Breitbart Business Digest: Historic Divergence Between Democrat Despair and Republican Confidence Has Enormous Economic Stakes

The Collapse of Democrat Confidence in the Economy

Consumer sentiment improved slightly in late April compared with the preliminary reading earlier in the month. But in a far more important development, sentiment remains deeply depressed—and the division between Democrats and Republicans has reached historic, almost unimaginable levels.

According to the University of Michigan’s latest survey, the final reading of the Consumer Sentiment Index stood at 52.2 in April, up modestly from the mid-month figure but still the lowest since July 2022. Beneath the headline, the political breakdown tells the real story: sentiment among Democrats collapsed to 34.4, the lowest level ever recorded for any partisan group in the survey’s decades-long history.

The Expectations Index for Democrats—how they feel about the future—dropped to an astonishing 22.7. Independents also saw a sharp decline, falling to 46.2. Meanwhile, sentiment among Republicans soared to 90.2, the highest since the final months of Donald Trump’s first term.

In short, Democrats have never been this pessimistic about the economy, and Republicans are more confident than they’ve been in years.

This divergence isn’t just about politics. It’s about the future of the economy—and one side is going to be wrong.

Either Democratic fears are justified, and the economy is truly headed for trouble, or Republican confidence is justified, and the current gloom is a massive misreading of economic reality. Or perhaps both sides are off-base, and the economy will just muddle through.

Sentiment is not just weak; it’s violently split along partisan lines. If Democrats are right, the ongoing stock market weakness is just the beginning of a much larger downturn. If Republicans are right, the market is offering one of the best buying opportunities of the decade.

The stakes could hardly be higher.

Your Financial Advisor Is Calling

The anxiety is already seeping beyond partisan surveys. Financial advisors across the country report being swamped with calls from worried clients. One advisor told Breitbart that the volume of concern now “dwarfs anything we heard during COVID.” Major brokerage houses are mobilizing their advisors to proactively call clients and reassure them, a rare move outside of full-blown financial crises. The panic is real—and it is intensifying, even as economic fundamentals such as job growth and consumer spending remain relatively strong.

Inflation expectations are another warning light flashing red. Consumers now expect prices to rise 6.5 percent over the next year, the highest reading since 1981. Over the next five years, expectations are up to 4.4 percent, the highest since 1991. The partisan gap is extraordinary: Democrats expect eight percent inflation over the next year. Republicans expect just 0.4 percent. Independents fall almost exactly at the national average, expecting 6.5 percent inflation.

All of these estimates are going to prove to be wrong. Inflation is not going to rise to eight percent over the next 12 months no matter how high the tariffs go or how much of the import duties businesses pass through to consumers. Even the independent estimate is too high. On the flip side of the coin, Republicans are loopy to expect almost no inflation at all.

What really seems to be happening is that consumers are not reporting their inflation expectations. Democrats don’t really think prices will rise eight percent over the coming year, and Republicans don’t really think inflation will fall to almost zero. Even independents are likely overstating where they expect inflation to go over the next year. Instead of estimating prices, people are using the survey to register their support or opposition to Donald Trump and his trade policies.

The University of Michigan’s director Joanne Hsu warned that consumers’ income expectations have weakened significantly. Nearly two-thirds of survey respondents now expect unemployment to rise over the next year. That seems realistic, given the fact that the Fed is in wait-and-see mode and unemployment is near historic lows. It really is more likely to go up than down. More than two-thirds expect their inflation-adjusted incomes to decline, which is less likely but within the realm of the possible.

There’s a bit of tension in the expectations figures. If unemployment were to rise and the economy to be as bad as Democrats think, it’s hard to imagine workers demanding the kind of raises that would be needed to fuel eight percent inflation. Absent massive fiscal or monetary stimulus, where is the inflationary impulse going to come from? Remember: tariffs are taxes. Raising them does not deliver the kind of spending power boost to consumers needed to raise inflation to the highest levels in four decades.

Mohamed El-Erian, one of the world’s most respected economists, noted today that the growing gap between soft data (like sentiment surveys) and hard data (like jobs and spending) could reflect a lag in transmission—or a bring-forward of consumption ahead of anticipated inflation. In other words, people might be spending now precisely because they fear prices will rise in the future. If that’s true, it raises the risk that later this year, consumption could fall off sharply—making recession risks more acute.

There’s another possibility—that the survey data is lagging the hard data. If the economy continues to perform well, at least some of the fears expressed by businesses and consumers about the future may lift. This would not be the first time in which the economy outperformed expectations.

We are at a crossroads. Either the overwhelming fear gripping Democratic voters will prove prescient or the confidence among Republicans will be vindicated, and today’s pessimism will go down as one of the great missed opportunities to buy into a strengthening American economy.

America hasn’t seen a partisan divide over the economy this sharp, or this consequential, in decades.