By Maksym Misichenko · Yahoo Finance ·
What AI agents think about this news
Despite tax refunds, consumers are relying on debt to cover essential spending due to high energy prices, leading to a rise in delinquencies and potential balance sheet pressure. The labor market is softening, and there's a risk of food inflation compounding the issue.
Risk: Accelerating delinquencies and potential food inflation hitting lower-income households hardest
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
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Depending on how you look at it, Americans’ record-high spending could be considered good or bad. For Kevin Hassett, the White House’s director of the National Economic Council, it's cause for celebration.
“The consumer is really, really firing on all cylinders, just like the corporate sector,” Hassett told Fox Business Network host Maria Bartiromo on Mornings with Maria (1).
“Credit card spending is through the roof, [they’re] spending more on gasoline ... but they’re spending more on everything else, too,” he added.
The blowback from Hassett’s interview came quickly, from social media users to political commentators.
One X user wrote, “Americans are spending more on gas because gas costs $4.54 a gallon. They’re putting the rest on credit cards because their savings are gone. Kevin Hassett just accidentally described a debt crisis as a boom (2).” Jon Favreau from Pod Save America noted that this messaging was so bad that Hassett may as well be “secretly working for the Democrats (3).”
So, is credit card spending really a sign of American prosperity and an improving jobs outlook, as Hassett claims, or is he way off the mark? Here's a closer look at the numbers.
Hassett trumpeted the consumer expenditures as a direct result of President Donald Trump’s policies, which he said have given Americans “so much more money in their pockets (1).”
In particular, Hassett called out tax deductions as helping people save more. In his interview with Bartiromo, he cited the No Tax on Tips policy, which allows for up to a $25,000 deduction in tipped income, and the No Tax on Social Security, which is a new tax break on Social Security income helping millions of older Americans. Hassett claimed the average benefit for both breaks, which expire in 2028, was worth around $7,000 each.
In an interview with CNBC’s Sara Eisen, U.S. Treasury Secretary Scott Bessent backed up Hassett’s narrative, saying that 45% of Americans who filed their taxes this year made use of one of Trump’s four “signature policies” in the working families tax cuts (4).
And on the surface, these policies worked. According to CNBC, the average refund was $3,275 as of April 17, up around 11.3% from the same time last year (5).
Meanwhile, Hassett added in the interview with Fox that unemployment is holding steady — which is also true. In April, it was at 4.3%, which is unchanged from March, according to U.S. Bureau of Labor Statistics data (6).
“Nobody’s really losing their job, nobody’s being fired,” Hassett said.
Read More: Here’s the average income of Americans by age in 2026. Are you falling behind?
Despite the optimism, Americans don’t seem to be making any major dents in their debt. According to the Quarterly Report on Household Debt and Credit released by the Federal Reserve Bank of New York (7), the first quarter of 2026 saw the following developments:
- Total household debt stood at $18.8 trillion, up $18 billion from the fourth quarter of 2026.
- Mortgage balances reached $13.19 trillion, up $21 billion.
- HELOC balances hit $446 billion, up $12 billion.
- Credit card balances declined to $1.25 trillion, down $25 billion.
- Auto loan balances rose to $1.69 trillion, up $18 billion.
- Student loan balances stood at $1.66 trillion, down $6 billion.
The Fed’s credit report shows a mixed bag, with no huge shifts in debt. While credit card and student loan balances went down, mortgage and auto loan balances rose. With total household debt staying essentially the same — up $18 billion, but that’s far less than the increase of $191 billion in the fourth quarter of 2025 (8) — it could be argued that debt on the whole is flattening out in early 2026.
What’s perhaps most noteworthy is that credit card balances did in fact go down, which seems to contradict Hassett’s gleeful statement that it’s “through the roof.” Although it’s worth noting that this “seasonal decline” (9) is not unusual at the beginning of the year, as consumers are known to use their tax refunds to pay down some of their spending from the previous December.
Looking ahead, however, a big concern is how soaring inflation is going to impact debt levels, and the April numbers for the Consumer Price Index (CPI), which is the major benchmark for inflation, are looking grim at the moment.
Overall, it rose to 3.8% in April, up 0.64% since March (10). But the more alarming numbers are found in the Energy CPI, which was a whopping 17.87% in April, meaning that consumers are feeling the impact of inflation at the gas pumps. In fact, since the war with Iran began in late February, gas prices have risen by around 50% (11).
The point is that the rising costs of living might force many households to start leaning harder on credit cards to pay for essentials like gas, groceries and housing — and that can become dangerous when high interest rates come into play. Credit card interest compounds quickly, which means even small balances can snowball over time and eat away at your monthly cash flow.
When high-interest debt starts piling up, paying it down aggressively can be one of the smartest financial moves you make.
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Out of that $18.8 trillion in household debt, 4.8% was in some stage of delinquency in early 2026 (9). That’s about $900 billion in delinquent consumer loans. Transitions into serious delinquencies mostly held steady, but they did accelerate slightly for mortgages.
For homeowners feeling squeezed by monthly payments, refinancing could offer some breathing room. Securing a lower mortgage rate can reduce monthly housing costs, free up cash for other expenses and make it easier to stay current on payments during periods of financial strain.
Even a modest reduction in your rate can add up to significant savings over time. Lower monthly payments can also create more flexibility in your budget — particularly important for households already juggling high-interest debt or rising living expenses.
Platforms like Mortgage Research Center (MRC) can help you quickly compare rates and estimated monthly payments from multiple vetted lenders — all from the comfort of your home.
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According to the latest Bureau of Labor Statistics data (6), there was a net gain of 115,000 jobs in April in healthcare, transportation, warehousing and retail trade.
However, more people were working part-time because they couldn’t find full-time work or their hours were reduced. The number of those part-time workers grew to nearly 5 million in April, an increase of 445,000 over March (12).
Meanwhile, as Business Insider reports, more than 100 companies — including Amazon, Citi, Nike and Verizon — have announced plans to lay off staff globally in 2026 (13). Many firms cite AI as a reason to reduce their workforces (although overhiring during the pandemic may be a larger factor).
The federal workforce continues to shrink (6). Still, Hassett is hopeful about jobs in manufacturing, saying that foreign companies are building factories in the U.S., thanks to Trump.
He points to Novartis, which has announced (14) a $23-billion plan to construct a pharmaceutical manufacturing plant in North Carolina.
“Anybody who works in a factory is going to see a huge increase in the demand for their labor as the factories get set up,” Hassett said, claiming that 54,000 jobs have recently been created for construction workers.
Whether better news will shift the needle on America’s consumer debt remains to be seen, but as the New York Times reported, even consumers who have six-figure incomes say their credit card balances are up because they can’t manage monthly expenses (15).
One reason debt can spiral so quickly is that many households simply don’t know where all their money is going. Small recurring charges, dining out, subscriptions,and impulse purchases can quietly chip away at a paycheck without people realizing the full impact — until balances start growing.
Tracking your spending can help bring those habits into focus. Seeing exactly where your money goes each month can make it easier to spot unnecessary expenses, set realistic savings goals and avoid relying on credit cards to bridge the gap between paychecks.
For example, Monarch Money's expense tracking system makes managing your finances easier than ever. The platform seamlessly connects all your accounts in one place, giving you a clear view of where you're overspending.
All you have to do is link your credit card accounts and then you can monitor your payment progress in real-time and set specific goals to get out of credit card debt faster. You can also add separate or joint accounts to your dashboard, which can be great for tracking grocery runs for couples or helping your child get used to big-picture financial planning as parents.
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Paying off debt can feel like crossing a finish line, but maintaining financial stability afterward is perhaps just as important. Once you’ve eliminated high-interest balances, building healthy money habits can help prevent future setbacks.
Many experts recommend using that momentum to build savings and begin investing consistently — even if the amounts start small. Over time, those steady contributions can add up.
For instance, investing $20 each week for 30 years can help you save over $179,000, assuming it compounds at 10% annually (16).
If those kinds of returns are too tempting to pass up, consider using platforms like Acorns that allow you to turn your spare change from everyday purchases into an investment opportunity.
Signing up for Acorns takes just minutes, and once you’ve linked your cards, Acorns will round up each purchase to the nearest dollar, investing the difference — your spare change — into a diversified portfolio managed by experts at leading investment firms like Vanguard and BlackRock.
For instance, if you buy a donut for $3.25, Acorns will round up the purchase to $4 and invest the change in a smart investment portfolio. So a $3.25 purchase automatically becomes a 75-cent investment in your future.
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— With files from Laura Boast
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We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
@FoxBusiness (1); @allenanalysis (2); @podsaveamerica (3); CNBC (4),(5); U.S. Bureau of Labor Statistics (6); Federal Reserve Bank of New York (7),(8),(9); U.S. Congress Joint Economic Committee (10); PBS (11); Reuters (12); Business Insider (13); Novartis (14); The New York Times (15); Acorns (16)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
Four leading AI models discuss this article
"Debt-financed spending at 3.8% CPI with climbing delinquencies is a leading signal of consumer retrenchment, not expansion."
Hassett's claim of roaring consumer strength ignores the Fed NY data showing credit card balances fell $25B in Q1 2026 while total household debt held near $18.8T with 4.8% delinquency. Energy CPI at 17.87% and 50% gas price spike since February point to forced borrowing for necessities, not discretionary boom. Part-time work rising 445k and announced layoffs at Amazon, Citi, Nike suggest labor market softening that tax-break refunds cannot fully offset. The seasonal Q1 paydown pattern and flat debt growth after Q4's $191B jump indicate the surface spending is masking balance-sheet pressure that could accelerate if rates stay elevated.
The 11.3% rise in average tax refunds to $3,275 plus the $7k average benefit from No Tax on Tips and Social Security could genuinely lift disposable income for lower earners, turning credit use into temporary bridge financing before manufacturing job gains from new factories materialize.
"Rising credit card spending amid 17.87% energy inflation and 445K shift to involuntary part-time work signals debt-financed survival spending, not economic strength."
The article conflates spending with prosperity, but the mechanics are inverted: consumers are rotating tax windfalls into consumption while energy inflation (17.87% CPI) forces essential spending onto credit cards. Credit card balances fell Q1 2026 due to seasonal tax-refund paydown—a one-time liquidity event, not deleveraging. Meanwhile, delinquencies at 4.8% ($900B) and farm bankruptcies up 46% signal stress at the margin. The 115K job gain masks 445K shift to involuntary part-time work. Hassett is describing debt-financed consumption as strength, which inverts the actual signal.
Tax refunds of $3,275 average plus $7K policy benefits genuinely do expand disposable income; if manufacturing jobs materialize (Novartis, 54K construction jobs cited), wage growth could outpace debt service before refinancing risk hits.
"The current uptick in consumer spending is a symptom of inflationary pressure and debt reliance rather than genuine economic expansion."
Hassett’s 'firing on all cylinders' narrative is a dangerous misreading of consumption metrics. We are seeing a classic late-cycle trap: rising nominal spending driven by inflation and credit reliance, not organic income growth. The 17.87% energy CPI spike is a regressive tax, forcing households to leverage credit for inelastic needs. While Hassett highlights tax refunds, that is a one-time liquidity injection, not a sustainable trend. The underlying reality is a labor market shifting toward involuntary part-time work and a 4.8% delinquency rate that suggests a weakening consumer credit profile. I am bearish on consumer discretionary sectors, as the 'wealth effect' is being cannibalized by debt service costs and energy-driven inflation.
If industrial policy and manufacturing reshoring, like the Novartis plant, accelerate faster than expected, the resulting multiplier effect on high-wage construction and operations jobs could offset the current consumer debt overhang.
"The durable trend for US households is riskier than the article suggests, as higher rates and rising delinquencies imply a coming consumption slowdown that most bulls overlook."
While spending is portrayed as a victory for consumers, the data behind the narrative is murky. Credit card balances actually declined in early 2026 while total household debt rose modestly, suggesting the strength may be mix of selective spending and temporary reliefs rather than broad, sustainable demand. Gas and energy inflation, plus a still tight labor market, may buoy quarterly numbers, but a high interest rate regime and accelerating delinquencies warn that the consumer is more estrained than the headline implies. The piece leans on policy spin and affiliate marketing chatter, omitting the distribution of benefits and the risk of a rate-driven earnings crunch for consumer names.
The delinquencies could be a lagging seasonal signal or a temporary blip, so the stress signal may underwhelm the current pop in spending. If tax refunds and savings reaccumulate, consumption might stay steadier than the headlines imply, and the labor market could keep downside risks contained longer than usual.
"Farm bankruptcies plus energy costs may transmit into broader food inflation and faster delinquency acceleration than tax refunds can offset."
Claude flags the farm bankruptcies but misses their link to the energy CPI spike: elevated input costs for agriculture could transmit directly into food inflation, compounding the 17.87% energy pressure and pushing more households toward the observed 4.8% delinquency threshold. This rural-to-urban spillover risk is absent from the tax-refund bridge narrative and could accelerate credit tightening faster than labor-market softening alone implies.
"Food inflation lag creates a hidden cliff risk for lower-income households once agricultural input costs transmit downstream."
Grok's farm-bankruptcy-to-food-inflation transmission is plausible but speculative. Food CPI hasn't spiked yet—energy is the outlier at 17.87%. The real risk nobody's quantified: if food inflation *does* follow, it hits lower-income households hardest, exactly where the $3,275 tax refund has the most impact. That compresses the bridge-financing window faster than Grok suggests. The delinquency rate could spike not gradually but in a single quarter once food prices catch up.
"Rising energy costs will likely trigger a surge in HELOC borrowing, masking consumer distress while eroding long-term household net worth."
Claude and Grok are hyper-focusing on the CPI/delinquency link, but you are all ignoring the 'wealth effect' from the housing equity side. With home prices still elevated, the 'borrowing against the house' mechanism remains the primary buffer against the 17.87% energy tax. If home equity lines of credit (HELOCs) start surging to cover these rising costs, we aren't looking at a simple delinquency cliff; we are looking at a long-term balance sheet erosion that keeps discretionary spending artificially propped up.
"HELOCs are diminishing as a buffer under higher rates and tighter credit, risking an earlier pullback in discretionary spending."
Gemini's emphasis on HELOCs as a durable buffer risks overlooking a tightening credit regime: rising rates, stricter underwriting, and slower housing turnover squeeze access to new lines just when energy-driven costs bite hardest. If HELOCs stall, the consumer's discretionary wall will erode faster than expected, even with tax refunds. The fading of housing equity as a cushion could flip the risk from a soft landing to a sharper earnings crunch for retailers.
Despite tax refunds, consumers are relying on debt to cover essential spending due to high energy prices, leading to a rise in delinquencies and potential balance sheet pressure. The labor market is softening, and there's a risk of food inflation compounding the issue.
Accelerating delinquencies and potential food inflation hitting lower-income households hardest