Economist Christopher Thornberg says the current economic churn under the new administration arrives as a strong economy was already facing some challenges.
“It’d be an understatement to say it’s been an eventful couple of months, and I appreciate that there’s a lot of new uncertainties,” says Thornberg, who heads Beacon Economics LLC, which provides forecasting for public and private clients across the U.S. But there were some “old uncertainties” as well, he told the recent NCSL webinar “From Headlines to Bottom Lines: Unpacking the US Economic Outlook.”
By many measures, the economy has been doing well, he says. Income and housing values are up, and consumers are spending but not racking up alarming levels of debt. Toward the end of the last administration, it was considered the “envy of the world,” Thornberg says.
Among the measures of economic health, he cites:
- “The bottom half of workers have seen about a 17% increase in their real earnings compared with 10.5% for the top 50% over the course of the last decade. It isn’t to say inequality is no longer a problem in the United States, but it is nice to see the trends are moving in the right direction.”
- “Foreign travel by Americans is at an all-time record high.”
- Restaurant sales, despite the big increase in prices, have increased by 50% over the course of the last five years.
- Every concert promoted by the Live Nation entertainment company is selling out.
“At this point in time, there’s very little sign of any kind of major financial distress,” Thornberg says.
But that doesn’t mean it will hold.
For one thing, he says, American households have benefitted from massive federal spending during COVID-19 to ward off the recession that many people expected from the pandemic.
“Ultimately, the U.S. is a consumer-driven economy, and consumer spending is almost 70% of GDP, so if the consumer is healthy in their spending, it pulls the rest of the economy forward,” Thornberg says. “Regardless of what’s happening in real estate, regardless of what’s happening in manufacturing, regardless of what’s happening in our banking sector, they are the true driving force.”
But that consumer confidence is problematic, he says.
“The reason household incomes have been rising is largely because Americans haven’t had to pay for all those wonderful government services we’re receiving at this particular point in time,” he says.
Another issue: the national debt.
“The federal government deficit is 6% of GDP, which is the largest full-employment deficit our federal government has run since World War II,” Thornberg says. “And in World War II, I would argue we had a substantially larger reason to be running those large deficits than we do in 2025.”
Thornberg says these are propping up the economy in a way that isn’t sustainable.
“These are not good trends. At some point in time, they’re going to have to come to an end,” he says. “And when that happens, well, things could get ugly quickly.”
Thornberg doesn’t foresee an imminent downturn, but he’s not hopeful about warding it off because that will depend on elected officials in Washington.
“Our Constitution or political system in the United States is built around what I would call one big idea, and that big idea is big changes can only happen with consensus,” he says. “And while we see a lot of changes in terms of the White House policy, we’re seeing very little in the way of that broad-based consensus necessary to create real change.”
Thornberg says new tariffs will raise consumer prices on key goods, including autos, food, clothing and electronics—and that will clip spending.
He says any proclaimed migration of manufacturing to the U.S. isn’t feasible because the nation has a labor shortage, even as it relies on immigrant workers. He notes in the last 20 years, the U.S. has added 16 million workers to the labor force, and 6 million of those workers were immigrants.
In fact, Thornberg says some manufacturing that moved from China when the U.S. imposed tariffs there went to Mexico and Canada because they have “substantially more labor force than we have.”
He says Washington will need to make difficult decisions to address the deficit, and he says the changes to the federal government under the so-called Department of Government Efficiency, led by billionaire Elon Musk, are “just window dressing.” It will take a much larger effort—with increased taxes and/or changes in laws that govern federal programs and spending, which means Congress and the president would have to work together.
Kelley Griffin is a senior editor and the host and producer of NCSL’s “Across the Aisle” podcast.