Treasury Secretary Scott Bessent struck an upbeat note on Sunday: despite a bruising year in Washington, a messy government shutdown and lingering inflation, he told CBS’ Face the Nation that the U.S. economy would finish 2025 with roughly 3% real GDP growth. "The economy has been better than we thought," he said, calling holiday sales so far "very strong."
Two stories in one economy
That assessment — optimistic and headline-friendly — sits beside a different reality for many Americans. Consumer surveys show worry. The University of Michigan’s December consumer sentiment index, for example, remained subdued, and daily life for many households still feels pinched even as some macro indicators brighten.
Why the mismatch? Part of Bessent’s answer was political: he blamed media coverage and Democratic policies for shaping perceptions of scarcity. He argued the administration inherited inflationary pressures and touted tariffs and other moves meant to rebuild domestic supply chains. "The American people don’t know how good they have it," he said, while also laying responsibility for some affordability problems at the feet of previous policy choices.
Critics see a different mechanism. Bank of America economists and business leaders have pointed to tariffs as a direct contributor to higher consumer prices — a point underscored by toy makers and retailers who say tariffs and supply shifts have been passed on to shoppers. Some forecasters warn of a mild stagflation risk if tariffs and supply disruptions continue to push prices up while growth cools.
The data and the math
The numbers offer mixed signals. Early 2025 data showed a year-over-year contraction in the first quarter, followed by a bounce: GDP contracted 0.6% year-over-year in Q1, then expanded sharply in Q2. Estimates for the third quarter remained elevated in early December — the Federal Reserve Bank of Atlanta’s tracker put Q3 at roughly 3.5% annualized — and the Bureau of Economic Analysis will publish its initial third-quarter results later this month.
Consumer spending, which makes up about 70% of GDP, is the fulcrum. Strong holiday retail receipts would help reconcile Bessent’s forecast with household anxieties, but sentiment and income distribution matter: headline growth can mask uneven experiences across income brackets.
Inflation’s shape is changing
Officials and analysts are also debating what’s driving inflation today. Bessent and others point to a services-led inflation story — stickier wage- and rent-related costs rather than rapidly rising goods prices. That helps explain why some price metrics have come down while many households still feel the bite of everyday staples.
Tariffs complicate the picture. Even if their broad economic effect is small relative to services inflation, targeted levies on imports raise costs for specific goods and industries, which can ripple through store shelves and consumer expectations. Some economists say the full pass-through of tariffs to consumer prices may not be fully visible yet.
Politics, policy and the messaging fight
This debate is as much political as it is technical. President Trump has dismissed talk of affordability as a partisan "con job," while Bessent has leaned into a narrative that blames both prior policy and how the story is told. That messaging battle matters: perceptions influence spending decisions, and spending in turn influences growth.
Meanwhile, fiscal questions remain — from a roughly $38 trillion debt picture to choices about whether tariff revenues or spending cuts will be used to rein in deficits. Those are the trade-offs that will shape markets and mood heading into 2026.
Information flows matter too
How Americans learn about prices and policy now happens across many platforms — broadcast, cable, social media and new AI-driven tools that surface research and headlines faster than ever. That changing information environment can amplify narratives on both sides; tools that surface and summarize complex data, such as recent advances in search and research technology, have made it easier for partisan frames to spread quickly and broadly (and for policymakers to push counter-narratives). For context on how those tools are evolving, see developments in Gemini Deep Research and the rise of agentic AI features in search and apps like Google’s AI Mode.
Bessent’s projection is a clear political win if it holds: a 3% finish would be a powerful talking point for an administration trying to convince voters that growth — and by extension, improving affordability — is within reach. But whether that message translates into felt improvements at kitchen tables across the country depends on how prices, jobs, and fiscal choices actually evolve in the months ahead.
Numbers will dominate the conversation when the BEA releases fresh GDP estimates later this month, but for now the story reads as a contest between macro momentum and the everyday economics that shape voter sentiment.