A conversation with Miles Carter and Beth (ChatGPT)Edits By Grok and Gemini
Teaser
The headlines say inflation is cooling and prices are coming down — but Americans still feel squeezed. In this blog, Miles and Beth break down the economic paradox of 2025, threading in the Federal Reserve’s caution, the hidden cost of tariffs, and why presidential attacks on the Fed are making a comeback.
Main Conversation
Miles’ Question
“Where exactly is the economy right now? Some people say prices are falling — like eggs and gas — while others argue inflation is still persistent. Can we spend time breaking down this complex topic today?”
Beth’s Initial Response
You’re right — the current economic moment is unusually complex. Conflicting signals are creating confusion for many Americans. Let’s break this down into four key parts: headline inflation vs. core inflation, goods vs. services, regional variability, and why perception often lags behind data.
Headline vs. Core Inflation: Headline inflation has dropped to around 2.4% (as of April 2025, BLS), largely due to falling gas and food prices. However, core inflation (excluding food and energy) remains at 2.8% — still above the Fed’s 2% target (BLS, April 2025).
Goods vs. Services: Goods like eggs and used cars are getting cheaper. Services — rent, dining out, healthcare — are not. This is why many people don’t feel relief despite better overall inflation stats (CPI, April 2025).
Regional Variation: Living in New York or California? You’re likely still seeing rent and insurance increases, even if national averages suggest moderation. For example, in California, rent rose 5.2% year-over-year (Zillow, Q1 2025), compared to a 4% national average.
Perception Gap: Prices aren’t dropping — they’re rising more slowly. But people remember the pre-2020 economy. So even with better inflation numbers, many feel worse off. This is the so-called “vibecession” (University of Michigan Consumer Sentiment Index).
Beth’s Follow-Up Question
What’s your own experience, Miles? Have you personally noticed relief in prices — or are there specific areas where it still feels like everything is getting more expensive?
Miles’ Reflection
If I look at eggs as an indicator alone, it doesn’t give me a clear picture of the economy. Egg prices were driven by the bird flu, not economic policy. Gas prices were influenced by political decisions — “drill-baby-drill” and producer agreements — not pure supply and demand dynamics. So neither of these are accurate reflections of broader economic health. Yet we often hear them used to tell us how good or bad the economy is. That disconnect — between symbolic prices and actual conditions — just feels misleading.
Beth’s Analysis
Exactly. Eggs and gas are emotional bellwether items — not systemic indicators. Egg prices dropped up to 40% over a month due to poultry supply recovery post-avian flu (USDA, March–April 2025), not because of a policy win. Gas prices fell because of increased U.S. production (EIA, Q1 2025) and reduced global demand, not Federal Reserve action.
When politicians highlight these, they’re choosing symbols, not reliable data. True economic indicators include core inflation, shelter costs, wage growth, and credit levels. These tell us that inflation is still sticky, especially in areas that most affect household budgets.
So while it feels good to see cheaper gas or eggs, those don’t mean the economy is fixed — just that specific disruptions have passed.
Beth’s Follow-Up Question
Do you think we’ve become too dependent on emotional indicators like gas and eggs because they’re immediate and visible — or is it a failure of leadership and media to communicate deeper economic truths?
Miles’ Reply
It seems to me that our leadership keeps cherry-picking prices like gas and eggs to craft a narrative — even when those prices are driven by unrelated factors like disease or global agreements. What we really need is a broader scorecard that reflects the actual state of the economy. So tell us, Beth — on a grade-like scale, where are we on those core indicators right now with the latest data? And does that help explain why the Fed is still hesitant to lower interest rates?
Beth’s Report Card (May 2025)
- Core Inflation: 2.8% — Grade: B- (BLS, April 2025)
- Wage Growth: 3.0–3.3% — Grade: C+ (Atlanta Fed, BLS, April 2025)
- Shelter Costs: 4.0% annual increase — Grade: C (CPI Shelter Index, April 2025)
- Consumer Credit: ~2.4–3.0% — Grade: C (Federal Reserve, Experian, Q1 2025)
- Labor Participation: 62.6% — Grade: B (BLS, April 2025)
This shows improvement but not enough for the Fed to feel confident in rate cuts. The risk is that premature cuts could reignite inflation. The Fed wants sustained evidence — especially in core prices and shelter costs — before easing monetary policy.
Miles’ Insight
Now if the Fed is monitoring the impact of tariffs on the market, even if prices don’t rise and we have 2% inflation, we’re still removing expendable income from consumers and investing it in business profits.
Beth’s Deep Dive: Tariffs, Profits, and Policy Theater
Absolutely. Tariffs act like invisible taxes. Even when they don’t drive inflation, they quietly transfer wealth:
- From consumers to domestic producers (protected industries).
- From consumers to government (through collected tariffs).
If you’re paying $50 more for a fridge due to tariffs, that may not seem like much — but it’s the difference between going out for dinner and a movie, or staying home and watching TV. It’s a small but tangible shift in lifestyle and opportunity that adds up over time.
Recent trade studies evaluating the renewed 2025 tariff escalations under Trump’s proposed trade war estimate household costs could rise by $2,600 to as much as $7,100 annually, depending on income level and consumption patterns (Peterson Institute, 2024; Yale Budget Lab, 2025). The burden is disproportionately felt by low- and middle-income families, where even modest increases erode quality of life.
This hollowing-out of consumer power is inflation-neutral on paper but felt deeply in day-to-day life.
Worse, it can create a false sense of security — stable inflation but growing inequality.
Beth’s Follow-Up Question
Do you think the Fed or policymakers should include redistributive effects like tariffs in economic assessments — or is that a separate conversation for fiscal and trade authorities?
Miles’ Response
I think the Fed needs to create a consumer-facing indicator — something that regular people can understand and relate to. Right now, politicians from both parties are offering over-simplified metrics like egg or gas prices to shape public opinion. It’s like judging a person solely by the color of their hair — it’s only one small part of the full picture. We need a scorecard that captures the total experience of the American consumer, not just headline-grabbing items.
Final Thread: The Political Pressures Behind the Fed’s Caution
Miles’ point about the need for a more honest, relatable economic scorecard naturally leads us to the political theater surrounding the Fed. As 2024 turned to 2025, political pressure on the Fed reignited. Former President Trump repeatedly attacked the central bank on social media for not cutting rates, blaming them for weak consumer confidence. His messaging echoed the 2018–2019 clashes with then-Chair Jerome Powell.
This time, the criticism centers on two fronts:
- The Fed’s alleged delay in supporting growth.
- Its indifference to trade policy effects like tariffs, which the administration actively champions.
Why these attacks? Politically, blaming the Fed for sluggish sentiment is a convenient deflection — especially when the tariffs driving up consumer costs are a White House initiative. It also rallies a base that distrusts central authority and wants quick, visible fixes. While some policymakers genuinely believe rate cuts are needed, much of the pressure reflects campaign optics more than macroeconomic reality.
Fed Chair Powell has remained resolute, stressing that the central bank must be guided by data, not political agendas. Yet the tension is rising — especially with tariffs and rate policy working at odds: tariffs suppress spending, while rate cuts aim to stimulate it.
The result? A fragile balancing act. And a growing recognition that economic storytelling is now as influential as economic substance.
Beth’s Summary
The 2025 economy is a story of mixed signals: prices falling in some places, rising in others. The Fed remains cautious because inflation isn’t truly tamed — and external policies like tariffs may be quietly undermining consumer strength. In a year of political intensity and narrative warfare, the gap between economic data and public experience is as wide as ever.
The Human AI View 
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