Navigating the Perilous Crossroads of State Capitalism and Economic Fragility

It feels as if we have entered a new era in financial markets, one where the government is actively taking equity stakes in private companies. From positions in Intel and MP Materials to a new golden share in U.S. Steel, the landscape of American capitalism is being fundamentally reshaped. This isn’t just a shift in policy; it’s a philosophical earthquake.

What are we to make of this embrace of state capitalism? I find it deeply confusing. The party that has long championed free markets and smaller government has suddenly become the standard-bearer for state intervention. The cognitive dissonance is staggering. One can only imagine the political firestorm that would have erupted had a Biden or an Obama administration pursued such a course. The reaction in Washington would have been immediate and explosive.

Beyond the political irony, I have profound concerns about the health of this development. It is not a healthy thing for corporate America. I am uncertain it is a healthy thing for the general economy. And I am quite sure it is not a healthy thing for the government of the United States to be so heavily vested in the fortunes of individual companies. The line between regulator and stakeholder becomes dangerously blurred, creating a system rife with potential for favoritism and misallocation of capital.

Flying Blind: The Economic Cost of a Government Shutdown

This conversation is happening against a backdrop of a federal government shutdown, an event that has left us flying blind in terms of economic data. This lack of information creates its own set of anxieties. What picture emerges when the instruments we rely on go dark?

My primary worry is threefold.

First, and most critically, is the data vacuum. We are being deprived of the government data the Federal Reserve relies on to navigate the economy. This is a particularly critical moment for the Fed. Recent surveys, like the one from the New York Fed this morning, show that consumer expectations for inflation are actually rising. As we know, inflation expectations can become a self-fulfilling prophecy. The idea that consumers anticipate inflation of three and a half percent or more a year from now is a significant challenge. This is a perilous moment for the Fed, data-wise, even before we consider the intense political pressures it faces.

The second worry concerns the human impact, specifically on federal workers and low-income consumers. Federal workers on the lower end of the pay scale are the ones feeling the immediate pinch of missed paychecks. They are the same cohort that has been consistently getting whacked by the pass-through effects of tariffs. These low-income consumers are in the foulest mood, possess the least disposable income, and we are already seeing signs that spending is falling off for the bottom sixty percent of the income spectrum. For those at the top, inflation is a nuisance, but it is bearable. For those at the bottom, it is a genuine crisis that forces difficult choices between essentials.

Finally, and most importantly on a macro scale, the shutdown signals a complete inability of the United States government to perform its most basic functions. It calls into question our capacity to manage what is, for now, the most important economy in the world. The situation has moved beyond parody into something far more concerning. It erodes global confidence and undermines the very foundations of our economic system.

The Fragile Foundation of Consumer Spending

What I find potentially more fragile than the shutdown itself is the underlying structure of our consumer economy. The data reveals a startling concentration: the top ten percent of earners are now responsible for half of all consumer spending. This creates a precarious situation.

If there is a shock—a slowdown, a correction in the AI-driven tech sector, or simply a change in sentiment—the top ten percent can easily reduce their spending by ten, twenty, or thirty percent. That kind of pullback would have a massive ripple effect. Conversely, the bottom ninety percent cannot cut their spending to the same degree because so much of their money is already allocated to essentials like food, housing, and transportation.

This leads to a worrying conclusion: we are increasingly fragile because a small number of people are essentially propping up the entire economy. This has been the trend for a long time, given that consumer spending drives roughly seventy percent of economic activity. But when that spending is so concentrated, and we are on the cusp of broader tariff impacts finally leaking through to the consumer psyche, we are left in a precarious position. This feels like a more perilous moment than many mainstream forecasters are willing to admit.

The Fed’s Instrument Panel Goes Dark

Amid a shutdown, the question of data becomes paramount. What are the most critical blind spots for the Fed, for investors, and for the average person?

The most valuable data we are not seeing is, without a doubt, the jobs report and the Personal Consumption Expenditures (PCE) index, which is the Fed’s preferred inflation gauge. The Fed employs a thousand PhD economists who have access to reams of private data, but this presents a twofold problem. First, private data is proprietary and not universally shared. Second, and more fundamentally, a lot of that private data is itself built upon the foundational public data the government provides.

When that foundation disappears, the Fed’s ability to make informed decisions is severely compromised. Think of the “soft landing” narrative that was dominant not long ago. The Fed had this economy on final approach. Then, tariffs came in, and the economic weather deteriorated. When the weather goes to hell and your instruments are unreliable, which is precisely where the Fed is right now, your options become severely limited. My sense is that the Federal Reserve is hanging on by its fingernails, navigating by instinct in a storm they cannot fully see.

Are We Flirting with Stagflation?

For those of us of a certain generation, there is a word that sends a chill down the spine, one that younger people may not fully appreciate: stagflation. It represents the worst of all economic worlds—the toxic combination of stagnant growth and high inflation.

Currently, we see inflation proving stubborn, with core inflation ticking up. Meanwhile, the jobs market appears shaky, existing in a state of low hiring and low firing, which makes it difficult for people to find new opportunities. We are witnessing two of the three key ingredients.

However, the most recent indicators for GDP growth are surprisingly strong, with trackers like the Atlanta Fed’s GDPNow suggesting growth of 3.8% for the current quarter. So, we are not in stagflation yet. But that GDP number itself is challengeable. The formula for GDP is Consumption plus Investment plus Government Spending plus Net Exports. The problem is that tariffs have caused a massive pull-forward of imports, which artificially skews the net exports component. So, while we have high inflation and a jittery labor market, the true strength of underlying economic growth is a open and critical question.

The Bizarre Circular Logic of Tariffs and Bailouts

Now, let’s delve into the mechanics of tariffs and trade. There has been talk of a potential $50 billion bailout for American soybean farmers, a group that has been thrown under the bus by the very tariffs intended to help them. This sum represents roughly half the revenue raised from those tariffs so far. The economics of this situation are as circular as they are destructive.

The reality is that soybean farmers have been shafted. I’ve spoken with a soybean farmer in Iowa who has had zero orders from China, which was once her largest market. Because of the trade war, China now sources its soybeans from Brazil and elsewhere. American farmers are facing a market catastrophe directly induced by the president’s policies.

Here is the circular logic at play: tariffs are taxes on American consumers and businesses. It is not China or Canada writing a check to the U.S. Treasury; it is American importers and, ultimately, American citizens. This revenue flows into the Treasury without congressional authorization—taxation without representation, in a very real sense. The administration then plans to take this tariff revenue, this tax on Americans, and redirect it to farmers to offset the catastrophe caused by the tariffs in the first place.

It is the economic equivalent of starting a fire and then charging the taxpayers for the cost of the fire department to put it out. It makes no logical sense. Furthermore, this business is not coming back. Even if tariffs were lifted tomorrow, China has established secure supply routes from South America. The American soybean farmer, as a major export force, is likely a thing of the past, a casualty of a policy that then uses its own ill-gotten gains to create a permanent subsidy.

The Limits of Economic Time Travel

The administration has announced new tariffs on a widening array of goods, from movies and furniture to medium and heavy-duty trucks. The political question is how far this can go before it alienates the political base that supports it. But the economic question is more profound.

The administration gives three justifications for tariffs: to revitalize American manufacturing, to generate revenue, and to protect American jobs. The problem is that these goals are mutually exclusive. If you successfully revitalize American manufacturing, you import less, and thus generate less tariff revenue. Furthermore, we simply do not have the workforce to fill many of the jobs the president is trying to protect.

I spoke with a furniture manufacturer in North Carolina, once the hub of American furniture making, who told me he could not find 5,000 woodworkers to hire if he wanted to. The skilled labor no longer exists here in sufficient numbers. The president is, in effect, trying to use policy to time-travel the economy back to the 1950s, ‘60s, and ‘70s. But the world has moved on. Global supply chains, automation, and a transformed labor force make this vision not just nostalgic, but fundamentally unworkable.

The Unseen Strength and Looming Challenge of AI

Despite these headwinds, I have been struck by the resilience of the American economy. If someone had laid out these policies a few years ago, I would have predicted a immediate recession. Yet, the economy has, so far, grinded on. One of two things must be true: either we are wrong about the impact of these policies, or the American economy is such a massive $30 trillion juggernaut that it can, for a time, absorb tremendous misdirection.

However, there are warning signs. The stock market is not the economy, and its current performance is not being driven by broad economic fundamentals. It is being driven by an explosion of investment in Artificial Intelligence, to the tune of hundreds of billions of dollars. The question of whether this level of spending is sustainable is very much up in the air.

The other catch is that these new AI data centers and tools are not going to employ a vast number of people. In fact, the primary economic impact of AI in the medium term is likely to be the displacement of a wide range of jobs. The flip side of this investment explosion is a potential crisis of employment and purpose. At some point, the lack of returns in real-economy terms from this massive AI investment will become apparent, and that reckoning will be a significant challenge for a market that has become dependent on the performance of just a handful of tech giants.

Consider the creative industries. A single major superhero film can employ over 3,400 people—more than the headcount of some major tech companies. The potential for AI to disrupt not just manual labor but creative and knowledge work is unprecedented. If the creative engine of Hollywood and other arts is machine-driven, it doesn’t just represent labor force destruction; it challenges the very nature of human-centric culture and consumption.

The Fourth Estate in an Age of Propaganda

This brings us to the role of the media, the institution tasked with making sense of these complex and turbulent times. The recent acquisition of major media outlets by wealthy individuals and the appointment of opinion journalists to lead legacy news divisions is a trend that should give every citizen pause.

Consolidation of media power is inherently challenging to a democracy. When a single individual controls a major movie studio and one of the big three broadcast networks, and then installs an opinion editor at the helm of that network’s news division, it represents a fundamental break with the tradition of an independent press. The “Tiffany Network” of Walter Cronkite, which stood for a certain sober, fact-based ideal, is being sacrificed at the altar of opinion-driven content.

This is a perilous moment for the republic. The importance of accurate, fact-based journalism that is unafraid to use precise language is critical. A credulous media, or one that hides behind euphemisms, will be the death of an informed citizenry. When a federal judge states that the administration’s position is “untethered from the facts,” our journalism must be willing to report that plainly. The instinct to “both sides” every issue, even when one side is demonstrably false, is a form of malpractice.

The business model for this kind of rigorous journalism is, to put it bluntly, challenging. The transition from a legacy, broadcast-driven model to a multi-channel, on-demand world is a difficult and expensive pivot. For public media, and for quality journalism broadly, the challenge is to convince stakeholders that investment in this new landscape is essential. We must stabilize new revenue streams to make up for the secular decline of the old, all while maintaining our core commitment to factual, contextual reporting. It is a difficult balancing act, but the survival of our democratic discourse depends on it.

A Personal Reflection: Service and the Path Ahead

My perspective on all of this is shaped not just by my career in journalism, but by my prior service. I spent eight years in the U.S. Navy, flying E-2C Hawkeyes off aircraft carriers. That experience instilled in me a profound sense of obligation and gratitude for this country, which is why I find the current politicization of our non-political institutions so disturbing.

Seeing active-duty military used as a backdrop for political rallies is deeply damaging to the professionalism and cohesion of the armed forces. The military is not “his generals”; it is the nation’s military, sworn to defend the Constitution. The idea of mandatory national service, in the military or in programs like Teach for America or AmeriCorps, is something I have long advocated for. We have lost a sense of shared purpose and understanding of one another. A program that brought young people from different backgrounds together in service to the country could help bridge the enormous gaps in our society that our current political environment so starkly reveals.

Personally, as my wife and I enter the empty-nester phase of our lives, and as I round the corner on a long career, these questions of legacy and next steps become more pressing. The economy, the media, the very fabric of our democracy feel like they are at an inflection point. The challenge for all of us, whether in our professional or personal capacities, is to bet on ourselves and on the principles we believe in. For me, that means continuing to strive for clarity and truth in economic reporting, even when it is inconvenient. For the country, it means remembering that our institutions, for all their flaws, are what separate a prosperous, functioning society from chaos. The work of preserving them has never been more important.

Kai Ryssdal is the host and senior editor of the public media program Marketplace, the nation’s most listened-to show on business and the economy.