Most Americans Are Cutting Back on Spending as Consumer Confidence Slides

Happy Tuesday! President Trump is looking to notch another win tonight in his campaign to exact revenge against perceived political enemies and those allies he deems insufficiently loyal. Trump endorsed the scandal-plagued Ken Paxton in today's Texas Republican Senate runoff against incumbent Sen. John Cornyn, even as many frustrated GOP lawmakers fume over the move, which they worry will imperil their agenda on Capitol Hill. Meanwhile, Trump was dealt a pair of setbacks today in his push to have Republicans redraw congressional districts to win more seats in November. Republicans in the South Carolina state Senate defied Trump to help block the approval of a new map, while a federal court blocked Alabama from using a redrawn map intended to give Republicans an edge in one more district.

Here's your evening update.

Most Americans Are Cutting Back on Spending as Consumer Confidence Slides

U.S. consumers are not feeling great these days. After a popular University of Michigan survey last week showed consumer sentiment falling to a record low, a survey released Tuesday by the Conference Board also shows that the economic mood declined this month, though not as severely.

"Consumer confidence edged downward in May as the inflationary impacts of the war in the Middle East intensified," said Dana M. Peterson, the organization's chief economist.

The Conference Board Consumer Confidence Index slipped 0.7 points to a reading of 93.1 (based on a scale in which the level for 1985 is 100). The index has been on a gradual downward trend since hitting highs of around 130 before the Covid pandemic, but it's still nowhere near the 25-year low recorded during the 2008-2009 recession.

Consumers in the survey cited rising oil and gas prices as a major concern, as well as war and geopolitics. Two-thirds of respondents said they are cutting back on spending due to high prices, with most reporting that they are buying fewer items and delaying major purchases. The outlook on the job market, on the other hand, remained positive overall, with more people continuing to say that jobs are plentiful than saying they are hard to get.

The survey also provides some evidence supporting the thesis that a K-shaped economy - marked by starkly different trajectories for different levels of wealth and income - is affecting the economic mood. Households earning more than $100,000 a year reported higher levels of confidence, while most other groups saw declines.

The bottom line: U.S. consumers aren't happy with the economy right now, and high gas prices and the Iran war are playing a major role. The University of Michigan survey, which focuses on personal financial conditions, shows a record drop in sentiment. The Conference Board survey is showing a less dramatic drop-off, though that may be due to the survey's emphasis on the conditions in the labor market, which has shown signs of resilience despite the threats to the economy from tariffs, war and inflation over the last year.

Congress Violated Law by Canceling Its Own Pay Raises, Court Says

Many members of Congress could be entitled to back-pay after years of denying themselves automatic cost-of-living adjustments.

Congressional salaries were set at $174,000 in 2009, and every year since then Congress has voted against allowing an automatic adjustment for inflation, worried about the political ramifications of giving themselves a raise.

A small, bipartisan group of current and former lawmakers filed suit, arguing that those repeated votes to freeze their pay violated the Constitution. In a preliminary ruling filed last week, U.S. Court of Federal Claims Judge Eric Bruggink agreed, writing that the votes effectively reduce lawmakers' compensation in violation of the 27th Amendment's prohibition on changing congressional pay until an intervening election has occurred.

Lawmakers have long clashed over their pay, with some arguing that congressional salaries need to be raised to better attract lawmakers from all walks of life and compete with private sector opportunities.

As Politico reports, House Speaker Mike Johnson noted last year that a member of Congress today is making 31% less than one in 2009, after adjusting for inflation. "Over time, if you stay on this trajectory, you're going to have less qualified people who are willing to make the extreme sacrifice to run for Congress," Johnson said at the time.

The impact of the judge's preliminary ruling is far from clear, with litigation reportedly likely to continue for months, and maybe even years. "There's some irony in the idea that maybe what's going to finally make this happen is Congress turning to an entire other branch of the government to do something that they themselves could choose to do, and in fact have decided not to," Molly Reynolds, director of governance studies at the Brookings Institute think tank, told Politico.

Ultimately, though, some plaintiffs in the case could be eligible for big checks. For example, veteran Democratic Rep. Steny Hoyer, who has served since the cost-of-living-adjustments law took effect, could be owed close to $420,000.

Op-Ed of the Day: California's Billionaire Tax

A multimillion-dollar political battle is playing out in California over proposed wealth taxes, including a ballot initiative put forth by a healthcare workers' union that calls for a one-time tax on billionaires of 5% of their total assets over five years. The tax is projected to raise about $100 billion in healthcare funding over five years - money that advocates say is desperately needed to counteract the effects of Trump administration funding cuts.

California Gov. Gavin Newsom opposes that ballot measure and has called it "badly drafted." Google founder Sergey Brin and other wealthy Californians have put millions into alternative ballot measures and vowed that they are leaving the state or will do so quickly if the 2026 Billionaire Tax Act is enacted.

In a New York Times op-ed published Tuesday, two of the economists behind the billionaire tax proposal make their case for the idea.

Emmanuel Saez of the University of California, Berkeley, and Gabriel Zucman of the Paris School of Economics write that the measure, if adopted in November, "would be the first tax targeted at the combined personal and business wealth of billionaires enacted anywhere in the world." They add that, because of the budget hole the state faces and several other factors, "California is an ideal place to test this idea."

The state has seen a remarkable rise in the fortunes held by its wealthiest residents. "The billionaire class in California includes roughly 250 households, a mere 0.001 percent of the state's families. Yet its wealth now amounts to more than half of California's entire annual economic output," Saez and Zucman write.

The economists argue that, because billionaires' wealth is largely held in stocks and other assets, the gains they generate over time don't get taxed unless those holdings are sold - but the billionaires can still benefit from the expanding asset base by borrowing at low interest rates. "Without a wealth tax, these tech barons will continue to hoard the rewards of the state's economic growth while its cities cut services and its workers lose health care," Saez and Zucman say. "This arrangement violates basic principles of fairness, deprives the government of revenue it needs for public services and fuels wealth concentration."

The economists also argue that the roughly $100 billion that the proposed tax would raise is far greater than the $4.1 billion the economists say California collected in income tax from its billionaires in 2025 - but just a fraction of the recent wealth gains of California's billionaires. "In the past three years alone, the total wealth of California's billionaires grew by a staggering 144 percent, to over $2 trillion," they note. "Taking such a small bite out of billionaires' exponentially growing tech wealth wouldn't doom Silicon Valley because the value of California's concentrated tech talent dwarfs the proposed wealth tax."

Read the full piece at The New York Times. And for arguments against the billionaire tax plan, see this recent piece by Noah Smith or this piece at Reason.

NASA Announces Missions for Moon Base

NASA on Tuesday released some new details about the $30 billion moon base it plans to build in just a few short years.

"The Moon Base will be America's and humanity's first outpost on another celestial world," NASA Administrator Jared Isaacman said at an event in Washington. "Every mission, crewed and uncrewed, will be a learning opportunity as we return to the lunar surface, build the infrastructure to stay, and master the skills required to live and operate in one of the most demanding and dangerous environments imaginable."

NASA announced a timetable for the first three missions in the moon base project:

• Moon Base I: Launching by fall of this year, the first mission will rely on Blue Origin's Blue Moon Mark 1 Endurance lander to start bringing materials to the lunar surface. Instruments will measure how rockets affect the lunar surface and explore the best way to identify specific locations on the moon.

• Moon Base II: Aiming for launch by the end of 2026, the second mission will use Astrobotic's Griffin lander to deliver more than 1,000 pounds of cargo to the lunar surface.

• Moon Base III: The third mission also aims to launch by the end of the year, using Intuitive Machines' Nova-C Trinity lunar lander to study the behavior of materials on the moon. Other nations will participate in this mission, including the European Space Agency and the Korea Astronomy and Space Science Institute.

NASA said it expects to announce more than a dozen missions this year. You can keep up to date with the developments at the project's new website.

Fiscal News Roundup

• Targets of Trump's Retribution Slam 'Slush Fund,' Saying They're the Real Victims of Weaponized DOJ – CNN
• Trump Fumes at Congress and Courts for Holding Up His Ballroom – Washington Post
• Attorney General Files Request to Resume Ballroom Construction, Citing Latest White House Shooting – CBS News
• Republican Congress Faces Major Pileup Before Midterms – Semafor
• South Carolina Senate Rejects Trump's Call to Redraw Congressional Map for Midterm Elections – Associated Press
• Trump Friction With GOP Senators May Imperil His Agenda, Senators Say – The Hill
• Members of Congress Won a Battle to Increase Their Pay. The War Will Go On – Politico
• As US Stock Market Hits New Highs, 2 of 3 Americans Are Cutting Back on Spending, Survey Shows – Associated Press
• Consumer Confidence Gauges Show Disenchantment, Yet to Different Degrees – Axios
• RFK Jr., States at Odds Over Cause of Obamacare's Enrollment Declines – Politico
• Trump Administration Proposes NDAs for Federal Employees to Stop Leaks – Associated Press
• Trump Declares Himself in Good Health After Physical Exam at Walter Reed – New York Times
• UFC Ring Construction Work Starts at White House to Celebrate Trump's Birthday – The Hill

Views and Analysis

• Where Trump's $1.8 Billion Payout Fund Gets Its Money and How It Could Work – Salvador Rizzo, Washington Post
• The Bond Market Is Telling Us the Free Lunch Is Over – Neil Irwin, Axios
• Bessent Has Limited Options to Halt Climb in Treasury Yields – Ye Xie and Chris Anstey, Bloomberg
• The New Oil Order That Could Emerge From an Iran Deal – Ben Geman, Axios
• The Case for California's Billionaire Wealth Tax – Emmanuel Saez and Gabriel Zucman, New York Times
• California's "Billionaire Tax" Is the Wrong Approach – Noah Smith, Noahpinion
• Deep Inside the Chaotic Politics of the California Billionaire Tax – Alex Thomas, New Republic
• $1.77 Billion for Your Thoughts? This War Is Worth Fighting – Jim Geraghty, Washington Post
• GDP Is a Flawed Measure of Prosperity. Alternatives Are on the Way – Lydia DePilis, New York Times
• Why US Support for Ukraine Must Continue – Irwin Redlener, The Hill
• Kevin Warsh's Internal Opponents Fire Away – Wall Street Journal Editorial Board
• New AI Models Raise Alarms Among Health Care Leaders – Rebecca Adams, Washington Post
• Cheaper, Alternative Health Plans Are Having a Moment, but Critics Urge Caution – Sarah Kwon, KFF Health News
• The Case for Investing Trump's Tariff Refunds Into Early Childhood – Melissa Boteach and Elizabeth Gaines, The Hill
• This Is the Reality of European-Style Social Spending – Washington Post Editorial Board
• Abdul El-Sayed Doesn't Understand How Medicare Works – Washington Post Editorial Board