What’s Going on with Trump, Fed, Economy, and Texas? | This Week's Economy Ep. 123
Tariffs, AI, Texas special session, jobs and GDP reports, and $3.1 billion in Fed renovations and more!
Hello Friends!
President Trump’s recent visit to the Federal Reserve was more than symbolic—it was a direct challenge. At a time when Americans are grappling with rising grocery bills, housing costs, and debt payments, the Fed is spending up to $3.1 billion to renovate its D.C. headquarters. Trump’s question—“What’s going on at the Fed?”—is one more people are starting to ask, and rightly so.
How do we spur growth? It’s encouraging to see the administration tackling that question, but some of the proposed solutions, such as new tariffs, risk doing more harm than good by raising costs on American consumers. In this week’s edition, we’ll dive into the latest trade developments, GDP and jobs reports, Texas’ special legislative session, the new Trump AI action plan, and more.
You can catch the full episode on YouTube, Apple Podcast, or Spotify, and visit my website for more information.
1. Economic Health
In the News:
While visiting the Federal Reserve, former President Trump publicly pressured Fed Chair Jerome Powell to cut interest rates. Despite the political pressure, the Federal Open Market Committee (FOMC) chose last Wednesday to keep its federal funds interest rate target unchanged in the range of 4.25-4.5%. The latest Gross Domestic Product report for the second quarter showed that real GDP grew at a 3.0% annualized pace. The U.S. jobs report noted a substantial downturn in the jobs market with just 73,000 net nonfarm jobs added in July. Sources: NPR, The Federal Reserve, Bureau of Economic Analysis, and Bureau of Labor Statistics
My Take:
What’s Driving Inflation: The Fed made the right call by holding its target rate unchanged. Inflation remains elevated, and the Fed’s bloated $6.7 trillion balance sheet—swollen by years of money printing and deficit monetization—continues to distort markets. This balance sheet is a central planning tool that disrupts real capital allocation, encourages speculation, and punishes savers. While these effects may not always be evident in inflation data, they manifest in deeper dysfunctions, including declining productivity, unaffordable housing, bank fragility, and a growing sense among Americans that the economic system is rigged against them.
Economic Reports: The recent GDP report isn’t the victory it’s being made out to be. Much of the gain came from trade distortions, not underlying strength. Real private demand grew just 1.2%, and inflation remains above the Fed’s 2% target. The weak jobs report for July shows that the labor market, too, reflects policy-induced volatility—not sustainable growth. What we’re seeing isn’t a boom; it’s a bounce on a rollercoaster shaped by erratic tariffs, aggressive monetary policy, weak private investment, and policy uncertainty.
The Real Problem: If the U.S. wants sustainable, long-term growth, it must stop using the Fed as a means to mask chronic fiscal irresponsibility. The real issue is that lawmakers are unwilling to cut spending. If we want real, lasting prosperity, we need a rules-based framework across the board: strict limits on federal spending growth, firm caps on monetary expansion, and real checks on the regulatory state’s power to impose hidden costs on everyday Americans.
Related: I delve into the details of the GDP report in my new Substack post.
2. Tariffs and Trade Deals
In the News:
The U.S. has reached trade agreements with the European Union and Japan, narrowly avoiding major trade disputes with key allies. Under the deals, most European goods entering the U.S. will face a 15% tariff, while tariffs on Japanese vehicle imports will be reduced to 15%. Markets responded positively, with Dow and S&P 500 futures rising 0.3%, and Nasdaq futures up 0.4%. Sources: CNN, CNBC
My Take:
These Aren’t Real Trade Deals: Despite the headlines, these aren’t true trade deals—they’re merely tariff adjustments rebranded as diplomacy. Instead of reducing trade barriers, the U.S. has doubled down on protectionism.
Taxes on Americans: Trump’s tariffs are one of the largest tax increases on Americans, and these new rates will continue to increase costs. The so-called “reciprocal” tariff structure leaves Americans paying more, not less.
A Better Path Forward: America needs genuine free trade guided by principles of liberty, stability, and prosperity, not more managed trade. The presidency should be a platform to unleash markets. That means taking credible first steps to restore fiscal discipline, reduce tax burdens, lift regulatory constraints, and build long-term policy stability to earn global trust.
Related: I explore these so-called trade deals that will hike prices on Americans in my recent Substack post.
3. Texas Special Session
In the News:
Governor Abbott called a special session of the Texas Legislature to address major issues like banning taxpayer-funded lobbying, providing property tax relief, and imposing local spending limits. Yet on the very first day, the Texas House convened for just four minutes before adjourning. Among the bills on the table are Senate Bill 9 (property tax relief) and Senate Bill 5 (a proposed ban on hemp-derived products). Sources: Rep. Brian Harrison, Senate Bill 9, and The Texas Tribune
My Take:
Texans Deserve Real Property Tax Relief: Since at least 2015, the Legislature has promised relief—but little has changed. SB9 doesn’t solve the problem; it merely tweaks it. It allows local governments to raise property taxes by 2.5% annually instead of the current 3.5%—which means property taxes can still double every 28 years instead of 21. That’s not meaningful reform. That’s surrender. As long as we rely on property taxes, Texans will never truly own their homes, land, or property.
Prohibition Doesn’t Work—SB5 Is Misguided: The proposed ban on hemp products is prohibition by another name. Supporters claim it’s about safety—but banning legal access doesn’t make people safer. It just pushes consumers to the black market, online sources, or across state lines, where there are no quality controls. Proper safety comes from regulated, open markets. Texans deserve the freedom to make responsible choices.
Texas Should Lead: Texas has the potential to be the first state to eliminate property taxes. Other states are catching on. If we want to lead again, we need bold vision, clear principles, and an unwavering commitment to liberty. Let’s stop managing decline and start building a future of genuine prosperity.
Related: Read my deep dive on the Senate Bill 5:
4. Trump’s AI Action Plan
In the News:
The Trump administration recently unveiled its AI Action Plan, a package of initiatives and policy recommendations aimed at cementing the United States' position as a global leader in artificial intelligence. The plan is organized around three core pillars: innovation, infrastructure, and diplomacy and security. And the federal government is already putting AI to work. The Department of Government Efficiency (DOGE) is deploying a new artificial intelligence tool—called the “DOGE AI Deregulation Decision Tool”—to streamline the regulatory code. The goal: eliminate half of all federal regulations by the end of President Trump’s first year in office. Sources: CNN, Washington Post, and The White House
My Take:
Good Policy in Action: President Trump’s AI Action Plan represents a significant course correction from the Biden years, abandoning top-down federal control and embracing innovation through deregulation, investment, and infrastructure development. It’s one of the most pro-market approaches to AI policy we’ve seen from any Western government.
The Plan’s Gaping Hole: However, while the plan’s vision is mostly correct, it lacks a crucial protection: a federal moratorium on state-level AI regulation. That omission leaves the door wide open for 50 different states to suffocate innovation under 50 different bureaucratic regimes. Now is not the time for a patchwork of reactionary mandates. Let’s stop the regulatory land grab and ensure that innovators, not stifled by politics shape AI’s future.
Using AI for Good: DOGE’s use of AI to streamline bureaucratic processes is an excellent example of this technology being leveraged for the benefit of Americans. Reviving the administration’s earlier deregulatory agenda, the tool aims to eliminate approximately 100,000 federal rules—potentially saving taxpayers trillions of dollars in compliance costs and contributing to a leaner, smaller federal government.
Related: Last week, I published commentary at The Daily Economy reviewing President Trump’s AI Action Plan.
5. State Taxes and Spending
In the News:
Ohio recently adopted a 2.75% flat income tax, making it the 15th state with a flat income tax rate above zero. It joins states like Iowa and North Dakota, which passed income tax phaseouts during this year’s legislative sessions. Meanwhile, other states—like Washington—are moving in the opposite direction by raising income taxes. Source: National Review
My Take:
Lowering Income Taxes: Nearly half of U.S. states now have either a zero or flat income tax. Getting to a flat or zero income tax—paired with sustainable budgeting—should be a top priority. States pursuing this approach will be far more competitive than those choosing to raise taxes. Interstate competition is a cornerstone of federalism and a driver of economic vitality.
Fixing the Property Tax Problem: Another area ready for tax reform is property taxes, a burden that is a direct result of excessive local government spending. Instead of holding the line, many localities set tax rates to collect more revenue and feed their spending habits. Real reform requires strict local spending limits to phase out property taxes ultimately.
Budget Discipline is Key: Sustainable budgeting at the state level is essential for long-term economic health. It requires disciplined fiscal planning, annual performance evaluations, and strategic use of surpluses to reduce tax burdens. States should also conduct regular external efficiency audits to increase transparency, ensure accountability, and cut wasteful spending. This approach not only protects taxpayers but also strengthens economic resilience.
Related: Watch my latest episode of This Week’s Economy on sustainable budgeting and delivering tax relief to hardworking Americans.
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God bless you, and let people prosper!
