries ammonia plant in Louisiana in 45 days. Ordinarily, it can take years. Once completed, the facility will be the largest of its kind in the world, producing 1.5 million metric tons of ammonia annually.

OPEC

Back in the Middle East, the Iran war poses a threat to OPEC’s dominance of the global oil market. Overshadowed by the fighting was the recent news that the United Arab Emirates, one of the oil cartel’s biggest producers, is leaving and pursuing its own energy policy. With Saudi Arabia, the UAE had long worked to balance oil markets by adjusting its output up or down to keep prices stable at levels that work for OPEC members. Now, it stands to pump more of its crude oil, lessening the cartel’s ability to control prices. That suggests greater volatility ahead, especially if more OPEC members decide they are better off operating on their own.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

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Most people don't think about insurance until they have to use it. That's not a knock — it's just reality.

Premiums are something you pay and hope you never need back. But here's the thing: Someone in your state is deciding how that system works. In 11 states that have elections for the position, you get a vote on who that someone is:

• California
• Delaware
• Georgia
• Kansas
• Louisiana
• Mississippi
• Montana
• North Carolina
• North Dakota
• Oklahoma
• Washington

The insurance commissioner is the single most powerful person in your state when it comes to how insurance works — or doesn't — for regular people.

• Premium increases? They sign off on those.
• Carrier exits? They approve or deny them.
• Whether your claim gets paid fairly, or you get five new claims adjusters? That traces back to enforcement decisions made by the commissioner's office.

In those 11 states, you get to pick who holds the job of insurance commissioner.

This is why it matters

So why does it matter? Let me give you a real example.

After the 2025 fires in Los Angeles, carriers started reassessing their California portfolios.

• Some insurers non-renewed tens of thousands of policies.
• Others made the decision to withdraw from the homeowners market.
• Others adjusted premiums by 30%, 40%, even 50% in a single renewal cycle.

Homeowners who'd been with the same company for 20 years received non-renewal notices with 30 days' warning. The ones who could find new coverage were paying double what they paid the year before. The ones who couldn't ended up on the FAIR Plan, which is technically insurance, but barely.

That situation didn't just happen. Policy decisions over the preceding decade and antiquated state propositions about how much reserves carriers had to hold (in the case of California), whether premium increases needed justification and how quickly non-renewals could proceed shaped the environment.

Every single one of them went through the commissioner's office. Yes, all of them.

In the states that don't elect an insurance commissioner, the governor makes an appointment, which means you have indirect input at best — you're voting for the person who picks the person who picks the regulator.

Which is fine, except when it isn't.

The difference between a good commissioner and a weak one shows up in whether your premium goes up 8% or 28% at renewal.

It also shows up when an insurance company becomes insolvent because it wasn't held to the proper standards of financial responsibility.

It shows up in whether the market stays competitive with four or five carriers competing for your business or whether you're stuck with one option that knows you have no choice.

How to find out what your commissioner has done

Look up who your current commissioner is. Look up what they've approved and denied in the last two years. Check whether consumer complaints in your state get resolved or buried.

That information is public, on your state's Department of Insurance website. You likely can check complaint ratios, premium-approval records, enforcement actions and more.

It takes about 10 minutes to find out whether your commissioner is doing the job you think they should be doing.

Then vote accordingly. Vote smartly.

Want to learn more about insurance? Visit KarlSusman.com.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

You may have heard about a settlement between President Donald Trump and the IRS to resolve a $10 billion lawsuit over his tax returns. The deal has sparked backlash, including over a provision that bars the federal tax agency from continuing existing audits involving Trump, his company, and his family members.

The agreement also reportedly creates a multibillion-dollar “Anti-Weaponization Fund” (more on that later).

Meanwhile...the administration has cut IRS staffing and budget — most recently by roughly $1.1 billion in FY26 — since Trump began his second term.

These developments raise several thorny political, legal, and practical concerns. But one key question is whether IRS enforcement priorities will shift in ways that affect more taxpayers: Who else will still get audited, and why?

Trump IRS settlement: How we got here

Before looking at who the IRS might audit, it helps to understand how the Trump IRS settlement came about in the first place.

As Kiplinger has reported, Donald Trump, the Trump Organization, and family members sued the IRS and Treasury Department in federal court in early 2026.

• They alleged that the agencies failed to safeguard Trump’s confidential tax information after an unauthorized disclosure by a former IRS contractor.
• The suit sought $10 billion in damages and drew scrutiny because a sitting president was suing over the very agency that enforces tax law.

By mid-May 2026, Trump said the dispute was resolved through a settlement with the Department of Justice (DOJ). As mentioned, a provision in that settlement appears to limit IRS action surrounding existing audits involving Trump, his family, and affiliated entities.

The settlement also reportedly creates a roughly $1.776 billion “Anti-Weaponization Fund” tied to claims of government misconduct. The fund would be taxpayer-funded and controlled by an administration-appointed group, not the IRS, raising concerns about its broad scope, lack of congressional oversight, and lack of precedent in tax disputes.

A lawsuit has already been filed challenging the fund’s structure, and the combination of a large compensation fund and limits on IRS scrutiny of Trump, his company, and his family is fueling concern.

In a May 21 letter to Treasury Secretary Scott Bessent and IRS CEO Frank Bisignano, several Senate lawmakers wrote the following.

“Through this settlement, you and the President have created a nearly $1.8 billion taxpayer-funded slush fund for the President's political allies, including potentially the January 6th insurrectionists . . . essentially making it official United States government policy that President Trump, his family, and many other allies are above the law.”

Update: A federal judge in Virginia temporarily blocked the Trump administration from creating or distributing money from its "Anti-Weaponization Fund" while the court reviews legal challenges alleging the fund may be unconstitutional and improperly benefit Trump allies.

IRS audit red flags for everyone else?

Even as Trump appears to have reduced exposure to IRS scrutiny for certain existing matters involving him or his family, audits remain unlikely to disappear for other taxpayers.

And one thing to note first: Historically, IRS audit activity has not been evenly distributed, and data show that a meaningful share of audits involving lower-income taxpayers has centered on refundable credits such as the Earned Income Tax Credit (EITC).

The reason seems to be that those are easier for the agency to flag and resolve through automated review and correspondence audit.

What about audit rates? The overall audit tax rate for the IRS is reportedly less than 1%.

• IRS audit rates fell sharply from about 0.9% of returns in 2011 to roughly 0.3% in 2018 (about 9 in 1,000 returns versus 3 in 1,000), according to IRS Data Book figures.
• Audit activity then ticked up modestly through 2024, following new IRS funding under the Biden administration's Inflation Reduction Act.
• Early reporting from President Donald Trump’s second term suggests that audits have softened again due to staffing and budget cuts, which affect enforcement capacity.

With fewer experienced revenue agents available, enforcement leans more heavily on automated systems that can operate at scale — flagging discrepancies between reported income and third-party forms like W-2s and 1099s, or generating notices based on data mismatches.

That tends to push compliance toward high-volume, low-complexity cases where algorithms identify errors. Some so-called “red flags” include:

• Income reporting mismatches detected through IRS computer systems
• Refundable tax credit claims requiring documentation checks
• Self-employment and gig-economy income reporting
• Automated compliance alerts triggered by third-party reporting gaps

More complex audits, like those involving large partnerships, layered business structures, and high-net-worth returns, require more staff time and specialized expertise. As a result, they tend to be more sensitive to staffing levels when the agency loses experienced examiners or shifts resources toward automation.

That doesn't necessarily mean fewer audits overall, but there could be a shift in which kinds of errors the agency catches most often. That tension lies at the center of the broader question raised by Trump’s settlement: not just who is exempt from audit scrutiny, but who remains most exposed and why.

Who get audited by the IRS: Bottom line

For most taxpayers, IRS audits in 2026 are still likely to occur — but probably at relatively low rates overall — and they don’t usually look like the intensive, in-person examinations some people experienced in the past or tend to imagine.

Note: Keep in mind that whether the IRS audits you will depend on your specific tax situation. As Kiplinger has reported, the agency may consider several factors, including income, tax breaks claimed, whether you own a business, etc. Consult a tax professional if you're concerned about your audit exposure.

• More often, modern IRS audits are "correspondence audits."
• These are automated notices often triggered by mismatched income records, missing paperwork, or questions tied to tax credits and deductions.
• They tend to be relatively narrow, system-driven, and generally designed to be resolved through documents rather than agent interviews.

But since enforcement tends to fall most heavily on returns that are easiest to flag automatically, everyday taxpayers can end up more visible than higher-income taxpayers with more complex cases, which many people would assume would or should draw the most scrutiny.

Meanwhile, the Trump IRS settlement is fueling a fiery debate.

Senate Finance Democrats, including the top Democrat on the Senate Finance Committee, Sen. Ron Wyden (D-Ore.), as well as Sen. Patty Murray (D-Wash.), have questioned whether the agreement oversteps congressional authority and effectively restricts IRS enforcement in ways never approved by statute.

At the same time, some Republicans, including Rep. Brian Fitzpatrick of Pennsylvania, have also raised concerns about precedent and process, arguing that any deal involving limits on IRS audits or large compensation structures requires clearer congressional oversight and guardrails.

Fitzpatrick and Rep. Tom Suozzi (D-NY) introduced the No Taxpayer-Funded Settlement Slush Funds Act to prevent federal dollars from being used for the fund.

Notably, Republican Senate Majority Leader John Thune of South Dakota reportedly has said he didn't see a purpose for the fund.

The Justice Department also recently faced questioning in a hearing on Capitol Hill over how the agreement was structured and how a nearly $1.8 billion compensation fund was justified in the context of a tax enforcement dispute. Lawmakers pressed acting Attorney General Todd Blanche for more details on how the terms were negotiated and approved.

Overall? Stay tuned. What becomes of the Trump IRS deal could spark continued debate over tax enforcement and fairness.

More on the IRS

• Common IRS Audit Red Flags to Avoid
• Ask the Editor: Will You Get Audited by the IRS This Year?
• Who Does the IRS Audit the Most?
• Received an IRS Letter? Taxpayer Confusion Grows Over CP53E Notices

To help you understand what's going on in politics and the economy and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…

You’ve heard about the K-shaped economy — the idea that affluent households’ financial fortunes are on an upward trajectory, while the middle class and lower-income consumers are trending down — what does it mean in practical terms?

The up and down slopes of the K are a useful proxy for the divergence of different types of consumers. But let’s look at what it means for the economy. The gap in spending power has been growing: The highest-earning 20% of households accounted for half of all consumer spending in 1995. Now it's about 60% of all spending.

The top 10% drive half of all purchasing across the economy. This bodes well for sellers of luxury goods and services: Jewelry, high-end cars, high fashion, exotic travel, home renovations, fine dining, etc.

Less-affluent shoppers are feeling strained. And are spending accordingly. As a result, the discounters stand to win more business as lower-income folks seek to stretch their dollars. This goes for the middle class and modestly well-off, too…there is a noticeable trend of those consumers shopping more at large discount chains, even if they technically don’t have to. For instance, buying groceries at Walmart or Aldi instead of Kroger or Safeway.

Retailers who cater to the middle of the income spectrum will struggle as their traditional customer base feels pressure to shop down-market, while the rich continue to patronize businesses that cater to the well-off. The recent sales struggles at Whirlpool, which says its basic appliances are selling well, but not its fancier ones, are a harbinger of this trend, middle-income folks prioritizing essentials over splurges.

This divergence explains why consumers are downbeat but still spending: Net spending, driven by the affluent, is up. But overall sentiment is down because the affluent make up only a small share of the people in economic surveys.

This is one reason financial markets have been able to perform so well, even when most consumers aren’t feeling good about their finances. Business is OK in general, and there’s little sense of the euphoria that can carry bull markets too far.

Note the obvious downside of wealthy consumers driving the economy: The vulnerability to a pullback, especially whenever the stock market drops. More and more, GDP growth depends on a small subset of well-off folks who feel great about their financial situations, as long as stocks are rising, home values hold up, etc. When the next market downturn hits, those same consumers may feel differently.

Meanwhile, the less wealthy are already getting tapped out, as shown by the decline in the national savings rate, now under 4%, vs. a historical norm of 5.5%. Few people are building much of a safety net to cushion the blow when the next bear market hits.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

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With gas prices climbing amid tensions in the Middle East (averaging $4.50 a gallon according to AAA, up more than 50% since the start of the war with Iran), President Donald Trump says he wants to suspend the federal gas tax “for a period of time” to help drivers.

But some economists say the policy would likely have only a limited effect, since gasoline prices are driven mainly by global oil markets rather than federal taxes.

What's a driver to do as we head toward the Memorial Day holiday? Read on.

Why a gas tax holiday might not lower prices much

The federal gas tax is 18.4 cents per gallon of regular, layered on top of state taxes (more on those below), but it represents only a small share of what drivers ultimately pay at the pump.

Gas prices are driven far more by global oil markets, which continue to fluctuate. That means even if the federal tax were temporarily suspended, prices would still largely reflect international supply and demand.

Even when costs fall, those savings don’t always quickly reach consumers.

Fuel prices adjust gradually, and companies across the supply chain — from refiners to gas stations — can retain part of the short-term margin depending on competition and local market conditions.

What about state gas tax?

Even if the federal gas tax were paused, drivers in most places in the U.S. would still pay state gas taxes, which are often significantly higher than the federal 18.4-cent tax.

As a result, the impact of a federal gas tax holiday would vary widely depending on where someone lives.

One state has already taken action to address this.

• As Kiplinger reported, Georgia temporarily suspended its state gasoline tax for 60 days in March as fuel prices surged following escalating tensions with Iran.
• The move cut roughly 33 cents per gallon from gasoline prices and about 37 cents per gallon of diesel.

Because Georgia’s state gas tax is higher than the federal tax, the immediate savings there were more noticeable than what a federal suspension alone would provide.

Still, economists note that even state-level tax holidays don't address the core driver of fuel prices: global oil markets. As mentioned, if crude prices remain elevated, pump prices can stay high even with tax relief in place.

On the flip side, out in California, Gov. Gavin Newsom has so far rejected calls for a state gas tax holiday. (Average fuel prices in the Golden State recently soared above $6 per gallon.)

Newsom has argued that suspending the state's gas tax could jeopardize infrastructure funding.

Hidden costs?

Worth noting: The federal gas tax also plays a key role in funding roads, bridges, and transportation infrastructure through the Highway Trust Fund.

Suspending it, even temporarily, could remove billions of dollars in dedicated transportation funding unless Congress replaces the revenue elsewhere, according to the Peterson Foundation.

• The Bipartisan Policy Center has estimated that a five-month federal gas tax holiday, for example, could reduce Highway Trust Fund revenue by roughly $17 billion.
• That matters because the fund is already under long-term strain and has required transfers from general federal revenues to stay solvent.

There is also a political hurdle…

Trump can't suspend the federal gas tax on his own. Congress would need to pass legislation approving the move, and lawmakers would also need to determine how to offset the lost transportation revenue.

Sen. Josh Hawley (R-Mo.) and Sens. Mark Kelly (D-Ariz.) and Richard Blumenthal (D-Conn.) have each introduced proposals to temporarily suspend the federal gas tax — currently 18.4 cents per gallon for gasoline and 24.4 cents for diesel — as a way to provide short-term relief from higher fuel costs.

In a release about his proposed Gas Tax Suspension Act, Hawley stated, "President Trump has proposed to suspend the federal gas tax, and he’s exactly right. American workers and families deserve immediate relief and this legislation will do just that."

Meanwhile, Kelly stated that "suspending the federal gas tax [via the Gas Tax Relief Act] would help bring prices down and give families some much-needed relief."

So, even though Congress has never voted to suspend the federal gas tax, the measure might resonate now on Capitol Hill because gas prices are highly visible and directly affect household budgets. Stay tuned.

What you can do about high gas prices

For consumers facing higher gas prices, most of the real relief comes from factors outside domestic policy. But some practical steps might help.

• Small changes in driving habits, like combining errands, accelerating and braking gently, and keeping tires properly inflated, might help improve fuel efficiency, according to the U.S. Environmental Protection Agency and the Department of Energy.
• Price comparison apps can also help drivers find lower-cost stations nearby, since prices can vary significantly even within the same area.
• Also, keep an eye on states with the highest gas tax and lowest gas tax rates.

And while gas prices tend to move with global oil cycles, they can shift quickly in both directions depending on supply conditions and geopolitical events.

Hopefully, some real price relief will arrive as unexpectedly as the price spikes did.

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To help you understand what's going on in politics and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…

The midterm elections are six months away. Here’s our early take on how things will go down.

Democrats have a chance to make big gains, with President Trump and his party reeling from sticky inflation and an unpopular war with Iran.

Republicans have lost ground with key groups of voters who helped power Trump to victory in 2024: Hispanics. Working-class white women. Gen Z men. And historically, the party controlling the White House tends to lose congressional seats during the midterms.

Democrats currently lead in the generic ballot, a rough measure of which party voters would prefer to control Congress, by about six points, on average. They should retake the House, where Republicans are down to a six-seat advantage after deaths, resignations and special-election losses.

How many seats they will gain is hard to say. While political conditions generally favor the Democrats, the party still must contend with its own image issues, as well as Trump’s persistent popularity with a small but loyal group of voters.

Redistricting has given Republicans a key advantage. While the legal issues are not completely settled, Republicans in several Southern states have drawn more GOP-friendly congressional maps in response to a recent Supreme Court decision narrowing the power of the Voting Rights Act. Democrats, meanwhile, have encountered legal setbacks in their efforts to do the same in Virginia.

Senate Democrats have a real possibility of flipping at least three GOP seats. In North Carolina, Democrat Roy Cooper comfortably leads his Republican rival, Michael Whatley. Maine Republican Senator Susan Collins is in the political fight of her life. The Ohio race, pitting GOP Senator Jon Husted against former Senator Sherrod Brown (D), is a toss-up. Dems also are bullish about their chances of defeating Alaska GOP Senator Dan Sullivan. Plus, Democratic candidates in key races are raising more cash than the Republicans.

The party needs to pick up at least four seats to gain control of the chamber, a tall order, given the rest of the Senate map. Republicans are defending more seats this year (22) than Democrats (13); however, all but one are in states that Trump won. By contrast, Dems are defending two seats in states that Trump won: Georgia and Michigan.

The odds still favor Republicans maintaining control of the upper chamber.

Whatever the results, expect the current gridlock in Washington to get worse. By controlling just one chamber of Congress, Democrats will effectively have a veto over future Trump legislative priorities and more opportunities to conduct oversight.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

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To help you understand what's going on in business and technology and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…

The Iran war has reinforced a new fact of life: The importance of drones in modern warfare. They’ve helped Tehran hold out against Washington and allowed Ukraine to hold its own against Russia.

The Pentagon is now trying to play catch-up as the U.S. prepares for a possible great-power conflict. Consider this simple cost comparison. Iran has forced the U.S. to use Patriot missiles ($4 million each) and THAAD interceptors ($12 million) to fend off swarms of $20,000-$50,000 Shahed drones, which is unsustainable in a longer conflict, especially with a foe as capable as China.

Other recent battlefield successes for the tech include Ukraine forcing Russian soldiers to surrender using only unmanned drones and robots. America lacks a robust drone industrial base compared with China, which accounts for roughly 90% of commercial drone production and controls most of the critical component supply chains. China’s DJI can make millions of reconnaissance drones per year. Skydio, the leading American drone manufacturer, can make thousands that cost three times as much. Note that Beijing is also catching up with the U.S. on more sophisticated drone technology used for both long-range strikes and spying.

Two noteworthy drone success stories: Ukraine and Taiwan. The former can produce 4.5 million drones per year, up from 5,000 in 2022 and deploy 9,000 of them per day in its fight against Russia. The latter is also ramping up output and exports, with the goal of increasing its production capacity to 180,000 units per year. Both countries have also managed to build China-free drone supply chains.

In response, Washington has launched its own Drone Dominance Program, a $1.1 billion effort with the goal of equipping the U.S. with hundreds of thousands of low-cost, weaponized drones by 2027. The Pentagon has purchased 30,000 so far after an initial competition involving 25 companies in February, ranging from start-ups to larger defense contractors like Kratos SRE and Neros. The agency is looking to buy at least 300,000 next year and start integrating them into U.S. battle plans.

More challenging than the drones will be building a reliable supply chain. The U.S. either relies on imports for key inputs, like sintered magnets (90% of which are made in China), or would struggle to scale up output at current domestic capacity. Case in point, the “brains” and “eyes” of drones depend on specialized semiconductors, like gallium-nitride power amplifiers, made at only a handful of Western facilities. The U.S. has taken some steps to address these issues, but still has a long way to go.

Don’t be surprised if Washington gets by with a little help from its friends. General Cherry, one of Ukraine’s largest drone manufacturers, recently struck a deal to build its products in the New Hampshire factories of U.S. defense contractor Wilcox Industries.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

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Energy is something we can't do without. It's been that way since homo sapiens were living in caves. Wood-burning fires helped protect people from dangerous carnivores, kept caves warm and provided light at night. In short, it was basic.

But in much of this century, many of us have taken the availability of affordable energy for granted. We expect that when we turn on the heat at home, it will work. Since the energy shocks of the 1970s, we've expected the cost won't break the bank. Likewise, getting gasoline from the filling station is easy and has been readily available at a reasonable price.

That's changed since the U.S. and Israel attacked Iran. It's brought energy-related matters to the forefront. Across the world, electricity, gasoline, diesel fuel, crude oil, fertilizer and natural gas have all seen sharp price rises. It's not always obvious to most people why that's happened.

We asked some experts why and what's happening, and at the same time, dug out some credible data that could tell us what's coming down the pike.

1. Extracting crude oil, refining and distributing are complicated.

Oil companies usually start by locating an oil deposit, then extract it from the ground or from undersea reserves. Next, the oil needs to be refined, so it's often shipped on massive vessels known as VLCCs (very large crude carriers).

When it gets to a refinery, the oil is converted into a variety of distillates, typically gasoline, diesel fuel, heating oil, and others. After refining is complete, the distillates are trucked to distributors, such as filling stations, across the U.S. If any part of the process is interrupted, prices can change.

The size of the price change will depend on the magnitude of the disruption.

2. Middle East at war in an energy zone.

On February 28, the U.S. and Israel attacked Iran. With 89 million people, Iran is the second largest country (behind Egypt) in the Middle East, where 30% of the world's oil is pumped.

But what happens in the Middle East doesn't stay in the Middle East. If there's a worry about access to oil, no matter where it's happening, traders in New York, London and Chicago quickly bid up the price.

"U.S. oil prices are sensitive to global prices," says Rob Haworth, senior investment strategist at U.S. Bank.

3. What matters about the Strait of Hormuz?

The Strait of Hormuz is a narrow waterway connecting the Persian Gulf to the Indian Ocean. At its narrowest point, the navigation lane is a vulnerable and easily mined two miles wide — half the range of a World War II-era torpedo.

As of this writing, the strait is shut down, choking off as much as 25% of the world's oil. It's not just the belligerents who have shut down shipments. Insurance companies have driven up the cost of insuring vessels while shipping companies want to stay out of harm's way.

"We are hearing shipping crews are reluctant to take on this role due to the risk of life," Haworth says.

4. Who's the king of crude oil output?

The U.S. is No. 1 in oil production — 13.7 million barrels per day in mid-March. Although the U.S. is the king of the oil patch, it doesn't control the price of its own oil.

Remember those traders in New York, London and Chicago? They've driven up the price of a barrel of crude oil to more than $100, vs about $65 before the war. According to AAA, the national average for a gallon of regular gas was $3.96 the last week of March, up more than a buck since before the war started.

To put it another way, the attack on Iran and the subsequent closing of the strait drove up the price of filling your car 35%. It now costs about $360 more to fill the tanks of a long-haul semi-truck than it did in February.

5. Don't expect quick drops in gasoline prices.

History shows that oil prices jump up quickly even on the potential of an oil blockade or a possible disruption.

In 2022, Russia invaded Ukraine, and the price of benchmark West Texas Intermediate crude shot up from $78 a barrel at the beginning of the year to $116 by May 30. It took until December 15 to fall to $57. The slow drop was due to production cuts by OPEC (Organization of the Petroleum Exporting Countries) plus Russia, says Rob Thummel, a senior portfolio manager at Infrastructure Capital Advisors.

"The supply was restricted," he says. Goldman Sachs warned in late March that the price of oil, and therefore, gasoline, could remain elevated until 2027.

6. The war has delivered profits to energy investors.

Since January, the energy sector has delivered exceptional returns. The State Street Energy Select Sector SPDR exchange-traded fund, which tracks a basket of energy stocks, had gained 34% excluding dividends by late March.

In contrast, the S&P 500 index lost 3.9% over the same period. It also helped that energy companies are better run than ever. "They generated free cash flow and paid down debt," Thummel says.

7. Energy is vital for food.

When you buy a loaf of bread, the cost includes energy.

Farmers typically use diesel-powered tractors to plant and harvest the wheat, plus fertilizer, which is often derived from natural gas. That must be milled into flour (using energy), made into bread in an oven (which uses energy), and taken to the store (likely via a diesel-powered truck).

"The cost of food will rise," says Jay Hatfield, CEO of Infrastructure Capital. "There is a huge bleed-through because food is 50% energy. Unless we open up the Strait, food prices will skyrocket."

8. Expect an inflationary surge.

When the price of energy increases, it tends to have an impact on costs across the board. The elevated prices of crude oil, gasoline, heating oil and natural gas will trickle through the global economy, raising prices of almost everything.

"The reality for this economy is that there's nowhere in the economy that fossil fuels don't touch," Haworth says.

9. Another energy risk: Artificial intelligence.

As anyone who has paid an electric bill lately knows, AI data centers demand enormous amounts of electricity and strain the power grid. In the U.S., about 45% of electricity is generated with natural gas and petroleum products. AI demands on energy are expected to double by 2030.

"The U.S. will need a lot of electricity to benefit data centers," Hatfield says.

10. All of the above.

The latest Middle East war has brought energy awareness back to the forefront. But the constraints on oil distribution and the rapidly rising demands for more electricity suggest a long-term adjustment in both the U.S.'s and the rest of the world's energy infrastructure.

It looks like we will need more oil, more coal, more hydro, more wind, more solar, more nuclear, more of everything to power the 21st century.

As Rob Thummel puts it: "The need for electricity is the new oil."

Note: This item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that's right on the money.

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To help you understand the trends surrounding business and technology and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts. (Get a free issue of The Kiplinger Letter or subscribe.) You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here's the latest…

Power semiconductors are surfing the wave of soaring AI electricity usage. Rather than moving and controlling data, power chips move and control electricity in each step that goes into converting high-voltage power from a power plant to the current that AI chips use.

"Power underpins everything in modern technology," said Leonard Shtargot, a fellow at Analog Devices, in a recent panel that brought together top industry executives. The skyrocketing amount of electricity that AI data centers use “all has to go through power semis one way or another,” said Shtargot.

Global yearly revenue for power chips will jump to $100 billion by 2029, up from about $80 billion in 2026, according to Omdia. The yearly growth rate of 7% or so is faster than previous years, with the AI segment seeing even faster growth.

Power chips are also used in EVs, smartphones, laptops, robotics, motors, wireless gear, military radar and much more. Many of the chips last for decades and have been traditionally treated as commodities, which has meant the sector hasn’t seen as much change or investment as other advanced chips, such as central processing units or graphics processing units.

Advanced power chips use high-performance, but costlier, materials such as silicon carbide and gallium nitride. The industry is also researching newer materials such as gallium oxide and diamond.

The AI industry needs power chip innovation to support the AI buildout. "I think the entire ecosystem has to evolve to meet the demand for AI end users," said Dinesh Ramanath, senior vice president at Onsemi, during the panel. He expects significant innovations in the AI market, especially in power density, or how many watts can be squeezed in a certain amount of space on a chip.

Germany’s Infineon Technologies is the industry leader with about 45% market share. The rest of the market is fragmented, with dozens of companies. Major vendors include Onsemi, STMicroelectronics, Mitsubishi Electric, Texas Instruments and Analog Devices. A big focus for chipmakers is getting power to AI chips more efficiently. For example, 10% to 15% of the high-voltage power that goes to a GPU is lost as heat, which is "not acceptable," said Jeff Halbig, product marketing manager at STMicroelectronics, during the panel.

One pressing concern is China’s push to win more of the market, including by relying more on its domestic suppliers. China already nabs 40% of global sales and Beijing is "focused on building up an ecosystem of emerging power chipmakers," noted MorningStar analyst Brian Colello in a research report last year. Other worries include cost pressure stemming from intense competition, demand volatility and worker shortages.

One way to deal with China’s effort to dominate the market is by boosting U.S.-based production, but that’s easier said than done. Industry players want more federal backing, including higher spending on research. They are also calling for efforts to ensure that chip shortages don’t become a surprise AI bottleneck.

Paul Pickering, research director at Omdia, used his presentation as a reminder about chip chaos during COVID: Cars were stuck in parking lots because they couldn’t get basic $1 chips. He wonders if in, say, 2031, there could be a data center ready to switch on, except for a missing $1 power chip and suggests that this hypothetical scenario is something that policymakers and companies can mitigate by acting early.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

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To help you understand the trends surrounding business and technology and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts. (Get a free issue of The Kiplinger Letter or subscribe.) You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here's the latest…

There’s a lot happening in space these days: NASA’s ambitious moon mission, data centers in orbit, satellite cell service straight to your smartphone and the list goes on.

There are plenty of reasons to think that future business prospects, new technology and geopolitical shifts will propel the industry to new heights. The renewed optimism of satellite CEOs was clear when I attended SatShow 2026, the industry’s leading conference in Washington, D.C. The mood was in stark contrast to the last few years, when SpaceX’s disruptive force and other business woes were driving the conversations.

SpaceX is still disrupting things as a de facto monopoly, but the entire industry is growing fast and there’s more room for other players to benefit. The global space economy will reach $1 trillion in 2034, up from $626 billion in 2025, according to consulting firm Novaspace. The U.S., led by SpaceX launching 85% of spacecraft into orbit and its Starlink Internet service, reaps most of the business.

One metric that drives home the point is the surge in launch activity last year, which will continue this year and beyond. 2025 saw 325 orbital rocket launches and 4,544 spacecraft (mostly satellites) deployed, according to a global launch report by BryceTech. That marked a 25% year-over-year increase in launches and a 54% increase in spacecraft. The U.S. had 193 launches in 2025, with 165 from SpaceX alone. Second-place China registered 93.

Geopolitics are lifting space revenues

Geopolitical turmoil is spurring growth with higher defense spending and national projects for space. "Now, just given the geopolitical realities, countries are realizing that they need more than what they were buying before," said Mark Dankberg, CEO of Viasat, at SatShow. Others in the industry agreed. "The geopolitical developments that we're seeing out there are creating far and away some of the biggest commercial opportunities for Telesat and, I'll say, the rest of us," said Daniel Goldberg, CEO of Telesat.

The U.S., European countries, China and other nations want to buy more space services and own and operate their own sovereign satellites. The Pentagon has upped space outlays and will continue the spending spree. For example, the Trump administration beefed up Space Force funding for 2026 and is now requesting $71 billion for the agency in its 2027 budget proposal, an 80% jump compared with 2026.

The wars in Ukraine, Israel and Iran show how space tech is crucial for missile warning and tracking, communications, surveillance, drone and vehicle connectivity, and more. In Ukraine, SpaceX’s ability to deliver high-speed satellite internet to a small antenna on the battlefield has been pivotal. "Starlink is functionally embedded into government infrastructure," said Kimberly Burke, director of government affairs at Quilty Space, in a presentation late last year. SpaceX can expect more Pentagon contracts for its launch business, too.

"That said, the Pentagon is still wired for diversity," said Burke. Recent large U.S. military contracts have gone to Rocket Lab, HawkEye 360, York Space Systems, Sierra Space, Lockheed Martin, L3Harris and many others. Though details aren’t clear, a missile defense system known as Golden Dome, costing $185 billion-plus, also catches much industry attention.

SpaceX going public ignites investing interest

Investing in the space sector is already heating up this year, and SpaceX’s splashy upcoming initial public offering (IPO) will supercharge interest. The 24-year-old company is seeking a valuation of more than $2 trillion and aiming to raise about $75 billion.

In 2025, revenue was reportedly about $18 billion. Most revenue comes from Starlink, its speedy, space-based internet service, which has more than 10 million residential subscribers, hundreds of thousands of business subscribers and hefty defense contracts.

Upcoming risky bets include launching artificial intelligence data centers into orbit, building a full-fledged computer chip factory and getting Starship, the largest rocket ever, ready for commercial missions. SpaceX won’t have trouble spending tens of billions of dollars quickly to pursue its mission. In the near term, the top focus will be on growing its Starlink business.

SpaceX’s stock listing will bring a new wave of capital to the entire sector, including from a flood of retail investors. Investors in the space sector are bullish about SpaceX’s unprecedented stock listing. The IPO is an "inflection point" for the space industry, said Michael Mealling, general partner at Starbridge Venture Capital, at SatShow. Mark Boggett, CEO of Seraphim Space, said it will pull up valuations across the entire sector.

The heightened attention means that more Wall Street analysts will start covering the sector as space companies are included in more stock funds and more space companies go public. Investors should know that space stocks can be risky, requiring due diligence, and that the frenzy among investors could outpace the reality of individual businesses.

"I am a little concerned about public market investors looking at the space sector and not understanding the level of risk," said Mealling. “Not every company that goes public is a good company." Mealling also said that having lived through the dot-com bubble of the late 1990s, "I hope we don’t replicate that."

Upcoming battle of the two megaconstellations

As SpaceX prepares to go public, it’s just starting to see a new, fierce competitor in Amazon. Amazon’s growing constellation, Leo, will battle Starlink for customers in consumer, government and business internet markets. Starlink has some major advantages, including a huge head start, with 8,500 operational satellites, and its own rockets to launch them. Amazon is in the early stages of building a commercial business, with more than 200 satellites in orbit so far.

"The signals we get from prospective customers are incredibly strong," said Chris Weber, vice president at Amazon Leo, at the conference. Amazon is touting how it can integrate Leo with its cloud computing platform AWS. For security-minded businesses, a compelling feature is that data can travel from space to Amazon’s cloud without ever touching the internet. Besides standalone web plans, Amazon could bundle satellite service with Prime, use it to track its vast logistics network, support autonomous drone deliveries and more, according to Neil Shah, an analyst at Counterpoint.

Amazon’s space mission has taken eight years and $10 billion, and that was before the company recently acquired satellite company Globalstar for $11.6 billion to expand its network and land Apple as a customer. The competition with SpaceX spells lower prices, faster speeds and more data for consumers and businesses.

Other constellations in operation or coming soon include Eutelsat’s OneWeb, Telesat Lightspeed, Blue Origin’s TeraWave and Logos Space’s. Sovereign constellations include the European Union’s IRIS2 and China’s Guowang. The tens of thousands of planned satellites mean more demand for rockets, especially for SpaceX, which has a packed launch manifest through 2028.

Other launch vendors poised to benefit include Rocket Lab, Arianespace, Blue Origin, United Launch Alliance and Firefly Aerospace. But they don’t even come close to SpaceX’s ability to reliably launch its Falcon 9. Satellite companies, including Amazon, are desperate for other rockets to start flying regularly so SpaceX doesn’t control launch pricing. Some see Blue Origin’s reusable heavy launcher, New Glenn, as a viable option in the coming years, though the rocket company only had two launches last year. Rocket Lab ranked second in commercial launches last year with 18.

Other space trends to watch

Many companies are excited about bringing satellite connectivity directly to smartphones, no extra hardware required. The direct-to-device (D2D) service is now available on newer smartphones for sending text messages, reaching emergency services and using some low-data apps, such as mapping. The feature is useful in spots without cell service, but the industry hopes it will grow into a massive new business. SpaceX and Amazon are both spending billions of dollars to pursue D2D and will be the two leaders. Other companies working on the tech include AST SpaceMobile, Lynk Global, MDA Space and SES.

Artificial intelligence tools are exploding on the scene to analyze Earth imagery, manage airwave interference, automate in-orbit navigation, answer questions and more. Companies such as HawkEye 360 have built their own AI models from years of proprietary data to better track and identify vessels at sea. Earth imaging leader Planet says AI on the ground can parse terabytes of data and AI in space can autonomously spot methane leaks from pipelines or identify airplanes. NVIDIA AI chips are being used on satellites to process info before it hits the ground.

There’s no shortage of companies with exciting tech. Xona Space Systems is developing an alternative to GPS in low-earth orbit with centimeter-level accuracy. ISI is using AI to analyze geospatial imagery. K2 Space is working on high-power satellites for data centers in orbit. Starcloud is building space data centers and has already launched AI satellites. ICEYE uses radar pulses to produce high-resolution imagery, even through clouds and at night. SpinLaunch has a giant centrifuge concept that flings objects into orbit and is already running test launches.

Traditional hardware segments may see higher sales, too. That includes antenna systems, made by companies such as ThinKom, Intellian and Kymeta. And ground equipment, made by companies such as General Dynamics, RTX, Lockheed Martin, Kratos and Airbus.

A final thought: Space is hard

Keep in mind that space is technically challenging and hugely capital-intensive. “This is not for the faint of heart,” said Amazon Leo’s Chris Weber. “You have to have really long-term thinking.” Major concerns include rising costs, global supply chain challenges and the risk of an economic downturn.

Even in a growing industry, it’s likely that there are too many companies and some of the new business ideas won’t work out. Expect more industry consolidation, plenty of delays and occasional outright failures.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

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Trae Bodge is a smart-shopping expert. Find additional savings tips at her website. Here, she tells Kiplinger Personal Finance Magazine about her favorite grocery hacks to keep prices low, plus where she thinks grocery prices are headed.

Q: With grocery prices up nearly one-third since 2020, food costs have become a major pain point for most Americans. Do you see prices coming down or moderating this year?

While I see prices stabilizing — barring a weather pattern that affects crops or an illness amongst animals — unfortunately, prices aren't likely to come down anytime soon. So it's important for shoppers to get into the habit of using savings tactics. You don't need to become an extreme couponer or do anything complicated to save. There are lots of little steps you can take that can be quite impactful over a year of shopping.

Q: What tools can shoppers use to learn about sales or increase their savings?

Download your favorite grocery stores' apps. They often have special coupons or promotions available and will alert you to sales. They also use artificial intelligence in a helpful way by serving up offers based on how you shop. You may get a notification when your favorite cereal is on sale, for example.

If you buy groceries online, I also recommend installing a couple of browser extensions, such as CouponCabin, Rakuten or PayPal Honey, which search for available cash-back or discount codes and automatically apply them when you check out.

Another potentially useful app is Flashfood, which partners with retail and grocery stores to help them sell surplus items. You can save up to 50% on overstock items you order with the app and then pick up from a local store.

With the Fetch app, you can scan your grocery receipts to earn points that can be redeemed for gift cards.

Q: Do you recommend using rewards credit cards at the supermarket?

I always shop with the credit card I own that offers the best points or cash back for groceries. As an Amazon Prime Visa cardholder, for example, I use that card at Whole Foods because it pays 5% cash back there. That's 5% I'm getting back on purchases I was already making.

The PayPal Debit Card is fee-free and pays 5% cash back per month in a category you choose, including groceries or restaurants. And the American Express Blue Cash Preferred card may be worth the annual fee ($95) because of its generous benefits — 6% cash back on supermarket spending.

Q: What changes can people make to their shopping habits to save more?

A very easy tweak is to look at your grocery list to see if there are any store-brand options that can replace name-brand items.

From my research, you can save between 25% and 40% just by buying the store brand. Often, name-brand and store-brand items are made in the same factories using the same ingredients.

Also, try to buy in bulk, especially if you're a family of more than two. Usually, the larger the quantity, the lower the unit price is. This is where, if you have a Costco, Sam's Club or BJ's membership, you can potentially save a lot.

But don't buy quantities that are too large. That giant tub of microgreens may be an amazing deal, but if it goes moldy before you're halfway through, you've just wasted money.

Q: What items should people avoid buying?

The whole prepared-food category is a no-no in my book. You're paying too much of a premium for convenience. You'll save so much by doing the chopping, washing or whatever yourself.

You could take this a step further by looking at things that you buy regularly that are easy to make. In my house, we make our own hummus and granola. Buying the ingredients and doing the work at home saves us so much money. A nice bag of granola can be $9, whereas I can make a batch twice as big for half the price, and customize it to the exact flavors I want.

I would also avoid nonfood items, things such as beauty products, office supplies, vitamins and supplements. In my experience, other retailers easily beat the pricing at the grocery store.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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To help you understand what's going on in politics and the economy and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…

No matter how long the Iran war goes on, the economy is bound to suffer from it. How much and how severely depends on just how long the conflict continues to crimp key energy exports. Some degree of inflation is now inevitable.

Energy prices won’t return to prewar levels, whenever peace returns. Too much damage has been done to the Persian Gulf’s infrastructure for pumping, refining and shipping oil and natural gas. Fuel prices will climb more if the war escalates, which is a real risk if Washington sends ground troops to secure parts of Iran’s coast or strategic islands.

Gasoline, averaging $4/gallon, could hit $5 or more this summer if the fighting mounts. Diesel, already nearing its all-time record of $5.82/gallon, could average $6, jacking up freight shipping costs. Fertilizer shortages will weigh on farmers around the world who didn’t secure what they needed before the war halted the Gulf’s huge fertilizer exports. That bodes especially ill for the spring planting season in the Northern Hemisphere. This means pricier food.

These and other cost pressures could boost headline inflation to 4% or more later this year, vs. 2.4% in February. That’s if oil prices, now at $110/barrel, stay near $100 per barrel for an extended period of time. While there will be plenty of price volatility, $100 on average is a real possibility if the war drags on. With the Persian Gulf blocked, at least 10% of the world’s oil, plus a huge amount of natural gas, can’t get to market.

Even a quick resolution of the fighting wouldn’t avoid an inflationary bump. Restoring exports of oil, gas, fertilizer and other key commodities from the Middle East will take anywhere from weeks to years, depending on the extent of needed repairs. In the U.S., gas prices might retreat to $3.50 — still above the $3 on the eve of the war.

Higher inflation makes any Federal Reserve interest rate cuts highly unlikely. The Fed has been cautious so far about what the war could mean for the economy. But it has signaled that it is on guard against renewed inflation pressures and will act to tamp them down if needed. It doesn’t want a repeat of 2022, when prices soared.

The economy can still keep growing, even in the face of higher inflation sparked by the war’s disruptions. Recall that in 2022, when inflation peaked at 9%, GDP still grew 2.5%. Outright recession is unlikely, though we can’t rule it out entirely. In fact, the economy stands to benefit from the extra defense spending that will occur, especially at ammunition factories. Inflation is not likely to hit the highs of 2022, given that the economy is not as tight and the labor market has more slack now. With a resolution to the war, or at least when oil tanker traffic can start to flow again, the price of oil will start to fall. Even if prices do not return to their prewar levels, any drop should grease the wheels of economic activity and restore investor confidence.

Other sectors that stand to be affected by the Iran war:

• Petrochemicals: Up to $25 billion in shipments pass through the Strait of Hormuz annually. Led by Saudi Arabia, the Middle East accounts for 40% of global polyethylene exports, the world’s most common plastic, the price of which has jumped 37% since late February.
• Cars: Overall sales will slip by 3.0% on higher interest rates. Purchases of fuel-efficient hybrids are sure to keep soaring. Electric car sales may rise a bit, too.
• Domestic oil and gas producers and refiners stand to reap sizable benefits as they partially fill the void in energy markets left by missing Middle East exports. The U.S. being the world’s largest oil and gas producer is an invaluable asset now.

Note the rising risk that the unpredictability of the war will dampen confidence among consumers and businesses this year. That could cause consumers to save more and businesses to cancel spending plans, especially if the fighting drags on or escalates.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

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A "millionaires tax" was signed into law in Washington state this week, and one wealthy Washingtonian is celebrating.

"In 2029, Washington state will start collecting a 9.9% tax on income over $1 million," travel writer Rick Steves wrote in a social media post. "The 8,000,000 Washingtonians whose households make less than a million dollars a year will pay zero under this new tax and enjoy all the benefits of a better-funded state. And for the wealthy (like me and an estimated 30,000 others), every million dollars in taxable income that our households earn after the first million will cost us about $100,000."

As Steves wrote, the tax, which was signed into law on March 30, takes effect January 1, 2028, for tax payments due in April 2029.

Washington Gov. Bob Ferguson has said the tax revenue will help fund K-12 education, health care, higher education and governmental services, as well as expansions to the working families' tax credit, according to local KOMO News.

Steves, who lives in Edmonds, Washington, made some waves with his support for the tax, although it wasn't entirely surprising: Steves has long been an advocate for progressive and Democratic causes, and support for "millionaire taxes" tends to follow political lines.

Steves stands in somewhat limited company of wealthy people who have spoken out in support of being more highly taxed. Here's what he and others have said.

Rick Steves' support for Washington's millionaire tax

Steves wrote extensively about the tax in his March 30 post. In it, he expressed that the tax wouldn't have a major impact on those paying it, but would benefit the public.

Seves added that he's been "investing my tax savings in my community" for about 15 years through donations to a local arts center and symphony as a "self-imposed wealth tax," and believes the state-wide tax will help local communities.

Steves said: "As a wealthy person myself, I see this tax as essentially free money for all Washingtonians. Everybody in my state gains. And speaking from personal experience, I know that anyone who earns enough to be subject to this tax is beyond the point where consuming more adds to their security, their well-being, or even, arguably, their happiness — meaning there will be basically zero human cost."

Warren Buffett's take on higher taxes

Investing icon Warren Buffett has long said he'd like to be taxed more heavily. While Washington state’s new tax targets personal income over $1 million, Buffett has called for eliminating loopholes that allow investors — those who often “make money with money” — to pay a smaller share of their income than people earning far less.

"These [tax breaks] and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species," he wrote in a 2011 New York Times opinion piece.

In fact, after that piece, then-President Barack Obama proposed a tax policy known as "the Buffett Rule," reflecting Buffett's principle that "no household making over $1 million annually should pay a smaller share of their income in taxes than middle-class families pay."

"My friends and I have been coddled long enough by a billionaire-friendly Congress. It's time for our government to get serious about shared sacrifice," Buffett wrote.

More recently, ProPublica published an investigation in 2021 that dove into Buffett's tax records and claimed his effective tax rate from 2014 to 2018 was 0.1%.

As part of a longer response to the investigation, Buffett wrote: "I continue to believe that the tax code should be changed substantially. I hope that the earned-income tax credit is greatly expanded and additionally believe that huge dynastic wealth is not desirable for our society. Perhaps annual payout requirements should be increased for foundations. Some time ago, I testified before Senator Baucus in favor of increasing and tightening estate taxes. (My persuasive powers proved to be limited.)"

He added, about his 2011 opinion piece, "I remain OK with what I said, though its effect in Washington was zero."

Jamie Dimon calls this a 'no-brainer'

JPMorgan Chase CEO Jamie Dimon has a somewhat nuanced view on raising taxes, which he's expressed over the years.

"If you said, 'Raise taxes and directly give it to the people who need it'? I'd do it," he said at the World Economic Forum earlier this year. "But that's not what happens. It goes to interest groups and they give it to their friends and all that, which is why the people consider it a 'swamp.'"

In 2024, speaking, like Buffett, of wanting to raise the earned income tax credit, Dimon said, "This is like a no-brainer to lift up society, and I would pay for it by taxing the wealthy a little bit more."

So while he's said he's open to increasing taxes on higher earners, he's balanced it with the idea that he would want those funds to go directly to helping lower earners and communities, an outcome of which he's skeptical.

Just recently, too, in an appearance on Fox News, Dimon acknowledged that "individual taxes, state taxes, corporate taxes," in addition to "quality of life," "drives people out" of places, pointing to New York and California.

The Patriotic Millionaires on taxes

There is an actual group of wealthy folks dedicated to the idea of "taxing the rich."

Patriotic Millionaires was started in 2010 to advocate for higher taxes on high earners. Of course, members of this group have spoken out regularly in their advocacy. The chair of the group is Morris Pearl, who was a managing director at BlackRock.

"What I'm talking about is what policies will not just help me personally, but that I think will be good for our country and my kids' generation," he told The Atlantic in 2016. "I don't want to live in a country where a few people do amazingly well and everyone else does poorly, because anyone, including me and my kids, may end up not being one of the winners."

Earlier this year, Pearl wrote a piece for The Indypendent about raising taxes on millionaires in New York. In it, he said: "As a successful investor, I reject the idea that investors need tax breaks as incentives to invest, create jobs, and grow the economy. That's fundamentally untrue. Even if tax rates on investment income were very high, I would always choose to invest because, the last time I checked, the alternative — stuffing money under mattresses — doesn't produce the greatest returns."

Scott Ellis, a California millionaire in the group, wrote in a piece for Business Insider in January: "Once you get beyond $30 million — and almost no one ever gets there — you get to a point where your life is so good, you really can't materially improve your life anymore. We should implement a very aggressive annual 50% tax on all household wealth over $30 million. Excessive wealth turns into excessive power through huge campaign donations, which threatens and undermines democracy and capitalism."

Abigail Disney, the Disney heiress, is also a member of this group. "It turns out that it is that hard to believe that, that someone would actually do something for the greater good and not in their own self-interest," she told Time last year.

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To help you understand what is going on in the commercial real estate sector and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here's the latest…

The Iran war hangs heavily over the housing market, tempering expectations for what many had hoped would be a strong spring selling season. While home buying is likely to improve modestly over the course of the year, sales will still run at a sluggish pace on account of challenging affordability and elevated economic uncertainty that continue to discourage prospective buyers.

Many buyers remain on the sidelines due to elevated mortgage rates, which have surged as Treasury yields climb. The average mortgage rate for a 30-year fixed loan finally dipped below 6% in late February, for the first time since 2022. However, rates quickly rebounded in mid-March to their highest level since September, just a few weeks after the Trump administration's announcement of the U.S.-Israeli attack on Iran.

While mortgage rates currently remain in the low 6% range, the conflict is injecting significant volatility into the market. If the fighting drags on, rates could be pushed even higher. This environment, combined with weakening consumer confidence, is undermining buyer sentiment during the critical spring selling season. While this season is shaping up to be slightly better than last year's — when rates hovered near 7% and trade policy volatility dented confidence — the recovery remains fragile.

Tepid sales and historical lows

Existing-home sales will remain tepid throughout 2026. Data show sales have averaged a 4.0 million-unit pace in the three months ending in January, which is approximately 37% below the peak pace hit in late 2022 and 20% below the 2019 average. While a jump in sales in December offered an encouraging signal, the subsequent slump in January and the minor gain in February confirm that the housing market isn't yet on solid footing.

The market's struggle to maintain momentum is hardly surprising, given how extremely stretched housing affordability has become over the past few years. Mortgage payments for first-time buyers are still near the highest levels since the 1980s (adjusted for inflation). Not surprisingly, the share of first-time home buyers in the housing market fell to a historic low of 21% last year, down from 31% in 2020. Meanwhile, the median age of first-time home buyers rose to an all-time high of 40, up from 33 in 2020.

The "lock-in" effect and pricing

Single-family inventory is increasing at a sluggish pace as many owners feel "locked in" by pandemic-era mortgage rates. These homeowners are often unwilling or unable to sell, as doing so would require taking on a new mortgage at a much higher rate. Currently, about 80% of outstanding mortgages carry rates below 6%, and nearly a third are between 3% and 4%. This issue is most prevalent in pricey coastal markets.

According to Redfin, these conditions are keeping price growth in check. The share of homes sold below asking price last year rose to the highest level since the pandemic, while the average discount was the highest since 2012. In 2025, the number of home sellers exceeded prospective buyers by the largest margin in over a decade.

Headwinds for home builders

The conflict in Iran poses significant challenges to the home building sector. Sustained high oil prices are expected to increase input costs while simultaneously weakening demand through lower consumer confidence and higher mortgage rates. Oil-based products, including asphalt, plastics and vinyl, face immediate price pressures, as well as energy-intensive manufactured products like insulation, drywall and cement.

Builders continue to grapple with excess inventory, prompting pullbacks in single-family permits. Building permits have been flat-to-down over the past three years. In fact, housing starts hit a five-year low in October 2025. Meanwhile, weak new-home sales have pushed inventories higher. Supply stands at 7.6 months at the current sales pace, well above a healthy market of six months. As a result, 37% of builders cut prices in March, up from 29% a year ago.

Policy responses

Policymakers have introduced various remedies, but their effectiveness remains an open question. One strategy involves the president's order to Fannie Mae and Freddie Mac to buy more mortgage-backed securities to increase liquidity. Another proposal focuses on limiting institutional investor purchases to less than 20% of single-family homes. However, critics point out that only about 2% of the market is actually captured by big institutional investors, suggesting such measures may have a limited impact on affordability.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

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To help you understand the trends surrounding AI and other new technologies and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts. (Get a free issue of The Kiplinger Letter or subscribe.) You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here's the latest…

Artificial intelligence holds huge promise for the U.S. military for both offensive measures and deterrence. That's why the Pentagon is racing to put AI in the battlefield and the office. With a yearly budget nearing $1 trillion, it's a massive tech shift.

The AI arms race

The global AI arms race leverages an unprecedented commercial AI boom. Large language models powering top AI tech are ideal for the military, since they are a general-purpose technology that can process vast amounts of data, reason and generate usable insights. Users interact with the AI in plain English, making adoption far easier. And vast U.S. tech spending has powered AI advances. The most cutting-edge models are being built by Anthropic, Google and OpenAI.

AI is already being used extensively in battle: By Israel in Gaza. Ukraine against Russia. Now the U.S. against Iran. These conflicts are a testing ground for many new AI tools. Ukraine even launched a product-development war program, known as "Test in Ukraine," where foreign military tech companies can get real-time data from combat conditions. In Iran, the U.S. is using AI to screen incoming data and help identify targets.

The big concern is competition with China, the second-largest AI spender. China is rapidly deploying AI to its military, adding electrical capacity at a rapid clip and providing $200 billion in state-backed AI capital. But China's top tech firms spent only 15% to 20% of what U.S. tech giants invested on AI in 2025, according to Goldman Sachs. This year, Alphabet, Amazon, Meta and Microsoft will unleash nearly $700 billion of capital expenditures to build AI.

America's focus on speed

Hence the Department of Defense's AI strategy: Speed wins. "Military AI is going to be a race for the foreseeable future, and therefore speed wins," according to the agency's AI strategy document. "We must accept that the risks of not moving fast enough outweigh the risks of imperfect alignment." Aggressive timelines, slashed red tape and updated procurement rules aim to speed up adoption and use.

The effort includes top-secret projects marked by urgency and little public oversight. Units that don't adopt AI quickly enough could see funding reviewed or pulled. The Pentagon also wants the latest AI models deployed to soldiers and civilian workers within 30 days of public release, a rapid pace of adoption that highlights the strategic imperative of accessing the most cutting-edge commercial tech.

Since December, the agency's 2.8 million personnel have had access to Gen.AI.mil, a chatbot powered by Google Gemini for unclassified work. The chatbot has been used by more than 1 million employees so far, while plans for a similar chatbot for classified work is underway. Google also introduced AI agents that can autonomously do work, such as drafting white papers, preparing briefings and processing data-heavy documents.

The Pentagon wants AI models without constraints. The feud with Anthropic, which erupted into a federal ban and now a legal fight, highlights the ongoing tension. The concern is that an AI system will suddenly refuse an urgent question or command because of the guardrails built into the AI model itself, even if the order is lawful.

Military AI's growing uses

The many combat AI uses include mission planning, target assessments and weapon systems tracking. AI can generate insights by fusing a vast array of data, including satellite imagery, video, radar, radio transmissions, cyber intelligence, social media activity, real-time news, field reports, troop locations and historical info.

"Defense and intelligence workflows that once required weeks of manual analysis can automatically detect threats and generate response plans by processing satellite imagery, sensor data, and historical patterns at unprecedented scale," says Amazon about its government AI cloud computing platform. Meta says its AI model powers a chatbot that enables special operations forces "to generate intelligence reports 18 times faster and process video footage nine times quicker."

AI-enabled drone swarms could pilot themselves, making decisions autonomously. Automated drone software updates could deal with new enemy radar systems, turning intel into weapons in "hours not years." AI could fend off cyber threats. Instead of weeks of manual analysis, AI surveillance could create instant insights.

The growing list of non-warfare uses include training, supply chain management, regulatory compliance, drafting policies, summarizing meetings, parsing contracts. In-depth research reports created in minutes will save hours or days of work. AI could even be used to assess and help modernize aging U.S. military IT systems, a major problem for 30 years that threatens to stall or hinder the AI transformation.

Introducing combat chatbots

Here's how an AI chatbot conversation could happen on the battlefield. On a laptop computer, a soldier sees an alert for an "anomalous activity" on an AI platform built by Palantir, a leading military AI vendor. The chatbot, which is scouring data and real-time info, says satellite imaging has detected that enemy activity could be nearby. The soldier types: "Show me more details." The chatbot says when images were taken, what they could be and shows a map.

The soldier could then ask about options to provide a higher-resolution image. After being provided two choices, such as a surveillance drone or more satellite imaging, the chatbot says, "How would you like to proceed?" The soldier picks the drone and the choice is sent up the chain of command to be approved by a commander. The new imaging shows a tank that is a potential threat.

The soldier then writes, "Generate three courses of action to target this equipment." Three options come with details, such as time required, equipment used, distance to target, personnel needed and more. After probing each option and getting more details, the soldier asks for a summary of the plan. A commander gives final approval.

The military sets permissions for these AI tools, saying what AI can and can’t do, and what data can be accessed. Records are stored for analysis. The guidance and guardrails are evolving fast, and Congress has yet to step in to set the rules for military AI.

The Pentagon's expanding efforts

The Pentagon has groups and initiatives laser-focused on rapid adoption of AI for combat and faster use of emerging commercial AI tech. Two major organizations are the Chief Digital and Artificial Intelligence Office (CDAO), which aims to accelerate adoption of AI for combat, and the Defense Innovation Unit, which aims to make faster use of emerging tech.

The Army's Project ARIA, or Army Rapid Implementation of Artificial Intelligence, focuses on autonomous agents, an AI app store for the battlefield, upgrading supply chain management and more. "Project ARIA represents a fundamental shift in how the Army develops and deploys technology," according to the Army's announcement. "By partnering directly with top AI firms, the Army is delivering solutions in months rather than years."

Project Maven looks to use AI to process battlefield data to speed decision-making. The Replicator initiative aims to use AI to fly thousands of autonomous drones. Thunderforge is an AI wargaming project. Rapid Capabilities Cell is an AI incubator.

Rising defense spending on AI

Military spending on AI will soar in coming years, with AI-related contracts for large tech companies, start-ups and traditional contractors. For example, Palantir has a 10-year, up-to-$10 billion Army contract. Shield AI, maker of AI pilot software, is part of a group receiving a U.S. Air Force contract worth up to $950 million. Anduril, which builds autonomous systems, has a $642 million, 10-year contract with the U.S. Marine Corps for an AI counterdrone system.

Anthropic, OpenAI, Google and xAI each received contracts worth up to $200 million for AI chatbot tech. Scale AI has a five-year, up-to-$100 million contract to label and annotate data for AI. Other start-ups receiving contracts include Rebellion Defense, webAI, EdgeRunner AI and Legion Intelligence. Hundreds of smaller vendors have received small contracts.

Even though AI start-ups are rapidly gaining ground, large firms are gearing up for bigger demand, too. For example, Amazon is investing up to $50 billion to expand AI cloud computing for the government. Meta is supporting national security uses with its open-source AI model Llama, which is easier to modify and can be used on devices without an internet connection. Lockheed Martin, RTX, Northrop Grumman, General Dynamics and Boeing use AI for internal operations and manufacturing, plus include AI in their products.

The world faces new risks

AI brings many risks and rapid adoption is likely to enhance the hazards. The tools need to have guardrails with continued testing and monitoring, since AI can produce mistakes, biases, data leaks, cyber threats and other problems. There's even the growing concern that AI-induced psychosis becomes a national security threat. Meanwhile, the Pentagon’s willingness to experiment and fail while it moves fast is sure to spur more scrutiny over defense spending on new tech.

Expect a much bigger debate over human vs. machine decision-making related to AI’s ability to automate all sorts of processes. And eventually, a discussion of AI arms control, echoing the nuclear age. "The emergence of nuclear weapons prompted the development of nonproliferation regimes that reshaped arms control beyond traditional use-based restrictions," writes Scott Sullivan, a professor of law at the U.S. Military Academy at West Point and the Army Cyber Institute, in a recent article. "Military AI may demand a similar shift."

These trends point to tremendous change as the U.S. military and its defense industrial base "is beginning a once-in-a-century transformation to modernize its military," says a report by researchers at the Wharton School of the University of Pennsylvania.

Still, there are some things that won't change. AI will help militaries fight their wars, but the decision on whether to start or join a war will still be a fully human choice of political leaders.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

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To help you understand the trends surrounding AI and other new technologies and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts. (Get a free issue of The Kiplinger Letter or subscribe.) You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here's the latest…

The Pentagon banning Anthropic from its defense systems and networks is much more than a contract dispute. The government’s approach to artificial intelligence could affect the entire artificial intelligence industry.

The feud is over Anthropic requesting restrictions on fully autonomous weapons and mass domestic surveillance, citing concerns about AI’s unreliability and citizens’ fundamental civil rights. The Pentagon says a private company dictating the terms of use for military AI is untenable, and that it follows the law.

Here are five takeaways from the ongoing dispute.

1. The administration is treating artificial intelligence as a powerful weapon, rather than a normal technology.

In this view, the tech is akin to a nuclear bomb, not a piece of software. Washington sees AI as crucial to military power and is in an arms race with China. That has huge implications for how the federal government may treat private companies developing AI in the future.

Generative AI is rapidly being integrated into mission planning and combat, including now in Iran, for intelligence, target assessments, wargaming and more. The current approach is to ramp up AI adoption across the military and have unfettered access to the very best tools available.

2. Anthropic is likely to win this legal battle but still suffer business damage.

The AI company is challenging the Pentagon’s labeling it a supply chain risk, a designation used for suppliers (mostly foreign adversaries) that are a national security risk. Anthropic also opposes the Pentagon calling for a wider ban in the private sector, which is beyond the scope of a supply chain risk designation.

For now, the government says federal agencies have six months to stop using Anthropic, while the company in a legal filing has already pointed to “irreparable harm” and huge losses from being blacklisted. Other cutting-edge AI choices are available to the government, including from OpenAI, Google and Meta.

3. The government’s aggressive tactics are here to stay and will jolt AI firms.

Even if the government loses in court, the pressure could coerce other AI companies to avoid similar confrontations. Military leaders will keep pushing AI firms to acquiesce, aiming to remove any usage restrictions baked into their AI model or in contracts.

The harsh tactics have irked Silicon Valley and beyond, casting a shadow over AI development. And tensions over AI guardrails aren’t over. Consider that OpenAI, which signed a new Pentagon contract after Anthropic was officially banned, continues to say it has red lines and will monitor military use.

Look for louder calls for Congress to step in and set rules for military AI.

4. Attempts at exerting control over AI are a bipartisan affair.

The Trump administration has also threatened to force Anthropic to build its desired AI tools by invoking the Defense Production Act, a Korean War-era law meant for steel mills and tank factories. Doing so would be a major escalation and would invite swift legal challenges.

It’s not clear how the legal case would play out. But note that the Biden administration also invoked the DPA for rigorous information gathering of leading-edge AI models. Though less coercive than forcing certain software to be built, it still sparked criticism from the industry.

Both parties see AI as too important to be left alone, though they differ on the risks, appropriate oversight and tactics.

5. Investors should monitor the government’s approach as billions of dollars in contracts flows to AI.

Banning certain AI companies, asserting control over AI or potential federal regulations could shake up the market. Anthropic reportedly has reached a rate of $20 billion in yearly sales and has a $380 billion valuation, and is eyeing an initial public offering this year. It continues to gain users, but some customers may be wary and opt for competitors, hoping to avoid confrontation with the Trump administration.

Meanwhile, Anthropic customers who have military contracts are scrambling to figure out if the ban means they have to ditch Anthropic. Federal contracts for AI will amount to tens of billions of dollars in coming years. Being excluded would be a huge loss for a large tech firm or a start-up.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

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To help you understand what's going on in politics and the economy and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…

Iran is down but not out. What lies ahead for the military situation and its economic impacts?

A clear-cut victory may prove elusive. American forces have performed effectively and demonstrated the superiority of U.S. weaponry. But Iran’s regime remains in place, shows no signs of collapsing, and vows to keep fighting. Its defeat may require a ground invasion, a daunting scenario that President Trump appears unwilling to order.

Tehran is waging an economic conflict since it can’t defeat the U.S. on the battlefield. The target: The region’s energy industry, a vital component of the global economy. Exports of oil and gas from the Persian Gulf are on hold, forcing some countries in the region to curb output. Tankers, refineries and other key energy facilities have been damaged by Iranian strikes. The longer this situation goes on, the harder it will become to restart energy exports whenever peace returns.

Energy prices have already jumped. Barring a ceasefire, they will keep rising. Iran is betting that Trump will have to back off as voters sour on rising gas prices. He is betting the battered regime will fold first. As of now, the most likely scenario seems to be an incomplete U.S. victory, in which Iran is left badly weakened, but defiant and intent on rearming for later.

The most serious economic risk of the war for the U.S. if the conflict drags on, is renewed inflation due to high energy prices. The economy is likely strong enough to stay out of recession, even though higher gas prices would probably crimp spending by many consumers. But if high fuel prices last longer and filter through the economy more broadly, inflation could prove painful and force the Federal Reserve to nix plans to trim interest rates. That would weigh on housing and other credit-sensitive sectors. In that scenario, Trump would come under mounting political pressure to declare peace.

An industry particularly exposed to the ongoing Middle East chaos is farming. About half of urea fertilizer ships through the Strait of Hormuz, which Iran has effectively closed to maritime traffic, as does a fifth of global shipments of liquefied natural gas — vital to production as both a feedstock and an energy source.

Prices are on the rise. Fertilizer prices have already increased by nearly 8%. Aluminum, another major Middle East commodity, has seen prices rise 32%. The effects of higher energy prices on Europe would be even more significant. Roughly 20% of the European Union’s crude oil and natural gas imports is sourced from the Middle East. The EU’s vulnerability is heightened by depleted gas storage following a cold winter. As with the energy price shock in 2022, a persistent rise in fuel prices now could spark another round of high inflation and a hit to GDP growth.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

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Arizona lawmakers have approved a proposal to eliminate state capital gains taxes on profits from the sale of a primary residence. It's a measure supporters say would reward longtime homeowners and make it easier for families to move, freeing up homes for more buyers.

The vote puts Arizona at the center of a growing debate over whether Americans should pay taxes at all when they sell their homes for a profit.

It also lands at a pivotal moment for the housing market. Mortgage rates have eased back toward roughly 6% after climbing sharply in recent years. But the housing supply remains historically tight, according to the National Association of Realtors (NAR).

Meanwhile, on Capitol Hill, Sens. Ted Cruz (R-Texas) and Tim Scott (R-SC) are reportedly urging the Trump administration to index capital gains to inflation through executive action.

That's a change supporters say could cut taxes for homeowners and boost housing supply. But critics warn it could reduce federal tax revenue and primarily benefit higher-income households.

So, will you stop paying taxes on gains from the sale of your home soon? Here's more of what you need to know.

Arizona proposal to eliminate capital gains tax on home sales

Senate Bill 1633 would remove the capital gains tax on homes that have been someone’s primary residence for at least five years starting in 2027.

The bill's sponsors argue that treating a family home as a home, not an investment, would reduce barriers to moving and help free up existing housing stock.

"Taxing gains on a primary residence can trap people in homes that no longer work for them," said Republican state Sen. J.D. Mesnard, who sponsored the bill. “Seniors may delay downsizing. Families may stay in houses that are too large, too small, or too far from work. When someone sells their home, the state should not take a cut of the equity they worked years to build."

Critics argue that the bill benefits wealthy sellers.

State Sen. Mitzi Epstein called SB 1633 “a bill for billionaires that must be stopped,” warning in floor debate that it would mostly benefit the wealthy and cost Arizona $18 million a year. As of 2026, Arizona taxes capital gains as regular income, applying its flat 2.5% income tax rate to most gains.

Note: The Senate passed it 16‑12 (2 not voting). It still must clear the state House and be signed by the governor to become law.

Cruz, Scott urge executive action to lower capital gains taxes without Congress

Meanwhile, Arizona’s debate is unfolding alongside a broader effort to reshape federal capital gains taxes.

• Last year, as Kiplinger reported, former Rep. Marjorie Taylor Greene introduced the No Tax on Home Sales Act, which would fully eliminate federal capital gains taxes on the sale of a primary residence.
• Currently, homeowners can exclude up to $250,000 in primary home sale gains ($500,000 for married couples filing jointly), provided IRS rules are met. At the federal level, long-term capital gains tax rates are 0%, 15%, or 20%, depending on income.
• Greene argued that homeowners are being unfairly penalized for appreciation that often reflects inflation and long-term ownership rather than speculative investment.

The proposal didn't advance in Congress, but the stage is set for a more aggressive push now.

The bipartisan More Homes on the Market Act, introduced by Rep. Jimmy Panetta (D‑Calif.) with over 100 cosponsors, aims to raise the federal capital gains exclusion on primary residences and index it to inflation. (A Senate companion bill proposes similar changes to encourage homeowners to sell and improve housing supply.)

More recently, as first reported by The Washington Post, Sens. Cruz and Scott sent a letter to Treasury Secretary Scott Bessent urging the Trump administration to use regulatory authority to reduce capital gains taxes without waiting for Congress.

“Using your executive authority to eliminate an unfair inflation tax on everyday Americans is the single most pro-growth economic action the administration can take unilaterally,” the senators reportedly wrote.

The lawmakers want the Trump administration to index capital gains to inflation. (Currently, capital gains taxes are levied on the full profit after an asset is sold, without accounting for inflation. Their proposal would tax only "real" gains above inflation, rather than eliminating capital gains taxes entirely, as Greene’s bill suggested.)

• Cruz and Scott reportedly note the correlation to housing, arguing that current capital gains rules contribute to what economists call a “lock-in effect.”
• Many older and long-term homeowners choose not to sell because their homes provide financial stability. Moving could mean trading a paid-off or low-rate mortgage for significantly higher housing costs.
• The argument is that adjusting the cost basis of capital gains for inflation could incentivize long-standing homeowners to downsize.

As you might expect, the idea isn't without its critics.

Some argue that the proposed changes to capital gains taxes would primarily benefit higher-income homeowners, since many middle-income sellers already qualify for the exclusion that allows them to avoid federal capital gains tax on their primary residence.

Then, there's a key issue with the Cruz/Scott proposal of whether the U.S. Treasury has the authority to implement such changes without Congressional approval, which could lead to court challenges.

Also: Reducing or eliminating capital gains taxes may significantly decrease federal revenue, potentially increasing deficits unless offset by other means. Some estimates suggest indexing capital gains taxes to inflation could cost around $200 billion.

How no capital gains tax could affect homeowners

The impact of capital gains tax changes for homeowners in the U.S. varies by location and how long they’ve owned their homes.

Many selling modest homes might already owe no federal tax due to the $250,000/$500,000 federal exclusion, but longtime owners in high-cost markets could exceed it, according to NAR data; about one-third do.

If capital gains taxes on home sales are eliminated, some say homeowners might keep more equity, retirees could downsize with less worry about taxes, and housing inventory could modestly increase.

Still, analysts caution that most households would see little benefit.

Research from the Tax Policy Center finds that roughly 95% of homeowners — including about 90% of those 65 and older — already pay no federal tax on the sale of a primary residence. A similar analysis from the Brookings Institution suggests the biggest savings would go to higher-income households with very large gains.

So, the debate over the best way to handle capital gains tax continues. Stay tuned.

Read More

• Capital Gains Tax Exclusion for Homeowners
• Capital Gains Tax Rates for 2025 and 2026
• Retirees Face a Growing Capital Gains Tax Trap
• States With Low and No Capital Gains Tax

Billionaires and wealth taxes are in the news again. This time, Sen. Bernie Sanders (I-Vt.) and Rep. Ro Khanna (D-Calif.) have unveiled a proposal for a 5% annual wealth tax on the richest Americans.

The Make Billionaires Pay Their Fair Share Act would apply to approximately 938 billionaires in the United States, who are reportedly collectively worth $8.2 trillion.

The bill’s sponsors cite compelling data on wealth inequality as a rationale for the proposal, saying "the CEOs of large corporations are now making 350 times more than their average workers" while noting that more than 60% of Americans are living paycheck to paycheck.

"At a time of unprecedented income and wealth inequality, this legislation demands that the billionaire class in America finally pay their fair share of taxes so that we can create an economy that works for all of us, not just the 1%."

Sanders' statement came in a release regarding the proposal, which economic estimates suggest could raise $4.4 trillion over the next decade.

So, should billionaires like Jeff Bezos of Amazon and Elon Musk of Tesla pay more tax? Read on to learn more.

Bernie Sanders billionaire tax coming soon?

Unlike the current federal tax system, which primarily taxes wages, business income, and capital gains when assets are sold, this proposal would apply directly to the total value of assets (e.g., stock holdings, real estate, private business interests, and other investments).

• According to the bill’s sponsors, the tax would raise an estimated $4.4 trillion over 10 years.
• A portion of that revenue would fund direct payments of up to $3,000 per year to households earning $150,000 or less — effectively creating a recurring benefit for U.S. taxpayers with lower and middle incomes.

"We have a deep economic divide in this country," Rep. Ro Khanna said in a statement supporting the legislation. Khanna added, "On one side, places like Silicon Valley are generating extreme wealth. On the other side, families are struggling to cover the cost of health care, housing, and basic needs. We can tax billionaires a modest amount to make sure everyone has a fair chance while keeping our innovative engine."

Supporters argue the proposal is designed to address what they call a structural flaw in the tax code: wealth that grows on paper — particularly stock holdings — can accumulate for years without being taxed unless sold.

• A summary of the bill states that a family of four making $150,000 or less would receive $12,000.
• That money could be used to offset the high cost of housing, health care, prescription drugs, childcare, and other necessities, at an estimated cost of $959 billion.

Beyond direct payments, bill sponsors say that if approved, the wealth tax would fund programs to expand Medicare coverage, invest in affordable housing, support child care, raise teacher pay, and improve home health care for older adults and people with disabilities, all to ease costs for working families.

Those who oppose wealth tax proposals typically argue they amount to punitive taxation that could discourage investment, slow economic growth, and push high-net-worth individuals and their businesses overseas.

Some policymakers warn that taxing unrealized wealth each year presents significant practical and legal challenges. Those might include figuring out how to accurately value privately held assets annually and whether such a levy would even withstand legal scrutiny.

How much tax do billionaires pay now?

Under current law, billionaires typically pay taxes when they realize income. That might be by selling stock and triggering capital gains tax. But because much of their wealth consists of unsold stock that appreciates over time, large fortunes can grow dramatically with limited annual tax liability.

For example, billionaires like Jeff Bezos of Amazon and Elon Musk of Tesla have seen their net worth rise by tens of billions of dollars in some years, largely due to stock gains.

At the corporate level, both Amazon and Tesla have faced scrutiny in past years for paying little to no federal income tax during certain profitable periods.

• For example, according to the Institute on Taxation and Economic Policy (ITEP), Tesla, the company led by Musk, reported roughly $11 billion in U.S. income from 2018 through 2022 but paid little to no federal income tax over that period.
• In 2022 alone, Tesla reportedly earned about $5.5 billion but had an effective federal tax rate near zero after deductions and stock-based compensation credits.

This highlights how corporate tax rules — combined with unrealized gains on stock — allow enormous wealth accumulation for billionaires like Musk.

The proposed wealth tax would operate differently. Instead of waiting for stock to be sold, a 5% levy would apply annually to total net worth above $1 billion.

For a billionaire worth $10 billion, that could mean a $500 million tax bill in a single year, even if they didn't sell assets.

California billionaire tax: States considering wealth taxes

While a federal wealth tax has yet to pass Congress, some states are moving forward with legislation that would tax high earners.

States including California, New York, Washington, and Minnesota have recently floated wealth taxes, capital gains levies, or surtaxes on the ultra-wealthy to help fund public services.

As Kiplinger has reported, the California 5% wealth tax proposal, backed by the Service Employees International Union–United Healthcare Workers West (SEIU‑UHW) and Congressman Khanna (D-Ca.-17), but opposed by California Gov. Gavin Newsom, would apply, if approved, to individual residents with more than $1 billion in wealth as of January 1, 2026.

While some similar proposals have stalled, others have evolved into narrower taxes on capital gains or high-income earners. But a broader trend is emerging: some policymakers at the state and federal levels are revisiting how extreme wealth is taxed.

Taxing the rich: Bottom line

Whether the Sanders-Khanna proposal becomes law is far from certain. Wealth taxes face steep political hurdles in a divided Congress and almost certain legal challenges if somehow enacted.

But with midterm elections approaching later this year, proposals like this can energize a political base concerned about inequality and draw contrasts on tax priorities.

In any case, the debate over who really pays the most taxes and who isn’t paying their fair share continues. Stay tuned.

Read More

• California Wealth Tax? What's Happening Now
• 'Unrealized Gains Tax' Survives U.S. Supreme Court
• Capital Gains Tax Rate Changes for 2026
• $0 Income Tax? These Changes Could Wipe Out Federal Bills for Some

Who knew that monetary policy could be so exciting? The way the Federal Reserve Bank sets interest rates and manages the money supply might prompt some terse words among economists or some raised voices on CNBC, but it typically creates little controversy outside financial circles.

As with many things in the Trump administration, however, the president's nomination of financier, lawyer and former Fed governor Kevin Warsh to replace Jerome Powell in May has been mired in high drama.

Warsh, 55, is currently a lecturer at Stanford University and a partner in the family office that manages billionaire Stanley Druckenmiller's fortune. He served as a Federal Reserve governor from 2006 to 2011 after President George W. Bush made him, at 35, the youngest-ever appointee. A former Morgan Stanley executive and a Harvard-educated attorney, Warsh was credited by Ben Bernanke for his Wall Street savvy as the Fed navigated the Great Financial Crisis that started in 2008.

That résumé may sound par for the course — President Donald Trump called it "central casting." But even assuming Warsh wins Senate confirmation, it is safe to say that this is not the typical Fed-chair transition.

Trump's rhetoric and his administration's actions have raised the specter of a level of political interference in monetary policy that's unprecedented in the modern history of the central bank. And as if that weren't enough, the transition to a new Fed chair comes at a time when a mulligan stew of mixed economic indicators makes the Fed's next course of action with interest rates anything but clear. In short, the selection of Kevin Warsh as the next Fed chair may be the most consequential in decades.

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A hundred years and counting

The Federal Reserve system as we mostly know it today started in 1913 after decades of fits and starts in establishing a national bank. It had its successes and failures, with the Great Depression notable in the latter category. A 1951 agreement between the Fed and the Treasury Department freed the Fed to use monetary policy to control inflation.

In 1977, an act of Congress directed the Fed to also use its policies to maximize employment, in addition to fighting price increases. This is called its dual mandate, because the two aims can be contradictory. Few other of the world's central banks try to achieve both goals.

Right now, the Trump administration seems intently, if not solely, focused on maximizing employment — and, if the president's social media posts are an indication, boosting stock prices. That policy would call for lower interest rates and is described as dovish in monetary-policy terms. The opposite approach, raising interest rates to slow down the economy and cut inflation, is called hawkish. The Warsh pick is curious, many say, because he has more of a track record of hawkishness than the other candidates Trump considered.

During his time as governor, Warsh repeatedly expressed concerns about inflation. After leaving the Fed, he criticized the central bank's policy of increasing the money supply for years after the financial crisis via a massive bond-buying program known as quantitative easing. That policy stoked economic demand and contributed to inflation. However, Warsh has recently expressed the view that lower rates are appropriate right now. He has been arguing that productivity gains from artificial intelligence mean the U.S. can have lower rates without risking a jump in inflation.

William Merz, head of capital markets research at U.S. Bank Asset Management, says Warsh has repeatedly said the Fed needs to intervene less in the economy, unless there is a crisis, and make fewer public comments. "I think there's probably an underappreciation for the extent to which Warsh believes the Fed is in need of significant reform," says Merz.

As Fed chair, Warsh would yield tremendous power. But ultimately, he would be just one of 12 votes on the Open Market Committee, the Fed's rate-setting body. The seven governors are joined by five of the regional Federal Reserve Bank presidents, four of whom rotate in and out each year.

"I think Warsh is seen as more credible, more independent," says Idanna Appio, portfolio manager of the Global Income Builder Fund at New York City–based asset management firm First Eagle Investments. "I think he has a better chance of bringing the rest of the committee along."

A consensus of current forecasts calls for no more rate cuts during Powell's tenure, through May, and the potential for one to two cuts in the remainder of 2026. That may shift depending on how the market comes to view Warsh's nomination.

It's also important to note that a cut in the fed funds rate doesn't necessarily translate into lower long-term rates, including mortgage rates, which tend to take their cues from the bond market. If bond traders see Fed rate cuts as the first step toward overheated markets and more inflation, they're likely to sell off long-term debt, causing long-term bond yields to rise, not fall.

A question of independence

Trump put Powell in the position of Fed chair in February 2018 but has repeatedly maligned him for a failure to cut interest rates more quickly. In mid-January, Trump said Powell "either is incompetent or he's crooked," and said, "That jerk will be gone soon." (Powell's term as a Fed governor does not end until January 2028; he has not said whether he intends to stay on in that role.)

Trump's comments came after Powell issued an extraordinary statement confirming that the Department of Justice had launched a criminal investigation of him. Although the DOJ is scrutinizing Powell's congressional testimony regarding the cost and extent of a renovation of the bank's headquarters, Powell said the threat of criminal charges is a consequence of the Fed "setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the president."

The administration has also sought to remove sitting Fed governor Lisa Cook, claiming she committed mortgage fraud prior to joining the Fed, which she denies. The matter has reached the U.S. Supreme Court, whose decision will determine how far a president can go to shape the Fed's board.

"I'm not going to sugarcoat it — trying to threaten the independence of the world's most powerful central bank is a problem," says Liz Ann Sonders, the chief investment strategist at the Schwab Center for Financial Research. "It's not bombastic to say that we'd be in a world of hurt if somehow any administration was able to wrest control over monetary policy decision-making — and that should not be seen as a partisan statement."

Powell's successor will have to live up to a legacy that has grown in some quarters as Powell has stood up to Trump's exhortations. "I think we're very fortunate to have someone like Jerome Powell in the role of chair at the moment," says David Doyle, head of economics at Australian financial firm Macquarie Group.

But the experts we interviewed also acknowledged the blemish on his record: the failure to contain the post-pandemic inflation that gave Americans their first taste of sharply rising prices in four decades. Powell and the Fed get credit, however, for acting decisively once the problem became clear.

"A lot of people who want to criticize Powell will point to how inflation got out of hand in 2022 and how the Fed was a little bit late to recognize that inflation wasn't transitory," says Chris Zaccarelli, the chief investment officer of Charlotte, N.C.–based Northlight Asset Management. "However, once they did recognize their mistake, they moved quickly to raise interest rates, got inflation much more under control and, surprisingly, were able to engineer all of that without causing a recession."

Doyle says the pandemic and the associated shutdown were "hopefully a once-in-a-century event. I think that was tough for anyone to have gotten right."

The challenge today

No such crisis exists now — but in a way, that makes it harder to chart a course. On the one hand, inflation has been above the Fed's 2% objective for nearly five years. On the other, there's a host of weak economic indicators, including employment numbers, consumer sentiment and manufacturing activity.

"When we have a recession or when we have very high inflation, the policy outlook is very clear. What we have here is a little more nebulous, which is inflation that is slightly above comfort levels and growth that is slightly below," says Frances Donald, the chief economist at Royal Bank of Canada. "It is exactly the type of environment that creates a significant debate over the next move."

That, more so than an ideological divide, might explain the recent, unusual split votes within the Open Market Committee. In the December meeting, three of the 12 members dissented from the decision to lower the target range for the federal funds rate, the rate banks charge each other for loans, by 0.25 percentage point, to 3.5% to 3.75%. One member wanted a bigger cut, while two preferred to make no change at all.

In the January meeting, Christopher Waller, who was also considered for the chairmanship, and another governor wanted cuts when the committee held steady. "You have to go back decades in order to see that many dissents amongst voting members," says Zaccarelli. "It's completely reasonable to have differing opinions on the exact same data given that the future forecast looks a little muddier."

Investors, for their part, might want to buckle up. According to Daniel Siluk, a portfolio manager at U.K.-based Janus Henderson Investors: "Whenever a new Fed chair steps in, interest rate volatility often jumps higher as markets adjust to the fresh communication style and initial policy signals. There's a brief period of uncertainty, and overreaction, until the new chair finds their footing." Stocks fell slightly, bond yields were mainly steady overall, and the dollar rose on the day of Warsh's nomination.

In the meantime, outgoing chair Powell has some advice for his successor: "Stay out of elected politics," he said at the press conference following the January Open Market Committee meeting. "Don't get pulled into elected politics. Don't do it."

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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For most taxpayers, the 2026 filing season is already shaping up to be complicated due to a recent overhaul of many parts of the tax code. Now, things with the tax agency are getting messier.

Why? President Donald Trump is suing the Internal Revenue Service and the U.S. Treasury for $10 billion.

The lawsuit, filed last week in federal district court in Florida, alleges that the federal government failed to protect the Trump family’s tax records from illegal disclosure.

The unprecedented claim brought by a sitting president arrives as a tax-industry watchdog is sounding the alarm. The warning is that budget constraints, staffing shortages, and a more complex tax code could disrupt this year’s filing season, particularly in the wake of the 2025 Trump-GOP tax law, also known by some as the "big beautiful bill."

This latest legal action not only raises questions about taxpayer privacy but also about conflict of interest and a potential for more widespread litigation, particularly if Trump's claim is successful.

But what does all of this mean for you and your taxes?

Trump IRS lawsuit: Alleged tax data breach

Trump, joined by his sons Eric Trump and Donald Trump Jr. and the Trump Organization, LLC, filed suit on January 29 in the U.S. District Court for the Southern District of Florida. They allege that the IRS and the Treasury Department were negligent regarding Trump's family and business tax returns and related information, which were unlawfully leaked to the public.

The complaint stems from disclosures made by a former IRS contractor, Charles Littilejohn, who accessed and shared tax records without authorization between 2018 and 2020. That contractor later pleaded guilty in 2023 and was sentenced to prison.

Trump’s filing argues that federal agencies failed to implement adequate safeguards, exposing sensitive financial information and causing lasting reputational and economic damage.

Via the lawsuit, Trump is seeking $10 billion in damages from the U.S. government. And as you might expect, reaction and backlash were swift.

"Donald Trump is a cheat and a grifter to his core, and for him to abuse his office in an attempt to steal $10 billion from the American taxpayer is a shameless, disgusting act of corruption," Ron Wyden (D-Ore.), ranking member of the U.S. Senate Finance Committee, said in a statement.

Sen. Thom Tillis of North Carolina, a Republican not seeking reelection this year, pondered on the Senate floor: "Where's that money coming from? The money fairies or your pocket?"

During an Air Force One gaggle on February 1, 2026, Trump was asked about a seeming conflict of interest, i.e., what it’s like to be both plaintiff and defendant in his lawsuit against the IRS and Treasury, and how any settlement might work in that unusual position. Trump reportedly responded that he might work out "some kind of a settlement" and suggested giving any proceeds to charity.

But amid the political back-and-forth, some industry professionals wonder about potential legal ramifications.

David Gair, partner at Troutman Pepper Locke, says that "most tax practitioners view these types of lawsuits as 'chasing good money after bad,' adding, "Most clients, when they understand what is involved with [such a case], would avoid the time, effort, and cost."

However, in an emailed statement provided to Kiplinger, Gair also noted that "the president’s actions are already making those affected by Mr. Littlejohn’s actions reconsider filing a lawsuit."

Gair explained: "President Trump has unprecedented control over the Department of Justice, and if he is successful with his lawsuit, then others should also have a greater chance of success with a Department of Justice that wants to make an example out of the IRS."

Taxpayer protection: Who's privacy matters?

Trump’s $10 billion IRS lawsuit highlights the long‑running tension between taxpayer privacy and government data‑sharing, and some see irony in that. As mentioned, the suit stems from the unauthorized disclosure of Trump’s tax returns by a former IRS contractor years ago.

Under Trump’s current administration, however, the IRS faces backlash for sharing taxpayer data with other agencies, including U.S. Immigration and Customs Enforcement (ICE). That cooperation, which reportedly included information about individual taxpayer identification numbers (ITINs) and taxpayer addresses, prompted lawsuits and has led to court‑ordered limits on such data‑sharing.

Some key points:

• Federal law strictly limits the disclosure of tax return information, allowing it only in narrow circumstances such as authorized criminal investigations.
• Last year, a coalition of small‑business groups, a tax clinic, and two unions sued the IRS over its data‑sharing with ICE.
• In Center for Taxpayer Rights et al. v. IRS, a federal court issued a preliminary injunction blocking further data sharing with ICE while the case proceeds.

Privacy advocates argue that these exchanges violated federal confidentiality rules and eroded public trust.

"This unlawful data‑sharing is one of the worst attacks on Americans’ privacy in decades," Skye Perryman, president and CEO of Democracy Forward, which represented plaintiffs in the suit, said in a release regarding the case.

Perryman added, "The Trump‑Vance administration’s actions to share taxpayers’ most confidential data with ICE betray the promises our government has made and threaten public trust in the tax system."

The contrast is striking: the former president who once oversaw policies exposing others’ tax information is now suing the IRS for failing to safeguard his own. Trump seeks billions in damages for alleged breaches of his tax return information. In a press release, Sen. Wyden described the claim as representing "the height of hypocrisy."

More broadly, the case raises a fundamental question: can taxpayers, wealthy and prominent or not, trust the government to protect their most private financial data?

Note: Federal officials have previously acknowledged the breach but have not commented on the merits of Trump’s lawsuit.

Tax Season 2026 strain? IRS budget cuts, staffing losses and backlogs

Meanwhile, the lawsuit lands as a new report from the National Taxpayer Advocate warns that the IRS is entering the 2026 filing season with fewer resources and diminished capacity to help taxpayers who encounter problems.

According to the report, the agency has experienced a steep reduction in staffing over the past year, driven in part by funding constraints, layoffs spurred by the Department of Government Efficiency (DOGE), and a Trump administration-imposed hiring freeze.

"The IRS is simultaneously confronting a reduction of 27% of its workforce, leadership turnover, and the implementation of extensive and complex tax law changes" mandated by Republicans' tax and spending measure that President Donald Trump signed into law last summer," NTA Erin M. Collins wrote in the 2025 annual report to Congress.

• Additionally, a proposed budget deal currently before Congress includes about $1.1 billion in reductions to the IRS’s base budget compared with FY 2025.
• If approved, it would claw back an additional $11.6 billion in supplemental funding originally intended for long‑term modernization at the tax agency.

IRS officials have said that most filers should be able to submit returns and receive tax refunds without major disruption. But the report cautions that taxpayers who need assistance may face longer wait times, difficulty reaching trained agents, and extended delays in resolving disputes.

On the Horizon: SCOTUS tariff decision

And speaking of taxes and lawsuits…

A high-stakes legal battle has yet to fully unfold as the U.S. Supreme Court prepares to rule on the legality of President Trump’s sweeping tariffs program, a key part of his second-term economic agenda.

As Kiplinger has reported, the tariff case challenges the administration’s use of emergency powers to impose tariffs on major trading partners. It raises important questions about executive authority and congressional power regarding taxation.

Though Trump's tariffs have reportedly generated hundreds of billions in revenue, lower courts have found some aspects unlawful, which could potentially lead to refunds of tens of billions of dollars.

The outcome could impact supply chains, markets, and federal finance, especially if tariff revenues significantly affect budget projections.

A SCOTUS ruling is expected soon, and some businesses, like Costco, are already filing lawsuits to secure refunds if the court rules against the Trump administration.

Read More

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Planning for a secure retirement isn't just about saving and investing; it's also about anticipating how changes in Washington might affect your nest egg. Two major threats to retirees' finances are tax risk and legislative risk.

Tax risk is the chance that you'll face higher taxes in retirement than you expected, leaving less money in your pocket.

Legislative risk is the possibility that Congress could change the rules on retirement accounts, altering what can be taxed, when it's taxed or how it's taxed in ways that undermine your carefully laid plans.

These risks are real.

In recent years, new laws have changed how inherited IRAs are taxed. Given the current legislative environment, retirees and pre-retirees need to be prepared.

Here are four ways Washington could impact your retirement, along with steps to help protect yourself.

1. Changing the tax brackets

Congress could take a bigger bite out of retirees' income by changing tax brackets.

Throughout modern history, lawmakers have adjusted federal income tax brackets, altering both the range of income in each bracket and the tax rates applied.

The Tax Cuts and Jobs Act of 2017, for instance, temporarily lowered tax rates for most Americans, but these lower rates were set to sunset at the end of 2025 before Congress passed the One Big Beautiful Bill (OBBB) this year.

Similarly, future legislation could raise tax rates or compress brackets. The impact on retirees is clear: If you're planning your retirement income using today's tax rates, be aware that you might owe more tax on the same income in the near future.

2. Limiting tax deductions

Another legislative risk to watch for is the reduction or elimination of tax deductions. Congress could change which deductions or credits taxpayers can claim, effectively increasing taxable income.

We saw this in 2017, when certain deductions were scaled back. For example, the state and local tax (SALT) deduction was capped, and personal exemptions were eliminated.

Changes to deductions directly affect how much of your retirement income is subject to tax. Imagine a retiree who normally deducts medical expenses or charitable contributions. If new laws limit those deductions, more of their income could become taxable.

Although a higher standard deduction for older people, currently in effect, has helped many retirees, it is also subject to legislative change.

The bottom line is that the deductions you rely on today might not be there tomorrow, potentially raising your tax bill in retirement.

3. Adjusting which assets are taxed

Congress also has the power to change which types of income or assets are taxable, altering long-standing rules.

A historical example is Social Security benefits, which were tax-free before 1984. Legislative changes in 1983 and 1993 introduced taxes on Social Security benefits for many retirees.

Similarly, in 2019, the SECURE Act changed the rules for inherited retirement accounts, forcing most beneficiaries to withdraw (and pay taxes on) the entire account within 10 years instead of stretching distributions over a lifetime.

This kind of legislative change can upend the plans that retirees made under the old rules. We might see future laws that make currently tax-free or tax-deferred assets taxable.

For instance, proposals to tax portions of high-value retirement accounts or further limit tax advantages on inherited assets have surfaced.

If the government changes which assets are taxed or how they're taxed, some retirees could find they have higher tax obligations and less spendable income than they anticipated.

4. 'Changing the rules' on retirement accounts

Perhaps the most unsettling way Washington could affect your retirement would be by changing how and when you must withdraw your own money, effectively "changing the rules" of retirement accounts.

We've already seen legislation increase the age for required minimum distributions (RMDs), and there are further debates. A recent House bill proposal (part of the initially debated Build Back Better legislation) sought to impose a new type of RMD on very large IRAs and 401(k)s, regardless of the owner's age.

In this proposal, if an account exceeded a certain balance, the owner would have been forced to withdraw 50% of the excess each year and pay taxes on it, even if they didn't need the money.

Although this particular provision didn't become law, it signals the kinds of ideas lawmakers consider to raise revenue. They could require you to withdraw funds under new rules or timeframes that didn't exist when you were saving.

In short, if Congress changes the structural rules for retirement accounts, you might end up accessing your savings under a different set of conditions than you planned for.

How to prepare for tax and legislative uncertainty

You can't control what lawmakers do, but you can protect your retirement from tax and legislative risks:

Diversify your tax buckets. Spread your savings across tax-deferred, taxable and tax-free accounts. Roth IRAs and Roth 401(k)s provide tax-free withdrawals, while vehicles such as municipal bonds or cash-value life insurance can add income with little or no tax.

Relying only on tax-deferred accounts leaves you more exposed if tax rates rise.

Plan withdrawals strategically. Use a savvy withdrawal strategy to help minimize taxes over time. Partial Roth conversions in lower-tax years let you pre-pay taxes on your terms.

Coordinate distributions across taxable, tax-deferred and Roth accounts to keep your taxable income steady and avoid surprises such as higher Medicare premiums.

Stay flexible. Laws will change. Revisit your plan when new rules, such as RMD age changes or Social Security adjustments, take effect.

Keep liquidity and backup strategies in place so you can adapt. A good adviser can help you interpret changes and adjust quickly.

In short, expect continuous tax and legislative changes. With a proactive, flexible plan, you can safeguard your retirement income against decisions made in Washington.

Ezra Byer contributed to this article.

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

President Donald Trump nominated Kevin Warsh, a former governor of the Federal Reserve, to be the next head of the Fed back in January. On Wednesday, Warsh received confirmation from the Senate, which voted 54-45 to make Warsh the next Fed chair.

Warsh served on the Federal Reserve Board of Governors from 2006 to 2011, after being nominated by President George Bush. On the Fed chair selection, President Donald Trump said in a social media post, "I have known Kevin for a long period of time, and have no doubt that he will go down as one of the GREAT Fed Chairmen, maybe the best."

Trump's appointment could impact the Fed's future policy — which will influence how much you'll earn on your savings accounts. Here's what savers should know.

A policy tug-of-war between Trump and the Fed

Trump has criticized the Federal Reserve for being slow to cut interest rates and frequently called for deeper cuts. After the Fed reduced rates by 25 basis points last December, Trump said the move "could have been doubled," according to Bloomberg. Trump wants much lower interest rates to help economic growth by lowering borrowing costs.

Warsh has built a reputation as an inflation hawk, often favoring higher rates. More recently, however, he has criticized the Fed for being slow to cut rates, calling that hesitancy a "mark against them" in a July interview with CNBC.

Meanwhile, inflation is a major sticking point for the Federal Reserve. The latest CPI report showed the Consumer Price Index rose 4.2% year-over-year.

Energy costs were the chief culprit in rising prices. While the Iranian War resolution lowered fuel prices, it could take until 2027 for energy prices to fully stabilize.

This means that while inflation is likely at its peak, it could remain sticky throughout the summer months, making it difficult for the Fed to do anything but wait it out.

Will the new Fed chair lead to more rate cuts?

Trump's appointment of Warsh signals a desire for a more aggressive approach to rate cuts. Even so, a Fed chair more aligned with the president's policy preferences does not guarantee a steady pace of rate reductions.

The reason? The Federal Open Market Committee (FOMC) has 12 voting members. The Fed chair only has one vote and must build consensus with the committee to shape policy decisions.

However, there's one key area to watch: The Board of Governors has seven members, three of them Trump appointees.

Jerome Powell, who will end his term as the Fed chair on Friday, announced he would remain on the Board of Governors to help the Fed keep its independence. He will also serve a crucial vote on Fed rate decisions moving forward until his term ends in early 2028.

How can savers prepare for a new Fed chair?

Your best course of action is to find a savings account that keeps pace with inflation. If you have short-term savings goals, a high-yield savings account remains one of the wisest choices.

You can earn APYs as high as 4.20% with minimal fees. Just know that if the Fed cuts rates in the future, it could impact your earnings since savings accounts have variable rates.

Use this Bankrate tool to find the best options fast:

If you have the flexibility to lock in your cash, you should look at CDs. Unlike high-yield savings accounts, CDs have set rates, so what you get now is what you'll get through the whole term of the CD, even if the Fed cuts rates.

The tradeoff, however, is that you have to hold your cash in the CD for the full term to get the full interest payout. That means if you get a five-year CD, for example, you would have to leave your cash there for five years.

The best CD rates Kiplinger has found are around 4%, varying depending on the issuer and term. Use this Bankrate tool to find and compare the best CD rates quickly:

Final thoughts on the new Fed chair's confirmation

The Senate's confirmation of Kevin Warsh as the new Fed chair could have a significant impact on future rate cuts. However, keep in mind the Fed has 12 voting members. So, even with another Trump appointee leading the group, it doesn't necessarily mean the Fed will cut rates at every meeting.

The more pressing focus is inflation. As prices keep rising, sheltering your money from its impact becomes more vital. That's where a high-yield savings account can help. It will keep your earnings on pace with inflation. And as prices stabilize and inflation slowly lowers, you'll be in a prime position to improve your purchasing power.

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After months of speculation — and years of criticizing his last pick — President Donald Trump announced his selection for the next chair of the Federal Reserve.

The president announced on Friday, January 30, that Kevin Warsh will be the next Fed chair. If approved by the Senate, he will take over when Jerome Powell's term ends in May 2026. Trump had been reviewing several candidates for some time now.

"I am pleased to announce that I am nominating Kevin Warsh to be the CHAIRMAN OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM," Trump wrote on Truth Social. "I have known Kevin for a long period of time and have no doubt that he will go down as one of the GREAT Fed Chairmen, maybe the best. On top of everything else, he is 'central casting,' and he will never let you down."

In December, the president said his nomination will be "someone who believes in lower interest rates by a lot."

Who is Kevin Warsh, and how could he impact your life and your money?

What to know about Warsh

Warsh was Fed Chair Ben Bernanke's right-hand man during the 2008-09 global financial crisis and was his primary liaison to Wall Street, which earned him credibility he still retains.

Markets see Warsh as a source of stability should Trump continue to pressure the central bank. He served on the Federal Reserve Board from February 2006 through March 2011.

He was special assistant to the president for economic policy and executive secretary of the White House National Economic Council from 2002 through 2006, during the George W. Bush administration. From 1995 to 2002, Warsh worked for Morgan Stanley.

He's currently a visiting fellow in economics at Stanford University's Hoover Institution, a lecturer at the Stanford Graduate School of Business and a member of the Panel of Economic Advisers of the Congressional Budget Office.

Warsh is widely viewed as a "hawk" on monetary policy who generally favors higher interest rates rather than the risk of inflation.

At the same time, Warsh, who was said to be a candidate for Treasury secretary before Trump picked Scott Bessent, was on the short list because he has a great relationship with the president.

Warsh said in mid-2025 that "the independent operations in the conduct of monetary policy is essential," adding "that doesn't mean the Fed is independent in everything else it does."

Though he consistently took the hawkish line on inflation during his time inside the central bank, Warsh has more recently advocated for lower interest rates.

Powell's legacy

Current Fed Chair Powell's term comes to an end on May 15, 2026. He's served in this role since he was appointed by Trump in 2018 as the 16th chair of the Federal Reserve.

Powell navigated the economy through the economic trip-up of the COVID-19 pandemic and the inflationary period that followed.

Asked about his legacy in the December Fed meeting, Powell said: "My thought is that I really want to turn this job over to whoever replaces me with the economy in really good shape. That's what I want to do. I want inflation to be under control, coming back down to 2%, and I want the labor market to be strong. That's what I want. And all of my efforts are to get to that place. They have been all along. But, ultimately, that's what I want."

In the January Fed meeting, Powell offered his successor some words of advice. In addition to staying out of politics, he reminded the next Fed chair that their accountability is to Congress and maintaining this accountability will keep them legitimate to the American people.

He also said that the Fed staff is excellent.

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The 2026 tax filing season officially began on January 26, and it was already shaping up to be a challenging one for the IRS due to staffing and funding challenges.

But now, some wonder whether a looming government shutdown at the end of January could disrupt operations just as the season kicks off.

Last week, congressional leaders released a "minibus" spending package designed to avert a government shutdown on January 30.

The initially proposed bipartisan deal includes about $1.1 billion in reductions to the IRS’s base budget compared with FY 2025. Perhaps more significantly, it would claw back an additional $11.6 billion in supplemental funding originally intended for long‑term modernization at the tax agency.

But since then, as Kiplinger has reported, following the January 23 shooting of Alex Pretti by federal agents in Minneapolis, Senate Democrats have pledged to block the package because it includes funding for the Department of Homeland Security.

IRS funding is tied to this same legislative bundle, so the agency faces a risk of a funding lapse if lawmakers can't come to an agreement.

Meanwhile, the IRS, which reportedly lost nearly a quarter of its staff since the start of President Donald Trump's second term, has said that it expects to receive approximately 164 million individual income tax returns this filing season.

Last year, the agency received roughly 140.6 million individual returns.

So, it's fair to say that the IRS will have much to do this year, with fewer resources. And if a partial government shutdown occurs instead of this deal passing, the IRS could be forced to operate under even tighter emergency contingencies.

What does all of this mean for you and your taxes?

New proposed IRS budget cuts

The most recent proposed government funding agreement (now seemingly in limbo) signals a move toward a leaner IRS on top of already existing staffing shifts, cuts, and funding clawbacks.

Here is how the proposed budget for the current fiscal year (FY26) compares to last year:

IRS Budget Comparison FY25 vs FY 26

These proposed budget cuts follow a volatile year of internal restructuring.

About a year ago, in 2025, the Department of Governmental Efficiency (DOGE), then led by Elon Musk of Tesla, X (formerly Twitter), and SpaceX fame, began cutting IRS personnel, culminating in a 25% reduction in the tax agency's workforce.

Later, on July 4, 2025, President Donald Trump signed the so-called "big, beautiful bill" into law, which made sweeping changes to many tax provisions, including those that significantly impact individual filers.

IRS staff cuts could mean a long wait for help

For example, you might spend a long time on hold this tax season while waiting to speak with an IRS taxpayer assistance agent.

Following the IRS staffing cuts last year, a report from the Treasury Inspector General for Tax Administration (TIGTA) noted significant declines in staffing in taxpayer assistance functions and warned of potential impacts on service.

• The IRS reported having 20,692 taxpayer assistance employees.
• The IRS previously reported that more than 20,000 employees worked on taxpayer assistance, but TIGTA found that staffing has fallen since then, leaving fewer staff available for the 2026 filing season.
• TIGTA stated the IRS needs 3,500 additional personnel to reach an adequate staffing level.

The IRS is under a hiring freeze, so it can’t recruit new full-time permanent employees. It used its "direct-hire authority" to recruit temporary employees, but whether it hired enough people went largely unreported.

Additionally, according to Accounting Today, the IRS has closed 9 walk-in centers nationwide, including locations in California, Pennsylvania, and New York.

At the end of 2025, several Democratic senators called for an end to the hiring freeze. In a letter to Treasury Secretary/Acting IRS Commissioner Scott Bessent, Sens. Elizabeth Warren (D-Mass.), Bernie Sanders (I-Vt.) Cory Booker (D-N.J.), Raphael Warnock (D-Ga.), and others expressed concern about the impact of personnel cuts on IRS services.

While acknowledging " some isolated instances of hiring for internal positions", the senators wrote: "We are concerned that the recent personnel cuts…and the ongoing hiring freeze will greatly hinder these advocates' ability to provide quality, timely service to taxpayers who need help."

A bumpy ride with a new Schedule 1-A?

While it's unlikely that the 2026 filing season will be "smooth sailing," the IRS released guidance last fall on new deductions for tips, overtime pay, and car loan interest — all changes in the 2025 Trump tax bill. These new deductions will be claimed by eligible taxpayers on the brand-new Schedule 1-A (Form 1040).

In a January 8 news release, IRS CEO Frank Bisignano, who simultaneously leads the Social Security Administration (SSA), expressed confidence:

"The Internal Revenue Service is ready to help taxpayers meet their tax filing and payment obligations during the 2026 filing season. As always, the IRS workforce remains vigilant and dedicated to their mission to serve the American taxpaying public. At the same time, IRS information systems have been updated to incorporate the new tax laws and are ready to efficiently and effectively process taxpayer returns."'

Getting information about your return

One way to navigate the communications dilemma posed by IRS staffing cuts is to create an online IRS account. To do that, go to IRS.gov and follow the instructions. You’ll get access to your tax transcripts, account status, and digital notices.

However, the account’s functionality is limited. You can’t ask questions or get tax advice. So consult with a trusted tax professional if you have questions or concerns about your 2025 tax return.

Read More

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• Not Ready to File Taxes? 8 Things to Do Now to Prepare

To help you understand what's going on in politics and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…

Starting the second year of his second term, Donald Trump has put the world on notice, deposing Venezuelan President Nicolás Maduro, toying with ideas to buy or seize Greenland from Denmark — a NATO ally — and warning U.S. adversaries like China and Russia to stay out of the Western Hemisphere.

Such bold moves could have big implications, both good and bad, for America’s standing in the world. By extending U.S. influence over Venezuela, Trump could hit America’s adversaries hard. Both China and Russia were key backers of Maduro, with Beijing also a major buyer of Venezuelan oil. Moscow, in turn, relies heavily on its own oil wealth and is leery about Washington having de facto control over more than half of the world’s petroleum reserves.

Elsewhere in the region, Cuba’s teetering economy could be pushed over the edge by the loss of Caracas as an energy supplier and middleman in global trade. But will he maintain this pressure campaign outside of Latin America? China and Russia both hope that Washington’s policy shift will leave them freer to pursue territory in their spheres of influence. So far, Trump is not entertaining this idea, even agreeing to tougher sanctions on Russia and threatening action against the Iranian regime amid anti-government protests.

At the same time, Trump is burning bridges with U.S. friends and allies, particularly with his efforts to acquire Greenland. Even if the threat of force is a ploy to get Denmark to give up the territory, it will sow distrust throughout the alliance, whose members were already concerned about U.S. commitment to their security. Expect this distrust to outlast Trump, even if NATO ultimately endures.

Meanwhile, the rest of the alliance will continue to prioritize increased defense spending. Security concerns could combine with trade tensions closer to home. Trump’s threats to take military action against drug cartels south of the border could worsen relations with North American free trade partners Mexico and Canada.

Trump seems to be betting his presidential legacy on bold action abroad, even invoking past commanders in chief, like James Monroe, as part of this push. Doing so can be a double-edged sword. On the one hand, presidents generally have more latitude on foreign policy, a plus when they are struggling to accomplish their domestic goals. On the other hand, the administration also risks stirring up regional chaos or getting bogged down in a conflict beyond its control — just ask George W. Bush. Trump has gotten lucky so far, but luck can be fleeting.

Also note that if Trump goes too far, there may be a congressional backlash. Republican lawmakers largely stand behind the president, but the initial GOP votes in favor of a Senate war powers resolution on Venezuela could signal trouble ahead.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

Read more

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To help you understand what's going on in the economy, business and politics and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…

Congress is set for a busy and raucous 2026, despite the looming distraction of the November midterms, which typically slow down the legislative process. The GOP is eager to advance President Trump’s agenda while they still control the House and Senate, which won’t last if Democrats wrestle back control of one or both chambers after the midterm elections.

A government funding bill is first on the list. Funding for most federal agencies expires January 30, and without a bipartisan deal, those agencies will partially close. While a government shutdown is possible, odds are lower now after the 43-day closure that was forced by the Democrats last fall. Their appetite to play hardball has waned since that showdown.

Unifying House GOPers won’t be a breeze, as hard-liners and moderates haggle over priorities. But Speaker Mike Johnson (R-LA) has kept his party in line during past funding rows, though not easily.

Venezuela could upend funding deals. Democrats are incensed at President Trump’s invasion of the nation without congressional approval, and could withhold needed votes for military funding unless Congress also restricts future White House military actions against Venezuela. But that likely won’t happen, as Republicans overall have cheered Trump’s move. Regardless of congressional action, Venezuela will consume lawmakers this year and add to the widening divide of trust and cooperation between the parties.

The thorny issue of whether or not to extend Obamacare tax credits lingers. The subsidies expired on December 31, resulting in premium hikes for millions of Americans. But Democrats and moderate Republicans haven’t given up trying to address the issue. A deal still could be worked out during the early months of the year, as lawmakers in both parties fear a voter backlash in the midterms if health care costs aren’t lowered. Despite the challenges, some sort of fix is in the cards, if only a modest tweak.

There is a growing bipartisan push in Congress to slap Russia with sanctions over its ongoing war with Ukraine. Democrats have been clamoring for this for months, though GOPers have been reluctant, as they wanted to give the president time to broker a peace deal. But patience with Russian President Vladimir Putin has run out, and lawmakers are ready to move forward with sanctions. Trump seems to be on board.

Tech issues also will be front and center in 2026, though whether any bills successfully clear both chambers is uncertain. Many in both parties want stronger regulations for artificial intelligence. Ditto for rules for the expanding cryptocurrency market. Trump favors a more hands-off tack. But compromises may gel as the year proceeds.

The upcoming ruling on Trump’s tariff power could put Republicans in a bind. Many of them aren’t fans of the tariffs. But if the Supreme Court rules against Trump, he will pressure lawmakers to take up legislation imposing the tariffs themselves.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

Read more

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How did the stock market perform during the first year of the second Trump administration? In short, the main U.S. equity indexes closed 2025 at or near all-time highs after posting double-digit annual gains as they did in 2024 and 2023. And the direction of the major trend remains up.

Equity indexes across the world rallied in the face of what many market participants describe as historic uncertainty throughout the 12 months. Most encouraging is the fact that the upside was driven by earnings growth as opposed to valuation expansion.

As Carson Group notes, "The S&P 500's 17.9% return in 2025 came mostly from profit growth, powered by sales growth and margin expansion." The math shows 14.3% of the S&P 500's upside was due to earnings growth (including 5.5% sales growth and 8.8% margin expansion), 2.1% was a result of multiple expansion, and dividends accounted for 1.5%.

"2025 offered a reminder that investors can still make meaningful progress in an environment that rarely felt calm or straightforward," Sequoia Financial Group writes in its year-end review. "Progress," Sequoia observes, "was earned through discipline: Staying invested when headlines were unsettling, leaning on diversification when it was uncomfortable, and letting fundamentals — not sentiment — set the tone."

The year will likely be memorialized with multiple entries on a widely circulated chart that plots major economic, political and social disruptions on a long-term "up and to the right" price line. Perhaps the "long 2025" trade began on November 5, 2024, when Donald Trump won the U.S. presidential election.

In January 2025, Trump was the first president to be inaugurated for a second but nonconsecutive term since the late 19th century. From Election Day to Inauguration Day, the S&P 500 gained 4%.

Last April will likely be defined by "Liberation Day," at least from a stock market perspective, for years to come. The fourth quarter was marked by the longest government shutdown in American history.

Yet, despite unpredictable tariffs and lingering inflation, volatile interest rates and murky monetary policy, political upheaval and consumer pessimism, stocks extended the long-term trend.

As of the closing bell on December 31, 2025, the broad-based S&P 500 read 6,845.50, up from 5,881.63 on December 31, 2024, a price-only rise of 16.4% that increases to 17.9% when you add in dividends. The blue-chip Dow Jones Industrial Average generated a total return of 14.9%, and the tech-heavy Nasdaq Composite added 21.4%.

"The foundation for better markets was quietly being rebuilt, even as sentiment wavered," Sequoia Financial Group concludes. "As 2026 begins, the conditions are in place for returns to broaden beyond a narrow group of leaders."

At the end of the first year of the second Trump administration, it all adds up to a healthier backdrop for global equities.

When and why stocks perform well

It wasn't a straight line higher, and it never is. But three straight years of double-digit gains for all three main indexes is impressive, even if the first year of the second Trump administration lagged 2024 and 2023, when the S&P 500 was up 25.0% and 26.3%, the Dow 15.0% and 16.2% and the Nasdaq 29.6% and 44.6%, respectively.

On a Trump-vs-Trump basis, the first year of the second Trump administration was worse than the first year of the first Trump administration. The Nasdaq surged 29.6% (price plus dividends) in 2017, while Papa Dow added 28.1%, and the S&P 500 increased 21.8%.

It’s important to understand, though, that among the innumerable factors in the countless decisions that drive day-to-day price action, even the actions of this heavy-handed chief executive amount to not much more than short-term noise.

That's not to say stocks won't respond. The Cboe Volatility Index (VIX), which measures expectations for 30-day forward-looking price movement for the S&P 500 and is known as the market's "fear index," got up to 60.13 on April 7. Then it quickly settled back into normal range, from 12 to 20, where it's resting right now.

The bond market will also respond, and in a way that enforces the only kind of discipline this president will heed. Note that the yield on the 10-year U.S. Treasury note was 4.163% as of December 31, 2025, vs 4.573% as of December 31, 2024.

The U.S. Dollar Index (DXY) closed at 108.58 on December 31, 2024, and rose to a recent high of 110.18 on January 13, 2025, a week before Trump's second inauguration. It closed the year at 98.28. As it is with market rates, what investors, traders and speculators track here is stability, or the change in the rate of change.

Market-based rates and the DXY have been volatile, but the process of discovering the price of such things as Trump's tariffs and his attacks on central bank independence revealed, again, that the foundation of the global financial system is solid – solid enough to support a resilient stock market.

Since April, both rates and the dollar have been relatively quiet.

What 2025 means for stocks in 2026

It is a market of stocks — many, many more than the Magnificent 7 stocks — but Nvidia (NVDA) and the AI revolution remain the fundamental force underneath it all right now.

As Sequoia says, spending on AI, the cloud and other infrastructure surged in the second half of 2025 – "but this time, the payoff was measurable." AI- and tech-related names drove earnings growth and equity returns last year, accounting for about 67% of the former and 60% of the latter.

At the same time, as Sequoia writes, "What once looked like concentrated leadership increasingly resembled genuine reinvestment and a powerful structural shift in corporate profitability."

Whether we're in an AI boom or an AI bubble is and will remain a fascinating debate. In the meantime, participation is expanding and leadership is changing.

Global stocks, as measured by the iShares MSCI ACWI ex US ETF (ACWX), generated a total return of 33.6% in 2025. Expansion of the bull market beyond U.S. borders is a good thing.

So is expansion of the bull market within U.S. borders. The Russell 2000 Index (RUT), for example, was up 12.8% in 2025, but in September the index of small-cap stocks established its first new all-time high since November 2021.

The Nasdaq's number shows tech stocks led again in 2025, but — and this is another broadly positive sign for 2026 — leadership is rotating. Capital is flowing to industrial stocks and utility stocks — the so-called picks and shovels for the AI revolution. Materials stocks are positioned for similar upside based on similar demand-side catalysts.

Meanwhile, health care stocks surged during the fourth quarter and topped the sector rankings with an 11.7% total return. You're unlikely to see a bull market without financial stocks participating, and the trend is solid here as well, with the group up 15% for 2025, 2% in the fourth quarter and 3% in December.

As JPMorgan Asset Management Global Market Strategist Meera Pandit writes, returns in 2023 and 2024 were driven mostly by multiple expansion, and they were also highly concentrated. The Mag 7 drove 63% of returns in 2023 but just 43% in 2025.

"What's more," Pandit adds, "profits have become less concentrated," with the Mag 7 responsible for two-thirds of profit growth in 2024 vs an estimated 43% for 2025. "Profit growth has broadened out," the strategist concludes, "with financials, industrials, utilities and materials all enjoying double-digit year-over-year profit growth in 3Q25."

About DJT

For the record, Trump Media & Technology Group (DJT) generated a total return of -61.2% for the 12 months ending December 31, 2025. DJT hit its high for the year 10 days before the president moved back into the White House.

DJT stock bounced late in the year when Trump Media merged with TAE Technologies to create a publicly traded nuclear fusion company focused on building utility-scale power plants to meet rising AI energy demand.

Nevertheless, the nuclear revolution, itself a product of the AI revolution, remains a viable theme in 2026. Other themes will emerge this year, too, sustaining the long-term trend like sector rotation and changing leadership do.

Let's agree with Carson Group that to say "expect volatility in the stock market" is a cliche. As their data shows, in an average year, you'll see a drawdown of about 14%. Volatility is a "toll" you pay, whether Trump-related or not.

At the end of the day, and as 2025 shows, over the long term, you'll be rewarded if you stay invested.

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The latest Consumer Price Index (CPI) report showed inflation is holding steady, though key areas such as shelter, food and energy saw prices rise. The data will likely keep the Federal Reserve sidelined at its January meeting, with the central bank all but guaranteed to keep interest rates unchanged.

According to the Bureau of Labor Statistics, headline CPI was up 0.3% from November to December, faster than the 0.2% rise seen the month prior and arriving in line with economists' expectations.

The CPI was 2.7% higher year over year, matching November's increase and economists' estimates.

Shelter was the largest factor behind the monthly increase in headline CPI, according to the BLS, rising 0.4% from November to December. Food and energy costs were also up.

Other areas that saw price increases included airfare and hospital services, while used cars and trucks and household furnishings saw prices edge down.

Core CPI, which excludes volatile food and energy prices and is considered a more accurate measure of underlying inflation trends, increased 0.2% month over month and rose 2.6% compared to year prior, matching what was seen in November and coming in below expectations.

"Economists were worried about some statistical resets after the government shutdown, but the bigger disinflation trend continued," says David Russell, global head of market strategy at TradeStation.

Russell adds that the report is good news for those worried about inflation reaccelerating. And while the December CPI "probably won't have much influence on Fed policy given the coming change in leadership ... it keeps expectations on track for lower rates and likely supports risk appetite."

Indeed, rate-cut expectations are little changed following this morning's inflation data. According to CME FedWatch, futures traders are pricing in a 95% chance the Fed will keep the federal funds rate unchanged at its January meeting, down from 95.6% one day ago. The first quarter-point rate cut isn't expected until June, with a total of two priced in for the year.

That said, with the December CPI data now in the books, here's some of what economists, strategists and other experts around Wall Street have to say about the results and what they could mean for the Fed and investors going forward.

Experts' takes on the December CPI report

"By most accounts, inflation is unlikely to drop to the 2% target in 2026, although it may gravitate towards that target, assuming that Fed independence stays intact. Some of the impact on inflation from tariffs hasn't been fully reflected in numbers, while other pockets of inflation reflect more structural problems (e.g., the price of beef and related items)." – Carla Nunes, Managing Director within Kroll's Financial Advisory Practice

"We've seen this movie before — inflation isn't reheating, but it remains above target. There's still only modest pass-through from tariffs, but housing affordability isn't thawing. Today's inflation report doesn’t give the Fed what it needs to cut interest rates later this month." – Ellen Zentner, Chief Economic Strategist for Morgan Stanley Wealth Management

"Inflation has been a little above the Fed target, but that masks some better news below the surface. The rate of increase has been relatively steady, and that should be good news for the markets. There are no indications that prices are likely to spike even after the impact of inflation and higher mortgage rates. The Fed still has some room to move, especially given weaker job creation and downward revisions in the latest report, but they may choose to wait and see if the impact of tariffs is really transitory. Rates are still likely to come down, but the timing is getting a little more cloudy." – Scott Helfstein, Head of Investment Strategy at Global X

"Shelter inflation showed some strength and will be an area to monitor going forward since it will continue to be understated until the April CPI release due to the missed sampling window in October. While investors will cheer this release as further evidence of disinflationary progress, the Fed will remain in 'wait and see' mode given the uncertainty until more distance came be put between the data and the shutdown. This release is positive for risk assets and increases the odds that the Fed will provide additional monetary policy support in 2026." – Jeff Schulze, Head of Economic and Market Strategy at ClearBridge Investments

"Core CPI inflation was on the softer side, signaling lower upside risk for inflation (especially from tariff-impacted core goods). We’re still unlikely to get another cut from the Federal Reserve in Q1 thanks to more solid labor market data in December, including lower unemployment. Still, the lower inflation print will allow the Fed to continue focusing on labor market risks." – Sonu Varghese, Global Macro Strategist at Carson Group

"Today's CPI release is a welcome dose of hard data in what has been a light-data, heavy-news environment. Ultimately, the data reinforces the Goldilocks environment. That said, inflation prints are likely to shift from being a primary market trigger to more of a background constraint as the market becomes increasingly focused on the risks to Federal Reserve independence. We continue to like being long risk, avoiding the news treadmill and positioning instead for durable, tradeable themes." – Alexandra Wilson-Elizondo, Global Co-CIO of Multi-Asset Solutions at Goldman Sachs Asset Management

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President Donald Trump announced on Truth Social that his administration plans to ban large institutional investors from purchasing single-family homes, a step he says is intended to help lower home prices and expand opportunities for everyday buyers.

In his January 7 post, Trump framed the proposal as part of a broader effort to restore the "American Dream" of homeownership.

The announcement didn't include details about how such a ban would be carried out, but Trump said he intends to "[call] on Congress to codify it" into law and would be taking steps "immediately."

The president said he plans to discuss the idea and additional housing policy initiatives at the World Economic Forum's annual meeting in Davos, Switzerland, which runs January 19 to 23.

What impact would that ban have, and why is it coming up now?

Who counts as a 'large institutional investor' in single-family housing

In the single-family housing debate, a "large institutional investor" typically means a company (often a private equity group or publicly traded real estate investment trust, or REIT) that owns and manages a large portfolio of single-family rental (SFR) homes at scale — not a mom-and-pop landlord with a handful of properties.

Researchers and policymakers don't always use the same cutoff, but a common working definition for "large" is owners with 100 or more single-family homes, with the biggest players owning tens of thousands across multiple metro areas.

The best-known names in this category include Blackstone, along with Invitation Homes (INVH), American Homes 4 Rent (AMH) and Progress Residential (owned by private-equity firm Pretium). These firms run their operations like large property management companies.

They buy homes in target markets, renovate them, then lease and manage them using centralized systems. These major firms own hundreds of thousands of single-family rentals. The large investors collectively own about 450,000 single-family homes nationwide, according to a 2024 report (PDF) by the U.S. Government Accountability Office (GAO).

The sector's rapid growth traces back to the aftermath of the 2007 to 2009 housing crash, when foreclosures and distressed sales created an opportunity for well-financed buyers to acquire homes in bulk and convert them into rentals.

The GAO notes that institutional investors moved aggressively into single-family rentals after the housing downturn, building large portfolios of homes managed under a single company structure. One of the most prominent examples is Invitation Homes, which grew out of a platform backed by Blackstone and later became a public company.

How much of the housing market they control

Measured against the size of the U.S. housing market, institutional investors account for a small share of total single-family ownership. Research, including from the GAO, Brookings and Urban Institute, shows that firms typically defined as institutional owners control roughly 3% of the nation's single-family rental stock.

That means the vast majority of single-family homes remain in the hands of individual homeowners or smaller landlords rather than large investment firms.

Why is this idea coming up now from Trump? Even though institutional investors own only a small share of homes, investor buying activity has been more noticeable in recent years.

Investors (of any size) accounted for roughly 30% of all single-family home purchases in the U.S. through the first three quarters of 2025, the highest share on record, according to Cotality. This came as many would-be buyers who would live in those homes, not use them as investments, were sidelined by high prices and elevated mortgage rates.

However, much of that buying came from smaller investors and mom-and-pop landlords, not the largest players, and institutional firms remain a minority of total ownership.

In some cities and regions where job growth and housing demand are strong, institutional shares of rental homes can exceed the national average, giving these firms a more pronounced footprint locally even if their overall national ownership remains modest.

How homebuying behavior has shifted recently

Institutional buying of single-family homes has pulled back sharply from pandemic-era highs. Large institutional investors bought about 0.3% of all U.S. homes sold in 2024, down around 90% from 2022 and at the lowest level in more than a decade, according to data published by Blackstone (PDF).

This trend reflects both a broader downturn in the housing market and a pullback by well-financed buyers as rising prices and tighter returns have made large purchases less attractive.

The shift also meant that some of the largest players were net sellers in 2024, a notable change from earlier years when firms were primarily buyers. In other words, major institutional landlords sold more homes than they acquired last year, which suggests that large investors are no longer expanding their portfolios at the same pace.

Pros and cons of a ban

Supporters of the type of ban Trump suggested say that limiting large institutional investors could reduce competition for entry-level homes, giving first-time buyers a better chance to compete in tight markets.

In many metros, cash-heavy investors can move faster than individual buyers who rely on mortgage financing, making it harder for individuals and families to secure affordable homes.

Critics counter that institutional investors already represent a relatively small share of total single-family home ownership, meaning a ban might have only a modest effect on overall prices or availability, according to MarketWatch.

Economists frequently point to chronic housing supply shortages, not investor ownership, as the primary driver of high home prices, especially in fast-growing regions where new construction has not kept pace with demand.

There are also practical questions about how such a ban would be implemented and enforced. Restrictions would likely require congressional action, and defining which buyers qualify as "large institutional investors" could prove complex.

Without clear legislative authority and enforcement mechanisms, implementing any restrictions could be difficult to enforce consistently across different states and markets.

Financial markets responded quickly after the announcement, with shares of major real estate investment firms slipping as investors reacted to the possibility of restrictions on institutional home buying.

Blackstone's stock fell as much as 9.3% before rebounding slightly, and related housing stocks also traded lower in the wake of the news, according to Bloomberg's market coverage.

Factors shaping housing affordability

Beyond investor activity, housing affordability is being shaped by larger structural pressures, including years of underbuilding, restrictive zoning in many communities, elevated construction costs and still-high mortgage rates.

Housing economists have consistently pointed to a decades-long shortage of new home construction, which has left many markets undersupplied as population growth and more people forming their own households outpaced home construction.

Until housing supply expands, affordability challenges are likely to persist regardless of who is buying homes, underscoring why policymakers continue to focus on zoning reform, construction incentives and mortgage rates and borrowing costs alongside investor activity.

What to watch for next

Details on how a ban would be implemented remain limited, with no formal legislative or regulatory language released so far. Any restrictions would likely require congressional action, a process and timeline that could be influenced by lawmakers' priorities and the upcoming midterm elections.

Trump has said he plans to outline the proposal further at the World Economic Forum in Davos and push Congress to codify the policy, setting the stage for more detailed debate in the weeks ahead.

For buyers waiting on the sidelines, the announcement is unlikely to change affordability or competition soon. The legislative process could take some time, and any market impact would likely be gradual.

Prospective buyers might be better served by focusing on what they can control now, such as monitoring mortgage rates, strengthening their credit, building savings for a down payment and tracking local inventory, rather than waiting on potential policy changes.

Curious about today's interest rates? Use the tool below to explore and compare some of today's top mortgage product offers, powered by Bankrate:

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To help you understand what's going on in the economy, business and politics and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…

To help you make plans for the year ahead, here are 10 of our top forecasts for 2026 for the economy, politics, new technologies and more.

The economy
1) The economy will hold up relatively well. But it won’t feel especially good for everyone. The pattern of K-shaped spending — high-income folks splurging due in part to their investments doing well, while lower-income households curb their spending — figures to continue and may grow more pronounced. Once again, inflation won’t return to the 2% level the Federal Reserve aims for, while anemic hiring appears set to continue. That’s a tough combination for less affluent consumers. But barring a big drop in financial markets, the wealthy will spend freely.

2) The Fed will find itself in a tough spot, trying to encourage faster hiring by cutting rates a couple of times while inflation is still above the 2% the Fed wants to reach. Whichever candidate President Trump chooses as the next Fed chair will favor trimming rates to goose the economy, but he is likely to face dissent from Fed officials who think the central bank should be more focused on wrestling inflation down.

3) Look for the frozen housing market to finally thaw a bit. Mortgage rates should settle into the low to mid-6% range — not exactly cheap, but low enough to get more potential buyers off the sidelines and into the game. In fact, buyers should regain a bit of leverage in some parts of the country where the inventories of homes for sale are running above demand, namely the Sun Belt, Florida and Texas figure to see prices dip for that reason, in the order of 2-5%. But the Northeast will see prices rise by similar levels, due to lower inventory and stronger demand.

4) After spiking in 2025, U.S. tariff rates will pull back a bit in 2026, on average, as trade deals or negotiated exemptions take effect, and some duties are likely nixed by the Supreme Court. The uneasy stalemate in the trade war between the U.S. and China will probably hold next year. Both nations will want to maintain some stability in trade relations ahead of the midterm elections here. Vietnam, India and Thailand will make inroads in the U.S. market at China’s expense.

5) Financial regulators will be busy policing AI “autonomous agents,” artificial intelligence-powered algorithms that can already approve loans and execute trades on their own. The Securities and Exchange Commission (SEC) and the Fed will introduce new regulations requiring banks to treat their AI agents as digital employees subject to dedicated monitoring. Look for the emergence of a new role at banks, the chief AI risk officer (CAIRO), to ensure compliance.

Politics
6) Look for Democrats to take back the House from Republicans, who now hold a precariously thin margin of seven seats. The swing in power won’t be substantial, with Dems likely to hold a similarly small advantage of 10 seats at best. Despite this, the House will pour cold water on the remaining two years of President Trump’s legislative agenda, forcing him to cut deals with Democrats, a scenario he’s been able to avoid so far with the GOP in total control of Congress. But Republicans will retain control of the Senate, and may even gain a seat or two, as the political landscape favors the GOP in the upper chamber. Susan Collins of Maine is the only vulnerable GOP senator up for reelection, although Democrats are bullish that they can flip North Carolina’s open seat by running former Governor Roy Cooper. Democrats face tough fights to retain seats in Georgia and Michigan, states Trump won in 2024.

Business and investing
7) Overseas AI data centers will see a surge in development and interest. Increasingly, foreign nations and businesses want local AI computing and data. That has spurred foreign cloud computing companies to build data centers to compete with U.S. giants, such as Amazon, Microsoft and Alphabet. For example, Europe’s Stackit caters to EU privacy and data rules for domestic customers. American cloud giants will ramp up data center projects overseas, where they can find cheap power or faster permitting for power, a big constraint in the U.S. and many other places. With the demand for sovereignty over data, look for U.S. tech giants to increase partnerships with local cloud providers, especially in countries like India, the United Arab Emirates and South Africa.

8) Expect lots of stock market and business jitters around AI investment. But major tech companies won’t let up on the astronomical spending that is required to maintain leadership with leading-edge AI. Frontier AI models, as leading AI is called, require huge amounts of computing power to get better. Tech giants and start-ups don’t see any way around the spending spree for now, since it’s the only reliable way to improve AI and stay at the forefront. Even as their financing gets stretched and grows riskier, big tech firms will forge on. Expect glimmers of lower-cost AI to make investors jumpy in 2026, especially as analysts closely scrutinize the cheaper AI models coming out of China.

9) SpaceX’s IPO will be a wild ride with lots of risk to early investors. The targeted valuation — reportedly $1.5 trillion — stems from very rosy predictions for the future of the rocket and satellite broadband firm. Its Starlink internet service is poised to gross about $16 billion in 2026, and future growth could get harder. SpaceX needs fresh funding for data centers in space, a Mars mission, a moon base and more. We think space data centers are an interesting tech project, but could take a decade or more to pan out, and even then, will be small in scale.

Foreign policy
10) 2026 will see the hardest push yet for a Russia-Ukraine peace agreement. Washington badly wants one, and Kyiv clearly sees the writing on the wall, so it has moved to compromise on some important sticking points, including land, in exchange for NATO Article 5-like security guarantees from the U.S. and Europe. Moscow remains the major wild card. Russian President Vladimir Putin has so far not been willing to budge on his maximalist demands for a peace deal. If Putin does ultimately accede to a U.S.-negotiated agreement, don’t be surprised if Moscow starts making plans to reignite the conflict a few years down the line.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

Read more

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• What to Expect from the Global Economy in 2026
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To help you understand what's going on in politics and the economy and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…

2028 will mark another milestone in American history: The first presidential race since 2012 without Donald Trump on the ballot. Since becoming the GOP nominee a decade ago, Trump has reshaped both the Republican Party and U.S. politics writ large.

What do the next 10 years of U.S. politics have in store? Expect both parties to struggle in sorting out their post-Trump identities.

Republicans have an obvious heir apparent in Vice President JD Vance, though it’s unclear if he can hold together the singular Trump coalition of voters, which ranges from religious conservatives to working-class whites. Also unclear is whether Trump’s successor can continue making inroads with minority voters, particularly Latinos, who swung hard toward the GOP in recent election cycles.

Democrats must decide between moderation and populism. The party has had lots of success in the Trump era with so-called national security moms — middle-of-the-road female candidates, often with some sort of military background, who do well in formerly Republican suburban areas. But the Democratic base is increasingly keen on left-wing candidates like NYC Mayor Zohran Mamdani.

Keeping politics local remains a major challenge. National party identities have made it difficult for Republicans and Democrats to run the right candidates in the right places. This especially hurts moderates trying to win in hostile territory. Until that changes, two-party competition will only become more cutthroat, as they both vie for a diminishing number of swing states and congressional districts.

The current midterm redistricting push offers a preview of what is to come. Democrats and Republicans will squeeze every seat possible out of the states that they control, a reflection of how closely contested the House has been recently. Recent election cycles have seen smaller gains for both parties. Since 2016, the average number of House seats gained has been 14.2, vs. 27.0 the decade prior. The only wave election of the last decade was the Democrats’ 41-seat pickup in 2018.

Republicans will retain a structural advantage in the Senate, since the GOP boasts more than 40 safe seats in the chamber, much more than the Dem total. At the presidential level, expect the current list of swing states to persist for at least a couple of election cycles. Arizona, Georgia, Michigan, Nevada, Pennsylvania and Wisconsin all stand at the center of some crucial demographic divides that show no sign of going away, specifically education and race. All feature some electorally volatile combinations of college-educated suburban white voters (who have trended left in the Trump era), working-class white voters (who have trended right), and swingy minority voters.

But a single election can quickly reshuffle the political order. Democrats are hoping that sharply divided North Carolina and white whale Texas can become competitive over the next decade. Republicans, meanwhile, like the party’s odds in Minnesota, demographically similar to neighboring Wisconsin and even New Jersey, where Donald Trump had the best GOP presidential performance in nearly four decades last year. Political power will continue to shift with the population to the Sun Belt. The region has accounted for 80% of U.S. population growth over the past decade and has gained both electoral votes and House seats accordingly. That bodes well for Republicans and ups the onus on Democrats to make inroads in those states.

The issue that will most likely define the next decade in politics: Affordability. Voters are already angry about the escalating cost of living. Electricity prices are up more than 30% over the last four years. Housing prices are up more than 26%. Nominal wages, on the other hand, have increased by only 18% over the same period. Many barriers stand in the way of new housing, factories and infrastructure. Washington has so far been willing to throw money at these problems, as evidenced by the Biden-era bipartisan infrastructure bill and CHIPS Act. However, lawmakers have struggled to address various regulatory barriers to construction.

Congress faces an early test on this front with its fight over permitting reform legislation. Addressing some of these barriers is likely to become even more difficult. Take artificial intelligence. It has fueled a data center construction boom that has driven up electricity prices and sparked a political backlash in some parts of the country. For now, Washington backs the build-out, viewing AI as the future of the U.S. economy. The question is whether it will remain politically viable to do so, especially if AI also winds up having a disruptive effect on labor markets. AI will also further test America’s ability to maintain its edge over China, whose economy has proved increasingly innovative and can build at scale better than the U.S. when it comes to making consumer goods or weapons of war. Beijing has notably struggled to catch up with the U.S. in several crucial areas, including advanced semiconductors. The Chinese are pushing hard to change that.

The U.S. will struggle to maintain the remnants of its global hegemony, amid fraying relations with longtime allies and a host of adversaries who are eager to take advantage of the situation. The Trump administration is setting the tone for the next decade, pushing fellow members of the North Atlantic Treaty Organization (NATO) to spend more on defense and fend for themselves more against a hostile Russia. That raises questions about how Washington would react if China tried an invasion of Taiwan, as it has repeatedly threatened. The tiny island-nation is important to Beijing as a status symbol and as the center of semiconductor supply chains.

At the same time, Washington faces mounting fiscal pressures. Federal debt now exceeds 100% of GDP. Uncle Sam routinely runs big budget deficits. The most expensive line items: Health care programs like Medicare and Medicaid, plus Social Security, which together account for more than 40% of federal spending. Both have proved politically difficult, if not impossible, to address, and Washington has not made a serious attempt to rein in federal spending in roughly a decade.

For now, the dollar’s status protects the U.S. from the worst consequences. The greenback remains the world’s reserve currency, along with being the top choice for international payments, insulating America from the effects of its debt and deficits. Even persistent efforts by China have done little to undermine the dollar’s dominance. But if anything dents demand for dollars, Washington will face the same tough choices over spending that many of its European allies, such as the U.K. and France, do now.

These are far from the only problems that the U.S. will face going forward. Washington will continue to face tough policy choices over immigration and other issues that lawmakers have long made a habit of putting off until later. But they may be the defining ones. Gone are the days when Washington could take its place in the world for granted. Instead, there are unsettled questions, the answers to which will have a huge impact on American power and prosperity.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

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The latest Consumer Price Index (CPI) report showed a modest uptick in inflation, but the data on price growth are muddied considering October figures were not collected due to the record-long government shutdown.

According to the Bureau of Labor Statistics, headline CPI was up 0.2% from September to November, slower than the 0.3% month-over-month rise seen in September and matching economists' expectations.

The CPI was 2.7% higher year over year, below September's 3.0% rise and the 3.0% increase economists anticipated.

Energy costs were a large factor behind the monthly increase in headline CPI, according to the BLS, improving 1.1% from September to November. Food costs were also on the rise, up 0.1%.

Other areas that saw price increases over the two-month period included household furnishings and personal care, while lodging away from home, recreation and apparel saw prices edge down.

Core CPI, which excludes volatile food and energy prices and is considered a more accurate measure of underlying inflation trends, increased 0.2% from September to November and rose 2.6% compared to the same period last year. In September, core CPI was 0.2% higher month over month and 3.0% year over year.

"Today's low inflation reading won't move the needle for the Fed given how noisy the data is," says Kay Haigh, global co-head of fixed income and liquidity solutions at Goldman Sachs Asset Management.

The absence of October data makes monthly comparisons "impossible," Haigh adds. "The Fed will instead focus on the December CPI released in mid-January, just two weeks before its next meeting, as a more accurate bellwether for inflation."

Indeed, rate-cut expectations have changed little following the delayed release of the November CPI. According to CME FedWatch, futures traders are pricing in a 71% chance the Fed will keep interest rates unchanged at its January meeting. Odds for a March rate cut are currently at 46%.

That said, with the November CPI data now in the books, here's some of what economists, strategists and other experts around Wall Street have to say about the results and what they could mean for the Fed and investors going forward.

Experts' takes on the November CPI report

"November CPI coming in weaker than expectations may keep the Federal Reserve on hold for the foreseeable future when it comes to any interest rate decisions. We likely have seen the last interest rate move last week from Chairman Powell's Fed as they now take a pause to assess if the inflation picture continues to improve and if employment continues to weaken." – Skyler Weinand, Chief Investment Officer at Regan Capital

"The steady downtrend in shelter costs is starting to bring down core inflation. This is good news for the Fed because shelter is the biggest category in overall inflation. The disinflationary trend may continue this month because oil has dropped and home prices are still under pressure. This is a relief for people worried about a hawkish start to the year. A Santa Rally could still be in the cards." – David Russell, Global Head of Market Strategy at TradeStation

"It always sounds smarter to predict trouble ahead, but this morning's inflation data was much better than expected. Of course, it's only one month's data points and they will likely fluctuate in the upcoming months, but the main concern of Fed officials who are reluctant to keep cutting is that inflation is persistently high and won't come down if they keep lowering interest rates, and at this point, that doesn't look like it's the case." – Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management

"Some caution is warranted in interpreting the topline inflation readings. The all-important shelter component was unusually weak in the two months leading into November, which may be more noise than signal due to the disruptions from the shutdown. That said, core goods inflation, which is at the epicenter of the tariff passthrough process, seems to have peaked, for now. Elsewhere, food and energy prices matter a lot of consumers' psychology, and though utilities costs are up appreciably, households are benefiting from minimal pump price growth." – Bernard Yaros, Lead Economist at Oxford Economics

"Today's CPI shows disinflation not just holding, but gathering rhythm — a reminder that prices can still move in the right direction, even when the details get noisy." – Gargi Pal Chaudhuri, Chief Investment and Portfolio Strategist at BlackRock

"Our take is that underlying inflation remains better behaved than we anticipated in late 2025, though we believe several more months of data — beyond the distorted government shutdown period — will be needed to confirm what is a remarkable improvement. At the least, this report adds to our conviction that the buildup of tariff-related inflation should prove limited." – Jennifer Timmerman, Senior Investment Strategy Analyst at Wells Fargo Investment Institute

""Inflation still feels high to many households because prices have moved up in levels, not just rates, and tariffs are contributing to that experience. Even as year-over-year inflation has cooled, households are facing higher baseline prices for goods, as companies have only recently (within the past few months) begun passing along tariff-related costs to end consumers. Tariffs may or may not cause sustained inflation, depending on timing, policy, and broader conditions. But the impact is ultimately psychological: higher prices, once in place, are felt continuously, even if inflation is no longer accelerating. That ongoing exposure is what keeps inflation feeling high for many households, despite cooling headline numbers. But even if prices for essential goods only go up for a while and then stabilize, if your wages haven't gone up accordingly, the effect leaves people with less acquisitive power." – Katie Klingensmith, Chief Investment Strategist at Edelman Financial Engines

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Sen. Josh Hawley (R-Mo.) is pushing a new “No Taxes on Healthcare Act” that would let households deduct up to $25,000 in out‑of‑pocket medical costs, including health insurance premiums they pay themselves.

This proposed deduction would be in addition to the standard deduction, which most taxpayers currently claim.

The proposal comes on the heels of a massive 2025 Trump/GOP tax and spending bill that offers taxpayers several new deductions for car loan interest, overtime pay and tip income.

However, Hawley's proposal, which would have to clear significant political hurdles to advance in Congress, wouldn’t replace the Affordable Care Act (ACA) premium tax credits.

Those credits, which help millions of Americans afford health care premiums, have been at the heart of debate on Capitol Hill since the government shutdown.

Will there be significant changes to health care tax breaks in 2026?

No taxes on health care?

In a release about the bill, Hawley points out that “nearly 41 percent of adults in the United States have some form of debt stemming from medical expenses. In the last year alone, a recent Gallup report found that 31 million Americans borrowed money to pay for health care.”

To address that, Hawley’s bill would expand the existing medical expense deduction, which currently is available only to taxpayers who itemize and only for expenses above 7.5% of adjusted gross income.

His plan would move that deduction “above the line,” so that any taxpayer could claim up to $25,000 per person in out‑of‑pocket medical spending, including premiums they pay directly for coverage.​

The proposal, announced in early December, is framed as “no taxes on healthcare,” echoing recent GOP slogans such as “no tax on tips” and “no tax on overtime.”

What about ACA tax credits?

ACA premium tax credits lower marketplace premiums up front based on income and plan cost, and enhanced subsidies created by pandemic‑era legislation are set to expire at the end of 2025 unless Congress acts.

• Hawley’s bill doesn’t extend those ACA subsidies and doesn’t create a new ACA‑style credit.
• Instead, his proposal offers a separate federal tax deduction that would come into play at filing time, not at the time you purchase a health care plan.​

Because deductions reduce taxable income rather than premiums directly, they generally deliver less relief than a dollar‑for‑dollar subsidy, particularly for lower‑income households with little tax liability.

If enhanced ACA credits lapse, many marketplace enrollees could see substantial premium increases in 2026, regardless of Hawley’s idea. Nonitemizers would still likely be left weighing higher monthly bills against a possible year‑end tax break

Who might benefit?

Generally speaking, an above‑the‑line health deduction would skew toward taxpayers with enough income and out‑of‑pocket costs to fully use it. Think middle‑ and upper‑middle‑income households buying their own coverage without employer help.

Lower‑income consumers who currently rely on ACA subsidies, Medicaid, or employer plans with modest worker premiums might see little or no direct gain from a health care tax deduction such as Hawley’s. That's because they often don't pay enough income tax to fully benefit from a large deduction.

And ... a tax deduction wouldn't prevent coverage loss for people who can't afford the higher gross premiums that will come if enhanced ACA credits expire.​

Health care premiums: Bottom line

Key mechanics of the Hawley plan remain vague, including a major fiscal issue: How the government would offset the revenue loss from such a significant, broadly available health care tax deduction.

For now, the long and short of it is that Hawley’s bill is just a proposal.

Senate Democrats, meanwhile, continue to push for an extension of ACA subsidies rather than a deduction‑based alternative.

The health care tax debate rages on.

Read More

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• Premium Tax Credit: Are You Eligible?

As New Year's resolutions faded and prices for everyday essentials remain high, discussions about new government stimulus payments once again captured public attention.

Online searches for “stimulus checks” climbed, and speculation about government payments intensified after President Donald Trump revived one of his attention-grabbing ideas: sending some U.S. taxpayers $2,000 “tariff dividend” checks.

Trump claims his tariffs on imported goods generated enough money to fund the plan and to pay down some of the deficit. However, since tariffs are taxes, U.S. consumers are bearing much of the burden of the administration's trade policy, and some fiscal experts say the "dividend" numbers don’t add up.

But when asked about a potential timeline for such payments, Trump recently told the New York Times, "I would say toward the end of the year."

So, the question is: Will you receive a $2,000 payment soon? Here’s what you need to know.

Related: Costco Sues Trump Administration Over Tariffs

Are Trump 'tariff dividend checks' really on the way?

Trump revived his proposal to provide a $2,000 payment to some U.S. taxpayers. He’s framed it as a fair share of the revenues generated by sweeping tariffs he implemented on imported goods since the start of his second term as president.

In a post on his social media platform, Truth Social, Trump wrote the following:

“People that are against Tariffs are FOOLS! We are taking in Trillions of Dollars and will soon begin paying down our ENORMOUS DEBT, $37 Trillion. Record Investment in the USA, plants and factories going up all over the place. A dividend of at least $2000 a person (not including high income people!) will be paid to everyone.”

Trump suggested the new plan for stimulus payments would be a patriotic payback to working families, who are shouldering higher costs. However, you might recall that this message echoes previous flirtations.

For instance, the Trump administration once talked about “DOGE dividends” — payments tied to Elon Musk’s infamous Department of Government Efficiency cuts. Those “savings” never materialized into payments to taxpayers.

And Trump’s call for tariff dividends raises other questions. Who will be considered “high earners”? When and how would the money be sent?

In response, Treasury Secretary Scott Bessent seemed to temper expectations.

On ABC’s This Week, Bessent said the administration is exploring whether the “dividend” would come in the form of direct payments, temporary tax relief, or another form, like tax cuts in the recently enacted 2025 Trump tax bill.

“The $2,000 dividend could come in lots of forms, in lots of ways. It could be just the tax decreases that we are seeing on the president's agenda — no tax on tips, no tax on overtime, no tax on Social Security, deductibility on auto loans.”

*Note: The 2025 Trump/GOP tax bill does not end taxes on Social Security benefits. For more information, see Social Security Tax Cuts Missing From Trump Tax Bill.

• On Fox News, Bessent noted that Congress would have to approve any such payout and that no final design had been established.
• The Treasury Secretary also floated an income limit — possibly excluding households earning over $100,000 — but stressed those details remain under discussion.
• Bessent later acknowledged a trade-off between using tariff revenue for checks versus paying down the federal debt.

Tariff stimulus: Is there enough tariff revenue to go around?

The fiscal realities and trade-offs are key, as several budgetary experts have raised concerns about the feasibility of Trump’s proposal.

John Ricco, an analyst with the Budget Lab at Yale University, told reporters, “It’s clear that the revenue coming in would not be adequate.”

That’s based on the assumption that Trump’s tariffs might have brought in $200 billion to $300 billion annually. (That amount reportedly constitutes less than 4% of total federal revenue.)

The Committee for a Responsible Federal Budget (CRFB) estimates that issuing a one-time $2,000 payment to every American, including children, would cost approximately $600 billion — roughly triple the proposed annual tariff revenue.

And even if the checks were limited to those making $100,000 or less, Alex Durante, a senior economist at the Tax Foundation, points out that this would mean checks going to an estimated 150 million Americans at a minimum cost of $300 billion.

Takeaway? Tariff revenue has grown, but not nearly enough to fund dividend checks of this scale without dramatically increasing the federal deficit.

• Despite tariff growth, the federal deficit in fiscal 2025 still reached nearly $1.8 trillion, according to data from the Treasury and the Congressional Budget Office (CBO).
• The International Monetary Fund warns that while tariffs can temporarily curb deficits, they often distort trade and raise consumer prices.
• The Tax Foundation notes that as tariffs rise, imports tend to fall. That can potentially undercut the revenue source Trump claims to want to redistribute.

Trump tariffs Supreme Court ruling

Then there’s also the now-answered question of the legal sustainability of Trump’s tariff policies.

As Kiplinger has reported, the U.S. Supreme Court struck down many of Trump's tariffs under the International Emergency Economic Powers Act (IEEPA), which underpins many of the Trump administration’s tariffs.

Since the Court invalidated many of the tariffs, the ruling will significantly affect the availability of funds for any so-called "tariff dividends" and possibly necessitate tariff refunds. (During oral arguments in the tariff case, Justice Amy Coney Barrett pondered the potential administrative “mess” involved in ordering massive tariff refunds for affected importers.) In a dissenting opinion, Justice Kavanaugh echoed that notion.

Then, here’s the legislative hurdle surrounding any tariff dividends. As Besent acknowledged, Congress would have to pass legislation to authorize the payments.

Earlier this year, Sen. Josh Hawley (R-Mo.) introduced a bill that would mandate annual “tariff rebates” for lower- and middle-income families, funded by duties on Chinese imports.

Hawley’s version, which hasn’t moved in Congress, would stop short of setting a flat $2,000 figure. If approved, the bill would reportedly provide at least $600 per adult and dependent child, meaning a family of four could receive a minimum of $2,400 in rebates.

• The $600 would be a guaranteed minimum per eligible person.
• But if tariff revenues exceed projections, payments could increase proportionally.

Meanwhile, even some Trump allies acknowledge the need for congressional approval for any such payments, meaning that any rollout of Trump dividends will face political and procedural headwinds.

Investor and Shark Tank personality, Kevin O'Leary, recently warned that sending out checks funded by tariffs is just a “quick band‑aid” that risks acting as a “silent tax” by stoking inflation.

On X (formerly Twitter). O’Leary posted: “Everyone loves the idea of a free check, especially in a tough economy. But here’s the truth, and it’s not always popular. Sending out $2,000 checks funded by tariffs might feel good in the moment, but it does nothing to fix the core problem.”

He later told reporters that any new tariff revenue should be used to pay down the national debt and shore up long‑term economic stability.

Trump giving $2,000 checks: Bottom line

The idea of a Trump $2,000 “tariff dividend” might understandably resonate with many households. But fiscal realities remain shaky, the legal situation is uncertain, and congressional cooperation is far from guaranteed.

Budget Pressure: The plan could significantly deepen the deficit unless the payouts are sharply limited.

Revenue Volatility: Tariff revenue tends to fluctuate, particularly when imports decline or trade partners retaliate.

Debt Trade-Off: Using tariff proceeds for checks would divert funds from federal debt reduction.

Legislative Hurdles: Congressional approval will be required for direct federal payments. And worth noting: if any such payments were approved, most taxpayers would likely have to receive them electronically. (The federal government has said it is moving away from paper checks for benefits, refunds, and other disbursements.)

Legal Risks: Court challenges have narrowed Trump’s tariff authority and likely eroded the revenue base.

So, for now, the “tariff dividend” looks more like another idea than a budget-ready program that taxpayers can look forward to. Focus on practical financial steps, including taking advantage of existing tax breaks and legitimate employment and income opportunities.

But, as always, stay tuned. Some states are sending various forms of rebates and relief payments this year.

This story has been updated to include information about the Supreme Court's tariff ruling.

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Question: I'm a government employee without a paycheck and need to get by until the shutdown ends. What can I do?

Answer: The government shutdown has now dragged on for almost a full month, and many federal workers are missing their first full paycheck this week. Between a missed paycheck and monthly bills rapidly coming due, this is an understandably stressful time – especially for those who don't have much buffer to get by until the government reopens.

But there's no need to panic, even if you've already cut back on discretionary spending and are making a dollar stretch at the grocery store. With some creativity and flexibility, there are plenty of options available to help bridge the gap until you start getting paid again.

Whether you're still working without pay or you've been furloughed, here's what the experts recommend doing to keep the lights on and food in your pantry.

Check community and state assistance programs – including unemployment

In times like these, getting help is better than going deeper into debt or letting overdue bills pile up.

Some states have expanded their eligibility criteria in light of the ongoing shutdown, so you might qualify for unemployment. These benefits may not kick in right away, but if your state offers a program, get the ball rolling on that application now.

You can also find help closer to home.

"Look into community assistance programs, which can often help provide a financial buffer," advised Leslie H. Tayne, finance and debt expert and founder of Tayne Law Group. Search online for nearby food banks where you can get groceries, as well as other local charities that might be able to provide help with essentials.

Tayne added, "Reaching out to family and friends who could help you financially can be an option worth exploring."

Asking for help is nothing to be embarrassed about. But, if you're feeling self-conscious about relying on family or assistance programs, commit to volunteering at your local food bank or donating to the charities that kept you afloat when your paychecks do kick back in. Remember that getting the help you need right now is the first step to getting yourself into a position where you can pay it forward later.

Defer your mortgage, rent or other big bills

If you know you won't have the cash to cover bigger bills like mortgage or rent after cutting out all the nonessentials from your budget, don't wait for those bills to come due. Call now to ask about deferral or forbearance options.

You can even call up your utilities to see what hardship assistance programs they might offer. You may be able to defer payments or negotiate a lower-cost payment plan before you miss a bill.

A lot of lenders, service providers and other companies have hardship programs available precisely for situations like this. Make a list of all your bills and other monthly payments. Then work your way down the list, calling each one. You'll likely need to give details about your financial situation. It's also a good idea to follow up with an email to make sure you have a paper trail confirming any arrangements you were able to make.

This tactic should be used after making what cuts you can elsewhere, though. Deferred payments can often mean paying more in the long run as interest continues accruing during the deferral period. That will get tacked onto your balance.

Still, if you don't have savings and you're choosing between paying your mortgage or putting food on the table, deferring your mortgage is worth it. Just keep that extra interest in mind and don't use this tool any longer than you have to.

Get a credit card with a 0% introductory rate to cover essentials

While you can defer some expenses and cut out others entirely, things like gas and groceries are trickier. One option to consider is signing up for a credit card with a 0% introductory rate (and no annual fee).

This will buy you around 12 to 18 months of interest-free credit that you can use to feed your family and fill up your tank.

Just make sure you only use this card for absolute necessities and don't spend more than you would in a normal month. You need to make sure you'll be able to pay off the balance in full before the introductory rate expires. Otherwise, you could end up paying 20% or more in interest on that balance.

Get a temporary side job to bring in some cash

If you need to find a way to get cash flow coming in without your usual paycheck, gig work is a flexible option. Platforms like Uber, DoorDash or Instacart are good places to start.

It's easy to sign up and you'll have the flexibility to work around your regular job if you need to. Side gigs like these probably won't be able to replace your full income. But, you can log enough hours on these platforms to fill the gaps in your savings or help you avoid more costly measures like deferring your mortgage and other debt payments.

Temporarily drop your car insurance to minimum coverage

If your insurer makes it easy to adjust your coverage, you can temporarily drop your car insurance to minimum coverage. This usually means giving up collision and comprehensive coverage, which leaves you on the hook for damages in an at-fault accident. So, it's not a risk to take lightly.

But, in a pinch, it can shave about $1,800 per year (or $150 per month) without resorting to giving up your car entirely. That cash can be redirected to help with groceries or utility bills while you're waiting on your paycheck.

You can get through this

Financial stress is one of the toughest kinds of stress to deal with, especially in a situation like this where there's no end in sight and so much feels out of your control. You might need to make some temporary sacrifices in your lifestyle or ask for help when you're used to being self-reliant and independent.

But there is a way through, and this will end eventually, even if we're not sure exactly when. This is a crisis we're facing together as a nation, and people are willing to help — just as you help serve the nation.

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To help you understand what's going on in politics and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…

As the government shutdown drags on, there’s no clear end in sight, as both parties continue to dig in their heels and talk past each other. As things stand now, the federal funding freeze could go on for a few more weeks, possibly into November.

Not all federal services have stopped, for now. Many agencies are open with skeleton crews. But services that are available now are at risk, as agencies exhaust their reserve funds. This possibility will become more likely as the Trump administration increases the number of furloughed federal employees. Many basic services remain operational.

Airports are open, as air traffic control and security workers are “essential” and must report to work, but without full pay. However, these workers are increasingly calling in sick, causing flight delays and long lines at security. Expect this to get worse. Flight cancellations are also possible in the future.

Passport processing continues, but wait times for new and renewed documents may grow longer. Some individual passport offices may be closed.

Medicare, Medicaid and Social Security benefits will continue. However, expect delays in some services. SNAP and WIC, the low-income food aid programs, are still operating, though with reserve money dwindling, it’s uncertain for how long. If the shutdown lingers, the White House says it will use tariff revenue to fund WIC.

The National Park Service says its sites will be “as accessible as possible,” including park roads, lookouts, trails and open-air memorials. But some park sites may be closed, and services at those that are open may be limited or unavailable.

The U.S. Postal Service is still delivering mail and post offices remain open throughout the shutdown, as the service doesn’t depend on Congress for funding.

Amtrak isn’t immediately affected and trains are running as scheduled, though a prolonged shutdown could have a long-term impact on the rail service.

The Internal Revenue Service remains open, though with limited service. Tax obligations still apply, and the IRS hasn’t announced any deadline extensions. Student loan bills must be paid, and federal student financial aid will be distributed.

Agriculture Department food safety inspectors will remain on the job.

The Department of Veterans Affairs isn’t being hit as hard as many other agencies. Benefits checks will continue to be processed and delivered, and VA medical centers and outpatient clinics will remain open. But VA benefits regional offices are closed.

As the shutdown continues, federal services will increasingly be affected. Information isn’t easy to come by. Agencies have mostly stopped updating websites and social media accounts. Meanwhile, phone centers often aren’t being staffed. For questions, your congressional representative’s office may be the best bet.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

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To help you understand what's happening in the economy our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…

The banking industry is pushing for a legislative fix to the GENIUS Act, a law that established the first federal framework for stablecoins, a form of digital token that represents a fixed amount of a fiat currency, such as the U.S. dollar. While the GENIUS Act prohibits stablecoin issuers from directly paying interest to holders, firms including Coinbase and Circle have circumvented this restriction by offering “rewards” programs. In these arrangements, customers lend their stablecoins to a cryptocurrency platform, which then generates yield for the customers. Banks argue this is functionally identical to interest, and are asking Congress to close what they call a dangerous regulatory loophole by explicitly banning firms from offering such rewards to customers.

Banks say these interest-bearing stablecoins pose a serious risk to the economy. They argue that, unlike bank deposits, which are protected by FDIC insurance, stablecoin holdings have no such government backstop, exposing consumers to greater risk. Banks also argue that a significant shift of funds away from traditional, insured deposits, which are the primary source of funding for bank lending, could reduce the availability of everything from home mortgages to small-business loans, slowing the broader economy. The Treasury Department has amplified this concern, estimating potential deposit outflows of up to $6.6 trillion if stablecoins are permitted to offer competitive yields. The crypto industry counters that this is fearmongering by the banking industry, claiming that allowing rewards simply introduces much-needed competition that will pressure banks to provide more competitive interest rates to customers who have earned little on their savings for over a decade.

At least for now, Congress is siding with the cryptocurrency industry. Lawmakers from both sides of the aisle seem reluctant to pass a narrow fix for the GENIUS Act, fearing it could stifle innovation in a fast-growing sector. Some key Senate Banking Committee members have signaled they’re open to addressing the issue but prefer to do so within a more comprehensive crypto bill, such as the Digital Asset Market Clarity Act. Such a bill would establish rules for market structure, consumer protection and the roles of various regulators. Proponents of the comprehensive approach argue that a holistic framework is necessary to provide long-term clarity for the industry, rather than engaging in a legislative game of "whack-a-mole" with every new product. They believe that narrowly targeting rewards could stifle innovation and push digital asset companies offshore, undermining U.S. leadership in financial technology.

For now, the outcome of this fight is hard to predict, given that both sides are intensely lobbying lawmakers. The stakes are high for both sides, as banks aim to maintain their traditional role in taking deposits from customers and making loans to households and businesses, while stablecoin issuers seek to gain a foothold in the financial sector.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

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Geopolitical shocks — terrorist acts, wars or military action — can give your portfolio a significant negative charge. The leading geopolitical source of market instability in 2025 has been the Middle East, as in years past. Israel’s decision to attack nuclear facilities in Iran in an attempt to retard that country’s weaponization efforts prompted a 1.1% drop in the S&P 500 index on June 13.

Among the losers that day, according to S&P Global Market Intelligence, were leisure-travel companies Norwegian Cruise Line Holdings (NCLH) and Carnival Corp. (CCL), which each fell about 5%. Other travel and leisure companies that fell at least 3% that day included United Airlines (UAL) and Delta Air Lines (DAL); Caesars Entertainment (CZR), MGM Resorts (MGM), Las Vegas Sands (LVS), and Wynn Resorts (WYNN); Expedia Group (EXPE); and Marriott International (MAR). Several energy and agricultural companies and defense contractors gained at least 2% that day.

Any unrest in the Middle East can have a major impact on the global economy if oil production gets disrupted. Oil shocks in 1973, 1979, and 1990 caused recessions and bear or near-bear markets.

But this past June, the market rebounded quickly as investors saw Iran’s retaliatory measure of limited strikes on a U.S. military base as a moderate response.

Seven of the 10 travel and leisure companies noted above gained at least 7% from June 13 to the end of the month. Norwegian and Carnival went up 14% and 26%, respectively. Many of the energy, agriculture and defense companies gave back all their gains, plus more. Halliburton (HAL) rose 6% on June 13, then fell 12% by June 30.

The lesson for investors: Markets typically recover from a geopolitical event quickly.

“It ends up being much more of a headline event than a bottom-line event,” says market historian Sam Stovall, chief investment strategist at market research firm CFRA. Stovall has studied nearly a century of shocks and found that seven out of 10 times, the stock market is up — sometimes meaningfully so — three months after the event.

Take, for example, the Boston Marathon bombing in April 2013. That day, the S&P 500 fell 2.3%. Ninety calendar days later, the S&P index was up 5.7%.

Stovall’s list contains 25 events dating back to Pearl Harbor. In 11 cases, the markets were up 30 days later. In 16 cases, they were up 60 days later. And in 18 cases — or 72% of the time — they were up 90 days later.

Long-term buying opportunities

Some events are sufficiently cataclysmic to trigger a recession; Iraq’s August 1990 invasion of Kuwait is one example. (The market fell 1.1% that day, and 90 days later it was down 14.5%.) But, Stovall says, most shock-driven market drops may instead be buying opportunities for the longer-term investor, in terms of the market as a whole or specific stocks or sectors.

Matt Gertken, of BCA Research, who gauges the geopolitical risk of certain scenarios, has moderated his assessment of the situation in the Middle East.

In mid-June, he saw a 60% probability of a major oil shock resulting from the current strife, with a 40% probability of a minor shock. (A minor oil shock is a reduction in oil output that can be solved in short order by other countries increasing their production. Major oil shocks are longer-term problems.) After the muted Iranian response, he reduced the probability of a major shock to 25% and allowed for a 25% chance that there will be no geopolitical impact on oil from the current events.

“As of mid June, I was basically saying there was a 0% chance that oil would be unaffected,” Gertken says.

Stay cautious amid the volatility

The market’s quick recovery and subsequent gains suggest investors are placing even less probability on Middle East risk and oil shocks. Nonetheless, says Gertken, it’s not the time to become complacent.

“Individual investors should recognize that with the market having recovered from Trump’s tariff announcement and rallied in the wake of what appears to be a dodged bullet with the Iran conflict, we’ve had a lot of good news priced in,” he says. “It might be a good time to take some risk off the table because there are still plenty of reasons to be cautious going forward.”

Chris Haverland, a global equity strategist at Wells Fargo Investment Institute, says the research firm currently prefers quality large-company stocks over small caps, and it prefers developed international markets over emerging economies. Recommended portfolios currently have more commodity exposure — to both energy and precious metals — than is typical.

“It’s obviously unpredictable,” he says. “You can’t really position a portfolio tactically prior to an event. And then you don’t want to be making changes during an event, because typically they’re short-lived — for example, the 12-day Israel–Iran war. So the best defense is to be diversified going into geopolitical events.”

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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To help you understand what's going on in politics, the economy and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…

A big shift in economic policy is underway. One that includes more federal involvement in parts of the private sector that were once off-limits. The shift began in Donald Trump’s first term. Now, the president is attempting to cement it.

Among the steps that Trump has taken so far:

Making the government a major shareholder of so-called national champion firms, such as Intel and U.S. Steel, to shore up the manufacturing base. Both companies have lost ground in recent decades, even with extensive efforts to engineer a turnaround. The administration has also floated taking a big stake in major defense contractors, such as Lockheed Martin.

Establishing more public-private partnerships in sectors critical to national security.
One example: A multibillion-dollar agreement with MP Materials to create a mine-to-magnet rare earths supply chain.

Imposing and threatening higher tariffs, hoping to strong-arm supply chains back to the U.S. Case in point, biopharma — one of the many industries facing higher duties — has pledged at least $292 billion to expand U.S. manufacturing in the past six months.

Most of the president’s moves have a national security angle.
The decline of the U.S. manufacturing base is one of Trump’s long-running concerns. Moreover, he has so far focused primarily on industries where ongoing competition with China is a concern. Beijing now dominates “traditional” manufacturing industries like steel and is increasingly making advances in high-tech areas, including semiconductors.

His policies are also limited to where the White House has clear leverage, such as extensive federal subsidies (Intel) or a pending merger approval (U.S. Steel). The big question now is how far the administration ultimately plans to go. For now, it’s signaling clear limits in its intentions, focusing mostly on manufacturing. Case in point, federal officials say that they have no plans to take a stake in Nvidia, a chipmaker, which, unlike Intel, outsources all of its manufacturing to other firms.

The risk of a legal backlash grows if Trump pushes further. For example, if the administration begins to regularly require companies to give Uncle Sam shares as a condition of receiving government contracts, as well as permits and licenses, lawsuits are highly likely. The White House could see its strategy blow up sooner than that if the courts nix its current authority to impose across-the-board tariffs.

Also unclear: How effective this strategy will be. Intel will be a key test case. More federal involvement could help the struggling chipmaker land more customers, or it could worsen the company’s long track record of corporate mismanagement.

Trump’s policies are not unprecedented, but their permanence is unusual in modern times. For example, Uncle Sam temporarily took ownership of GM in 2009.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

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To help you understand what is going on in new technologies and the economy, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we publish many (but not all) of our forecasts a few days afterward online. Here’s the latest...

Amid the hype over AI, a practical question: When will the technology boost the economy the way its developers and promoters are promising? Is artificial intelligence going to unleash a surge in worker productivity, as epochal new tech has done in the past? Or is investor enthusiasm for it overdone?

In one sense, AI is already adding to GDP. Spending on AI hardware is astronomical, both for the costly, specialized chips that power AI and the related infrastructure to deliver the electricity that those chips devour. This spending raised GDP by 0.3% in the second quarter of this year. Even that doesn’t fully capture the size of this investment surge, since some capital outlays that tech firms are making don’t show up in the official GDP accounting method. Just look at the top five firms by AI investment: Amazon, Alphabet, Meta, Microsoft and Oracle. The increase in their AI-related capital expenditures over the past two years equals about 10% of GDP gains in the U.S. over that time period. Add the power plants, transmission lines and other infrastructure they need to run their data centers, and the outlay is even bigger.

There are also signs that businesses are gearing up for AI to make an impact on their operations. Company mentions of AI use for research tripled since Nov. 2022, when ChatGPT launched and turbocharged generative AI. 25% of job listings posted for IT professionals since the start of last year have asked for AI-related skills. The number of mobile AI app downloads hit 60 million this March. Internet searches related to AI have grown tenfold since OpenAI unveiled ChatGPT to the public. When it comes to whether AI will make workers more productive, the picture gets murkier. There are some early signs that it’s happening. Inflation-adjusted revenue per worker among S&P 500 companies has been rising since late 2022, following a 15-year period when it stayed flat.

It’s not clear why, but the overlap with advanced AI applications going mainstream is hard to ignore. But with so much money pouring into AI, there are reasons for skepticism. Much of the investment being made today could end up wasted. Many companies that are in vogue now figure to fail. It’s possible that AI computing power being rushed online could ultimately prove to be unneeded, akin to how fiber-optic cable networks got overbuilt in the 1990s. That capacity eventually got used as data consumption rose, but not before builders who spent too much on it went bankrupt. If the current AI data center boom fizzles, the pullback in spending could spark a mild recession, as the tech bust in 2001 did. Most major technological leaps take time to filter through the economy. AI does seem genuinely transformative. But the transformation may take many years.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

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A fractured Congress will reconvene on September 2. A possible government shutdown awaits. Failure to pass federal funding for the new fiscal year, starting October 1, would shutter many agencies. And right now, lawmakers are far from agreement. The odds of a shutdown are less than 50%...For now. That may change.

Lawmakers are aware that shutdowns usually hurt both parties, politically, but they left Washington for summer break in a sour mood, with optimism for a deal waning. Democratic support in the Senate is needed to keep the government open, as 60 votes are required to pass annual appropriations bills.

With the GOP controlling 53 seats, Democrats hold a key bargaining chip. Dems are under pressure to play hardball, as many in their base are still furious at the party for letting Republicans dictate the funding package last spring, which avoided a shutdown at the time. Democratic lawmakers feel they’re between a rock and a hard place. Supporting a Republican funding bill written without Dem input would enrage their base. Opposing such a bill would score political points, but risks triggering a shutdown and possibly getting the blame from voters.

Adding to the fraught mood on Capitol Hill is a GOP rescissions bill passed in July that clawed back $9 billion in funding previously OK’d by Congress, a move that President Trump pushed hard for. With the White House hinting it wants to enact another rescissions bill, Dems fear that any spending deals they broker with their GOP counterparts could be undone later. Privately, many Republicans are also uncomfortable with the concept of rescissions on the grounds that Congress, not the White House, holds the power of the purse. Such bills are historically rare.

Senate Minority Leader Chuck Schumer and Trump will play the key roles in heading off a shutdown. They reportedly have not spoken directly in months, and the tensions between the long-time New York foes appear to be escalating. A deal is possible if they break the ice, though Trump would get the better of it, as Republicans control Congress and most Hill Republicans are Trump loyalists.

We expect lawmakers to avoid a shutdown, somehow, some way, as the economy would temporarily suffer and Wall Street wouldn’t react kindly if funding runs out and most federal agencies go dark. Expect the agreement to keep nondefense 2026 spending equal to or less than this year’s level, though there will be exceptions, such as increased border security funding. Still, expect Congress to approve only a temporary funding extension that lasts a few weeks, as partisan disagreements and Trump’s tough bargaining make a year-long deal in September unlikely, kicking the shutdown threat down the road.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

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In a lawsuit filed this week, New York Attorney General Letitia James claimed that over $1 billion was stolen from Zelle users via fraud between 2017 and 2023.

The Consumer Financial Protection Bureau (CFPB) filed a lawsuit in December 2024 alleging the same thing, but when that lawsuit was dropped in March 2025, New York's attorney general decided to file a suit of her own against the digital payment service to seek compensation for New York consumers.

The new lawsuit claims that Early Warning Services, LLC (EWS), the company that owns the Zelle app, knew fraud was a problem on the app but chose not to do anything about it. In response to the news, a Zelle spokesperson called the lawsuit "a political stunt to generate press, not progress."

The Zelle statement added: "More than 99.95% of all Zelle transactions are completed without any report of scam or fraud – which leads the industry."

If you've ever used Zelle to send or receive money, you know how convenient and quick it is. You have probably also heard about the many forms of fraud and scams that swindle unsuspecting users. Here's what you need to know about the New York lawsuit against Zelle and some tips to avoid being scammed when using payment apps.

Why the lawsuit blames Zelle for $1 billion in fraud losses

The short version of the charges by the New York attorney general's office is that EWS failed to implement safeguards that would have protected users from fraud.

The lawsuit alleges that after receiving repeated reports of fraud, EWS chose not to adopt basic safety measures that it had the technology and know-how to do. As a result, the lawsuit claims, consumers lost over $1 billion while the company profited from the app's rapid growth.

By the time the company adopted basic safeguards in 2023, the New York attorney general says that the measures were essentially too little, too late. She is now asking that Zelle pay stolen funds back to New York consumers who have been hit by fraudsters on the app.

Here's a quick timeline of what happened, according to the lawsuit:

• In 2017, the Zelle payment app was launched by EWS, a company co-owned by seven of the nation's largest banks – Bank of America, Chase, Wells Fargo, Capital One, Truist, PNC Bank and U.S. Bank. The app was rushed to market to compete with fast-growing rivals like Venmo and Cash App, the lawsuit says.
• Also beginning in 2017, EWS ran multiple ad campaigns emphasizing the app's safety and security. That included leveraging its connection to big banks that allowed the online payment system to be automatically integrated directly into users' existing mobile banking apps. One ad said Zelle is "backed by the banks, so you know it’s secure."
• By 2019, fraud was a problem, but the company hadn't adopted security measures to combat it, including not requiring banks to report fraud, the lawsuit claims. While it did require banks to report takeover fraud (when your account is hacked into or otherwise accessed without your permission), EWS was lax about the timing of reporting, the lawsuit claims, which gave fraudsters more time to "victimize additional consumers."
• In 2019, EWS developed a framework of "basic network safeguards" that could have made certain types of fraud more difficult. But, "EWS abandoned the basic network safeguards," the lawsuit says, opting for a less effective alternative.
• In 2023, the company implemented the "basic network safeguards" and fraud immediately decreased, suggesting that hundreds of millions of dollars could have potentially been saved in the years between 2019 and 2023 if EWS had adopted those safety measures when it first developed them. This is the main thrust of the attorney general's lawsuit.

Zelle's easy-to-use payment platform is just as easy to use for fraudsters

The same features that make Zelle so convenient for you also made it an easy target for fraudsters, according to the complaint filed by the New York state attorney general's office.

Some of the security gaps the lawsuit claims were present before "basic network safeguards" were implemented in 2023 included:

• A "quick registration process and lack of verification," making it easy for fraudsters to sign up.
• "Limited information displayed" when sending money to someone, making it easy for scammers to trick people into sending money to fraudulent email addresses.
• The immediate availability of funds after a transfer, making it easy for fraudsters to take the money and run, and next to impossible to claw those funds back if you're a victim.
• The ease with which users could change email addresses, link to different bank accounts or link to accounts at different banks, making it easy for scammers to juggle multiple scams at once and evade detection.

The complaint filed by the New York attorney general claims that basic safeguards could have helped protect many consumers from fraud.

As an example, the New York complaint describes a scam in which a fraudster registered on Zelle using an email with "Coned Billing" in the name — Con Edison is the major utility provider in New York City — and sent messages to users claiming they owed money and their power would be shut off if they didn't pay. The complaint says that if EWS had implemented a system for flagging potentially misleading email addresses, that email could have been blocked.

Protect yourself from fraud when using payment apps

While it's too early to say what will happen with the lawsuit in New York, there are steps you can take today to protect yourself from fraud or scams.

Here are a few of the most impactful steps:

• Know how easy it is to impersonate trusted people or organizations. Just because the name reads "Coned Billing" or otherwise looks familiar doesn't mean it's actually attached to the account in question. For individuals you send money to, get their payment app information from them in person and save it in your payment app ahead of time so you can easily spot a false contact.
• Know that you often can't get your money back from a scam. Zelle, and some participating banks, differentiate between "fraud" and "scams." Fraud is when someone takes money out of your account without your knowledge or permission. In many cases, banks will usually refund this type of theft. A scam, on the other hand, is when someone tricks you into voluntarily sending them money. Because it was technically voluntary, albeit through deception, some banks won't refund this type of theft. So, if you're ever in doubt, it's better to be too cautious.
• Hang up and verify before giving any personal information or sending money. Nothing is so urgent that you can't take a few minutes to verify the information you're being told. Even if the person knows certain details about you, hang up (or ignore the email). Then, go to the organization's website and use the contact information found there to call back.
• Question unusual or unexpected payment requests from loved ones. No matter how urgent or legitimate it seems, always hang up (or ignore the text/email) and call the person back by calling the number saved in your contact list. If it's that person, they won't mind you taking that minute to verify.
• If you really do owe money, pay it the way you normally would, not through a payment app. If your utility company or bank claims you owe money, you don't need to pay them right there via a payment app. You can log into the online portal where you usually schedule bill payments and see any balance owed there. Then, set up a payment using your usual methods. If online portals aren't available for a particular company, verify the amount owed in person and make the payment that way.
• Monitor your accounts regularly for unusual activity. Check your checking and savings accounts regularly, along with any credit cards you have. If you spot a transfer or charge that you don't recognize, call your bank right away. At the same time, change your password for accessing that account and consider locking the card or the account altogether while sorting out the issue with your bank.

Fraud prevention starts with awareness and caution

Regardless of the lawsuit’s outcome, this case is a reminder to stay vigilant when using payment services like Zelle. While providers should implement safeguards to keep scammers out, you should still be cautious and trust your instincts if something feels off.

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To help you understand what's happening in the economy our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…

The White House wants to usher in a golden age of cryptocurrency and make the United States the “crypto capital of the world” by rolling back some regulatory enforcement and championing legislation that would broaden its accessibility and appeal.

The most telling feature of the Trump administration’s radical policy shift regarding crypto is the overturning of several policies put in place by the Biden administration that emphasized a cautious posture that sought to identify and mitigate the risk of cryptocurrencies. This was a stance that many in the cryptocurrency industry perceived as stifling for innovation, leading to the “Crypto Winter” of late 2022. At the heart of the White House’s new crypto framework is a comprehensive effort to resolve the persistent regulatory ambiguity that has defined the digital asset landscape in the U.S. for years.

The Trump policy strategy tackles reforming the cryptocurrency market by pushing for landmark legislation to create a permanent, clear market structure, coupled with an immediate executive mandate for federal regulators to provide more clarity to the industry.

A similar push to codify the regulation of digital assets is in the works in Congress. The first of these bills to become law, the Guiding and Establishing National Innovation for U.S. Stablecoins Act, or GENIUS Act, established a regulatory framework for stablecoins. Alongside the GENIUS Act, the House also recently passed the Digital Asset Market Clarity Act, or CLARITY Act, and the Anti-CBDC Surveillance State Act. The CLARITY Act would establish a clear regulatory framework for digital assets, mainly by distinguishing cryptocurrencies as either commodities or securities. Meanwhile, the Anti-CBDC Surveillance State Act would ban the Federal Reserve from releasing a central bank digital currency without congressional approval.

These developments have set a clear regulatory path for stablecoins and crypto platforms, ushering in a new wave of institutional legitimacy and potentially widespread adoption of digital payments and finance in the U.S.

The GENIUS Act is the first major regulatory change that could trigger several significant shifts in the cryptocurrency industry, despite being limited to the regulation of stablecoins.

Stablecoins are a form of tokenized digital money using blockchain technology, the digital recordkeeping technology that bitcoin and other cryptocurrencies rely on. Their design aims to maintain a stable value, typically pegged one-to-one with conventional fiat currencies, most commonly the U.S. dollar. While bitcoin and other cryptocurrencies are volatile and trade as speculative assets, stablecoins are primarily used for payments, remittances, and liquidity in crypto trading and lending platforms.

So far, demand for stablecoins has largely been confined to the crypto industry. The GENIUS Act’s requirement for 100% backing of stablecoins with high-quality assets is projected to create a substantial new source of demand for U.S. Treasury securities and other safe assets. The scale of this demand, however, will depend on how quickly and widely stablecoins are adopted outside of the crypto industry.

Stablecoins offer merchants and consumers potential incentives over traditional money. Merchants could benefit from greater efficiency for payment settlement, particularly for cross-border transactions. For consumers, stablecoins work primarily as a non-interest-bearing store of value akin to store gift cards. While there are potential benefits to be unlocked by merchants from the likes of rewards programs for using stablecoins, similar programs for gift cards or credit payments are already available to consumers, so for now, consumers may not see a clear benefit to switching to stablecoins for payments.

Stablecoins could also pose some risks for banks, primarily as a new form of competition. Stablecoins will likely become direct competitors to other financial products like bank deposits and government money market funds. Banks, however, seem to be aware of this potential problem and many are working on launching their own stablecoins.

The establishment of a regulatory framework is helping move digital assets from the fringes of financial markets into the mainstream. This shift will attract new investors and will likely accelerate growth in the industry. That said, lack of understanding remains the primary reason most people don’t hold crypto. Most people still don’t feel knowledgeable about trading or using it.

Trust is another big hurdle for the widespread adoption of crypto, with many people still skeptical of an industry that has been plagued from the beginning with large-scale scams, fraud and stolen funds. As ownership of cryptocurrencies becomes more common, it is also important to remember that many risks remain, and fraud is still a big issue in the industry.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

Read more

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About four months after Liberation Day and a little more than two-thirds of the way into second-quarter reporting season, we're still learning about President Donald Trump's tariffs and the effects they'll have on revenue and earnings for specific sectors and stocks.

Some situations are more obvious than others. But conference call commentary from C-suite executives generally suggests management teams are still seeking clarity about the impact of Trump's tariffs on revenue and margins – and will be for some time.

Efforts to offset potential negative impacts generally include controlling costs and managing prices. Commentary so far indicates supply chain adjustments and other cost-cutting moves are already happening, with scaled-back promotions and straight-up price hikes on the horizon.

We have heard multiple explicit profit warnings from companies operating in different goods-producing and consumer-facing spaces, such as automakers. However, some companies are revising their forecasts for the impact of Trump's tariffs, even providing more optimistic guidance.

The bottom line is impacts will vary from sector to sector and stock to stock, and we'll be tracking them now, for the next several quarters and the next several years as the Trump administration attempts to reshape global trade.

Headwinds or tailwinds

Since April 2, when President Trump first introduced his tariffs, we've seen a steep stock market sell-off followed by a historic rally to new all-time highs.

Markets have been similarly moved by incoming inflation data, which will continue to be noisy from report to report and period to period as the impact of tariffs works its way through the economy.

That the S&P 500 and the Nasdaq Composite have made new all-time closing highs and the Dow Jones Industrial Average has come within points of its own fresh peak this summer suggests that market participants are more optimistic now than they were when the indexes bottomed on April 7.

And it's possible, according to WisdomTree macro strategist Samuel Rines, that some impacts of Trump's tariffs could be positive for specific companies and their stock prices, at least in the short term.

"Many of the companies that provided guidance for tariff impacts in the past," Rines wrote in a late-July assessment of second-quarter earnings season, "are guiding away some of the impact in the future."

And we'll continue to hear from companies "with 'too much tariff' priced in," according to Rines, during the current reporting period and for as long as the Trump administration uses tariffs to advance trade and other policy goals.

Expectations management

Second-quarter earnings-per-share growth for the S&P 500 is tracking at 9% year over year as of this writing vs a pre-season estimate of 4%. And more than six of every 10 S&P 500 companies are beating earnings expectations, one of the best performances in a quarter century.

According to FactSet Senior Earnings Analyst John Butters, "Both the percentage of S&P 500 companies reporting positive earnings surprises and the magnitude of earnings surprises are above their 10-year averages."

At the same time, as Goldman Sachs Chief U.S. Equity Analyst David Kostin observes, "Sharp downward revisions to analyst estimates earlier this year created an unrealistically low bar for companies heading into the reporting season, boosting the frequency of earnings beats."

It is a market of stocks, and those stocks represent companies, some with more and some with less exposure to tariffs. Trends with even greater gravity, such as artificial intelligence (AI) and the infrastructure build-out to support it, are also in play.

So the stories to watch over the next several quarters, according to WisdomTree's Rines, are on the ground.

"Some will execute," Rines concludes. "Some will not."

For some groups, it's the theme, for others just a theme. So let's take a look at how your exposure to specific sectors and stocks could be impacted by President Trump's tariffs.

Communication services

Communication services stocks such as Alphabet (GOOGL), Meta Platforms (META) and Netflix (NFLX) that see greater shares of revenue from advertising and subscriptions are likely to be more resilient in a rising-tariffs environment.

GOOGL is up 29%, META 45.4%, and NFLX 33.5% since April 7.

Through August 1, the Communications Services Select SPDR ETF (XLC) is up 21.8% from the April 7 post-Liberation Day bottom.

The sector includes old-school telecoms such as AT&T (T) and Verizon Communications (VZ), which are up 5.6% and 3.9%.

Consumer discretionary

Ford Motor (F), like fellow automakers General Motors (GM), Stellantis (STLA) and Tesla (TSLA), is a consumer discretionary stock.

Ford recently reported its first quarterly loss in two years due to an $800 million tariff hit. F stock is actually up 20.2% since April 7.

GM, which reported $1.1 billion in tariff costs for the second quarter and expects a total impact of $4 billion to $5 billion for the full year, has added 21.6%.

Stellantis expects a $1.5 billion profit hit this year; the stock is up 3.1%.

Tesla's better positioned than traditional automakers in the U.S. market due to its domestic production and supply chain concentration in North America, and this is reflected in its 29.7% gain off the April low.

Meanwhile, Amazon.com (AMZN), up 22.5% since April 7, presents a complex case because of the depth and breadth of its third-party seller market. That's a big question for this and future reporting periods.

All told, the Consumer Discretionary Select SPDR ETF (XLY) is up 19.9% since April 7.

Consumer staples

When Procter & Gamble (PG) reported its second-quarter results, management said it expects approximately $800 million in higher costs for the full year due to Trump's tariffs.

In April, during the depths of post-Liberation Day despair, P&G forecast a full-year hit "in the range of $1 billion to $1.5 billion."

PG, among the biggest and best-known consumer staples stocks, hasn't enjoyed much tailwind from its outlook for a smaller tariff impact, though, slipping 3.8% since its July 29 report.

The Consumer Staples Select Sector SPDR Fund (XLP) is up 4.1% since April 7, but is No. 10 among the 11 S&P 500 sectors during that time frame.

Underperformance reflects the simple difficulties confronting businesses with similar internal cost-and-price options as other types of business, but far fewer external megatrend catalysts (AI, for example) to offset those efforts and support margins.

Energy

Like many companies engaged in significant industrial activities, oil and gas exploration and production companies will face higher costs due to a 50% tariff on imported steel and new duties on other inputs for equipment and infrastructure.

Higher steel and aluminum prices will impact energy stocks in multiple industries, including electric, renewable energy and pipeline companies as well as E&Ps such as Chevron (CVX) and Exxon Mobil (XOM).

The Energy Select Sector SPDR Fund (XLE) has added 10.1% since April 7. CVX is up 9.4%, XOM 7.5%.

Financials

JPMorgan Chase (JPM) and other financial stocks will reflect the macroeconomic impact of tariffs, but not so much any specific cost or price pressures.

The Financials Select Sector SPDR Fund (XLF) is up 17% from the April 7 bottom, with JPM stock rising 35.6%.

Health care

Health care involves a lot of pure domestic service, so health care stocks such as UnitedHealth Group (UNH) will continue to move based on traditional fundamental factors and the market's perception of their ability to generate free cash flow for investors.

At the same time, the Health Care Select Sector SPDR Fund (XLV), down 0.6%, is the only one of the 11 S&P 500 sector ETFs with a negative return since April 7, anchored by beleaguered UNH.

And there are nominal health care stocks such as Johnson & Johnson (JNJ), which forecast during its first-quarter conference call $400 million of 2025 tariff impacts but cut that figure to approximately $200 million when it announced second-quarter results.

JNJ stock is up a little more than 12% so far in 2025, but did see a bit of a post-earnings bounce in late July.

Industrials

Not all companies that make and sell big, heavy machinery and other stuff are stalling out under the weight of Trump's tariffs. It's quite the opposite for many industrial stocks.

The Industrials Select Sector SPDR Fund (XLI) is up 27.9% since April 7, good for the No. 2 ranking among the 11 sector ETFs.

Bellwether Caterpillar (CAT) did report lackluster second-quarter results and does expect a $1.3 billion to $1.5 billion tariff hit in 2025. But management also noted the benefits of its exposure to broader trends such as the infrastructure buildout to support the AI revolution.

And 3M (MMM) guided down the full-year per-share impact of tariffs from a range of 20 cents to 40 cents to a net total impact of 10 cents. As Rines says, that "might sound trivial. But the interaction of expecting a larger impact and preparing for it led 3M to guide earnings higher than its pre-tariff (January) expectation."

Not all companies will manage tariffs the way 3M has, but those that offered worst-case guidance should enjoy the direction of travel.

Information technology

The Magnificent 7 are not all strictly tech stocks. Officially, we see TSLA and AMZN with consumer discretionary stocks, NFLX among communication services.

But we do have Apple (AAPL).

CEO Tim Cook said the iPhone maker faces $1.1 billion in additional costs due to tariffs during the current quarter, up from $800 million for its fiscal 2025 third quarter. But that was lower than management's original $900 million estimate.

Apple's exposure to higher tariffs on goods from China is well-known. AAPL stock is up 11.7% since the April 7 post-Liberation Day bottom. The SPDR S&P 500 ETF (SPY) is up 23.6%.

Microsoft (MSFT), meanwhile, must manage costs and inventories but continues to benefit from strong AI-driven revenue growth in its Azure cloud platform.

Indeed, MSFT stock is up 46.7% since April 7 and recently became the second company ever to surpass the $4 trillion market-cap threshold.

The first $4 trillion stock was, of course, Nvidia (NVDA), which is at the center of the AI revolution and is the hub around which "hyperscalers" are spending billions for an infrastructure build-out that continues to show it's a bigger market force than tariffs.

CEO Jensen Huang has courted President Trump publicly and privately, emphasizing the importance of American leadership of the global AI infrastructure build-out. The White House has also eased restrictions on chip exports to China.

Nvidia will report fiscal 2026 second-quarter results after the closing bell on Wednesday, August 27, and we'll find out more about the durability of the trend.

Already, the other six Mag 7 stocks have grown earnings by 26% year over year vs 4% for the rest of the S&P 500.

The Information Technology Select Sector SPDR Fund (XLK) has led the market back from the April 7 bottom with a gain of 40.4%.

Materials

DuPont (DD) continues to demonstrate its one of the best materials stocks to buy.

Management initially forecast a $60 million profit hit in the second half of 2025 due to tariffs related to shipping products to its own operations in China for final completion.

Management has adjusted its supply chains, sought exemptions and implemented surcharges to offset the impact.

And, now, DuPont expects a tariff-related hit of only $20 million, or 4 cents per share, down from 10 cents per share.

And management raised its full-year guidance to $4.40 per share, as broader business conditions offset tariff concerns.

DD stock is up 21.8% year to date, driving the Materials Select Sector SPDR Fund (XLB), which has risen 15.3% since April 7.

Real estate

The Real Estate Select Sector SPDR Fund (XLRE) has posted a total return of 9.6% since April 7, third-worst among the 11 official sectors.

The U.S. real estate market remains stuck due to high interest rates and other factors contributing to affordability, and real estate stocks continue to struggle.

At the same time, the National Association of Homebuilders notes that "tariffs on building materials and home appliances raise the cost of housing, and consumers end up paying for the tariffs in the form of higher home prices and goods."

According to the NAHB, Canada accounts for approximately 85% of U.S. softwood lumber imports, so the increase in tariff rates on Canada from 25% to 35% will have a significant impact on building costs.

Utilities

Like many industrial operators, utilities could face higher costs for energy storage and other heavy equipment. But management teams are sanguine about their contract protections, their ability to manage their supply chains and their long-term planning. And utility stocks are also enjoying an AI bounce.

Indeed, utilities such as Constellation Energy Group (CEG), Duke Energy (DUK) and NextEra Energy (NEE) are not likely to see material financial impacts to their forecasts or their results due to tariffs.

Electricity demand is rising along with spending on AI infrastructure, with more and more computing capacity requiring more and more power.

The Utilities Select Sector SPDR Fund (XLU) has generated a total return of 19.8% since April 7.

Utilities are actually the top-performing sector on a year-to-date basis with a gain of 17.7% through August 1.

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Tariffs have been a dominating topic since Donald Trump became president again. As trade deals finalize, we're starting to get a clearer picture of how tariffs will impact prices moving forward.

Trump secured a trade deal with Japan last week that includes a 15% tariff on Japanese goods. He said of the agreement: "I just signed the largest trade deal in history; I think maybe the largest deal in history with Japan."

The good news, at least for Japanese automakers, is that the 15% tariffs will cover automobiles and automotive parts, which gives them an edge over other car companies that incur 25% tariffs, particularly for cars and parts made in Canada.

On the other side of the deal, Japan pledges to invest $550 billion in the U.S. to build reliable supply chains in pharmaceuticals and semiconductors, while also purchasing up to $8 billion in agricultural food. Its importers will also pay a 15% reciprocal tariff on supplies.

While leaders from both countries praise this deal, it's still a tariff, which means companies could absorb some of these costs or pass them on to you. Here are five shopping verticals that might become more expensive for you as a result of this trade policy.

Expect to pay more for your next car

If you plan to buy a foreign vehicle made with parts from Japan, you can expect to see some of those extra costs. Even with the lower tariffs imposed, 15% is a substantial fee to pay to import cars overseas. These companies won't eat all the total costs forever.

How much will it cost you to buy a new Toyota, Nissan or Mazda? Prices could increase up to $6,000 for new vehicles, per Kelley Blue Book.

Keep in mind that not only will this affect the sticker price you'll pay, but it also impacts all other facets of owning a car, such as paying more in sales tax, financing, car repairs and insurance.

Certain TVs could become pricier

Some of the most common television brands, such as Sony, Panasonic, Sharp and Hitachi, come from Japan. We're already seeing significant signs of price increases for specific models, though these companies aren't saying it's due to tariffs.

Here's an example:

When Sony released the 65-inch Bravia A80L OLED in 2023, its price was $2,500. The newest model now goes for $3,400, according to Vocal, an increase of $900. This is at a time when Tom's Guide found prices for OLED models were dropping below the $1,000 mark.

That said, there's good news: You can secure an exceptional deal on older models. Here's a Sony OLED for under $1,900, where you'll save $400:

Say cheese: Your next camera could make you smile less

Fujifilm shifted production of its X series cameras from China to Japan because of the economic uncertainty about tariffs. While Japan didn't incur a 51% combined tariff on imported goods as China does, that 15% still means higher costs, at a time when some camera companies are already raising prices.

Digital Photography Review reports that some camera makers have raised prices due to tariffs. Cannon's average price hike was 9.7%, with price increases for models ranging from $100 to $500.

This means if you're looking for a digital camera from Fujifilm, now is the time to capitalize before price increases go into effect:

Your next joy ride might come at a higher cost

Japan has built a reputation for its stylish and nimble motorcycles from brands such as Honda, Yamaha, Suzuki and Kawasaki. Tariffs have hit the motorcycle market hard.

Some dealers report shortages of imported motorcycles, in part due to companies waiting to see how the tariffs play out. That shortage created a buyer's frenzy for older models, while the few newer models increased from $2,000 to $5,000 on average per West Coast Shipping. Expect this trend to continue.

Japanese drinks and food are expected to increase in price

Japan exports all sorts of tasty goodies to the U.S. If you're a fan of Japanese whiskey, sake, green tea and matcha, caviar, sushi and other items, the tariffs will hit your wallet.

While it's hard to determine by how much prices will increase, you can look at the big picture. The Yale Budget Lab found that the overall tariff rate customers pay is 20.2%, the highest it's been since 1911. On average, tariffs will cost the average household $2,700 more than regular expenses for 2025.

Ultimately, the 15% reciprocal tariff reached between Japan and the U.S. is far better than the original 25% proposed. On top of this, Japan's pledge of $550 billion into the U.S. economy to build supply chains in key sectors is a good thing, as it will create jobs.

At the same time, tariffs are still taxes, and someone must pay them. This means you can expect the costs of some of these goods to increase, which means now is the ideal time to secure a deal.

Too bad you can't stock up on fresh sushi.

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If you're exhausted by high grocery prices, you're not alone. Overall, food prices have surged 31% since 2019. While inflation has steadied somewhat, rising 2.4% year-over-year in June, that really only means your already-high grocery bill is getting higher — just at a slower pace.

When you zoom in on specific items, the story is more complicated. Overall food inflation might be dipping closer to the Federal Reserve's 2% target, but certain goods are still seeing double-digit inflation. According to the latest CPI data from the Bureau of Labor Statistics, egg prices are up 27.3% year-over-year, while coffee and ground beef are up 16.3% and 10.3%, respectively.

Rates were held steady, as expected, at the July Federal Reserve meeting, which concluded Wednesday.

Now, you might be wondering if there's any hope for an upcoming cut in the federal funds rate, and if a cut would bring grocery prices down. Here's a breakdown of the relationship between interest rates and food prices, along with a more in-depth look at why prices are so high and the future outlook for your grocery bill.

Does the federal interest rate impact grocery prices?

What impact, if any, federal interest rates have on grocery prices is tricky to pinpoint. The basic principle behind how the Federal Reserve works is that interest rates control the money supply. When rates are high, money is expensive to borrow, so consumers tighten their belts in an effort to spend only the cash they have on hand and avoid using credit or taking out major loans. When rates are low, the opposite happens.

In theory, then, high interest rates should curb inflation by decreasing demand as consumers spend less. In reality, the actual impact the federal funds rate has on inflation varies depending on the market you're talking about and the underlying causes of inflation.

In the case of groceries, the impact is, at best, subtle and indirect. No matter how expensive money is to borrow and no matter how high grocery prices get, people need to eat. While there are ways to save on groceries by shopping sales or opting for generic alternatives to name-brand products, there's only so much cost-cutting you can do here because you still have to eat.

That's led to a somewhat disturbing trend of more and more shoppers turning to buy now, pay later (BNPL) apps and services like Klarna or AfterPay to finance their grocery purchases. A recent LendingTree survey found that 25% of BNPL users are using the short-term loans to pay for groceries, citing the need to "bridge" the gap from one paycheck to the next.

On the business side, interest rates could indirectly affect grocery prices by raising the cost of the money retailers use to pay for inventory. If retailers are hit with higher interest rates on loans and credit used to keep shelves stocked, they may pass some of those higher costs on to you. But calculating just how much of today's sky-high grocery prices are the result of higher borrowing costs isn't straightforward and will vary from one retailer to the next.

To whatever extent higher borrowing costs are inflating grocery prices, a rate cut might help bring your bill down, assuming retailers choose to pass those savings on to you.

Why are groceries so much more expensive?

Even if interest rates are partly to blame for rising grocery prices, other factors have had a much bigger impact on your bill.

It's also important to keep in mind that while the federal funds rate can impact grocery prices, grocery prices also impact the federal funds rate. The Fed looks to prices and inflation to decide what to do to best help the economy. For example, they raised interest rates in the wake of the pandemic because prices were high.

With that in mind, here are some of the key drivers of past and future inflation on your grocery bill:

• Supply chain disruptions. The pandemic broke down already weak supply chains, creating shortages and sending prices soaring faster than they had since 1979. While things have since stabilized, an FTC report published last year found that retailers have kept their prices high despite no longer facing those same supply chain issues.
• Extreme weather. As the climate warms, searing heat and more frequent natural disasters are decimating crops worldwide. This can create a ripple effect of shortages, impacting not just the cost of that produce item, but any of the packaged foods that use that ingredient.
• Tariffs. It's hard to keep track of what's going on with President Donald Trump's tariffs. But, so far, shoppers have already seen costs go up on certain specialty foods like coffee, chocolate and produce that can't be grown in the United States. Depending on where trade negotiations end up, more foods could see tariff-related price increases or the ones already facing tariffs could become even more expensive.
• Farm worker shortages. One side effect of the Trump administration's immigration crackdown is a shortage of farm workers in the United States. According to the USDA, 42% of farmworkers are undocumented immigrants. With many either deported, detained or too scared to show up to work, crops are going unharvested. This will lead to a combination of food shortages and more dependence on imported crops (which may carry tariffs).

How to save on groceries

You might not have much control over macroeconomic policy or global weather patterns, but there are simple strategies you can use to counteract those soaring grocery bills.

Here are some of the most effective methods to try:

• Join your grocery store's loyalty program. These are often free to join and come with special deals and early alerts to upcoming discounts.
• Use cash back cards with elevated rates for groceries. While no credit card offers enough cash back to make up for the 31% inflation in grocery prices since 2019, some have surprisingly generous rewards, especially on groceries. Earning those rewards helps put some of that money back in your pocket. See our best cash back credit cards of 2025.
• Take advantage of deals to stock up on non-perishable items. If your favorite shelf-stable foods or household essentials are on sale, stock up. Just make sure not to stock up more than you can comfortably store at home.
• Plan meals with overlapping ingredients. You can often save by buying larger quantities of ingredients or at least minimize waste by using up what you've already bought. If you're buying a pound of carrots for a recipe that only needs one, look for another recipe to use up the rest of that bag.
• Join a warehouse club to take advantage of bulk discounts. Costco or Sam's Club are both known for everyday low prices on groceries and household essentials. If you haven't already joined one, do your research and compare the perks and products offered by each. You should also check which one has a location closest to you.

Like everyone else who needs to eat, we'll continue to keep an eye on grocery prices and look for ways to save, while remembering just how many factors go into the price of eggs.

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To help you understand what is going on in education, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we publish many (but not all) of our forecasts a few days afterward online. Here’s the latest...

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Congress just passed the biggest higher education policy update in two decades. The Republicans’ recent tax and spending law includes new caps on federal loans, new repayment plans and a sweeping accountability system. With most rules set to take effect next July, the Education Department and colleges need to act fast.

To try to lower college prices and student debt, an overhaul of federal student loans is coming. Federal student debt stands at $1.7 trillion, affecting about 43 million borrowers. Half of the debt comes from graduate loans, a big target of the law. Under the new policy, graduate students and parents of undergrads face new caps on yearly and total borrowing. (Limits on loans made directly to undergrads are unchanged.) A simplified loan repayment plan is on tap, which will reap about $270 billion in federal savings over a decade. Two repayment plans, a standard one with fixed payments and a new income-driven plan, spell higher monthly payments for many borrowers.

The new accountability system marks a huge shift. Schools will lose access to federal lending if graduates don’t earn more than nonattendees in the state. Advocates of the system say the goal is to push high-cost programs to reduce their prices. Undergrads will be measured against those with high school diplomas. Grad programs get measured against similarly situated adults without a graduate degree. 20% or more of associate degrees fail this test, per an analysis by Preston Cooper, senior fellow at the American Enterprise Institute. That failure rate comes with a caveat: “Students in these programs are less likely to use loans to begin with,” writes Cooper. “Many will be able to continue operating even if they lose loan access.” Around 8% of all master’s degree programs fail the test (the failure rate is higher for master’s degrees at for-profits). But just 3% of bachelor’s degrees fail.

Among the other policy changes: A bigger endowment tax on wealthy schools of up to 8%, up from today’s top rate of 1.4%. Small colleges with fewer than 3,000 students are exempt, however. And Pell Grants are now available for very short work programs of eight to 15 weeks, a big win for community colleges. Pells also received an extra $10.5 billion in funding.

Schools are racing to adapt and alert students about financial aid changes, though much uncertainty remains. Revenue could take a hit if fewer students enroll, especially at schools that rely heavily on grad programs. Some programs will shrink or be cut, as schools at least consider lowering tuition in some cases.

Expect more business for private lenders, such as College Ave, SoFi, Sallie Mae and Ascent. For example, 40% of medical students borrow more than the law’s annual loan limit. Private loans make up 8% of overall student debt and that figure is sure to increase.

Delays are likely as the Education Department faces implementation struggles. The agency has cut half of its workforce so far and has a lengthy, complex to-do list with tight deadlines. Passing the bill is “just the tip of the iceberg,” says Sarah Sattelmeyer, an education policy analyst at New America. “An incredible amount of work is coming at the Education Department.” This includes issuing reams of rules and guidance about loans, starting the new accountability system, policing lending violations and much more.

Meanwhile, the Trump administration will continue to pressure institutions to change policies, including by withholding current or future federal research funds. Expect more investigations of antisemitism, diversity, foreign students and other issues.

All this change comes as schools face other financial headwinds. A sharp decline in foreign enrollment looms ahead. There’s a homegrown demographic challenge, as the college-age population shrinks in the coming years. Higher costs of everything from construction to insurance are stressing budgets. These trends, and the new policies, mean more schools will mull budget cuts, while also considering sharing resources with other schools or even mergers.

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