Summary and Key Points: Total United States household debt has reached $18.8 trillion, with credit card balances climbing to $1.28 trillion, according to the New York Federal Reserve. Only 44 percent of Americans can cover a $1,000 emergency from savings, and nearly one in three Buy Now, Pay Later users have started putting groceries on installment plans. The Philadelphia Federal Reserve reports credit card accounts making only minimum payments are at the highest level in more than a decade. Meanwhile, 99 percent of CEOs plan AI layoffs within two years, and the Strait of Hormuz disruption could keep fuel prices elevated well into 2027.
Donald Trump and the Inflation Challenge
President Donald Trump participates in the swearing-in ceremony for Administrator of the Centers for Medicare and Medicaid Services Mehmet Oz, Friday, April 18, 2025, in the Oval Office. (Official White House Photo by Molly Riley)
Donald Trump speaking with supporters at a campaign rally at Veterans Memorial Coliseum at the Arizona State Fairgrounds in Phoenix, Arizona. Credit: Gage Skidmore.
When President Donald Trump ran for office for a third time, he promised relief from inflation. A year and a half on, and American households are still relying on credit cards and personal loans to maintain ordinary living standards as another global energy shock now threatens to push prices even higher.
That’s not to say inflation hasn’t cooled. It has. The Biden administration’s 9% highs have not been seen since then, and prices have never returned to their pre-pandemic levels. In fact, they may never return to those levels at all.
And, according to the New York Federal Reserve, total U.S. household debt reached $18.8 trillion earlier this year, while credit card balances climbed to roughly $1.28 trillion as consumers continue borrowing to absorb rising living costs. At the same time, the disruptions in the Strait of Hormuz are once again driving fears of higher gasoline and transportation costs, and, ultimately, an increase in the cost of various goods and services.
The result is a growing sense among many Americans that even full-time work is no longer enough to comfortably absorb ordinary expenses. In fact, it’s not even a sense – it’s a reality being experienced by families across the country.
Inflation Slowed, But Prices Never Went Back Down
One of the biggest misunderstandings about inflation is the assumption that lower inflation means lower prices. It does not. It simply means prices are rising more slowly than before. Americans are not comparing prices to last month, though. They are comparing them to what life cost them four, five, or even six years ago, before the pandemic.
Groceries remain substantially more expensive than they were before 2021. Auto insurance costs have surged nationwide. Utility bills remain elevated in many states. Rent prices are dramatically higher than pre-pandemic levels in much of the country. Even where wages have increased, many households feel those gains have already been swallowed by cumulative inflation.
The New York Fed also reported a “remarkable increase in food insecurity” this year, noting that the problem was affecting “lower-educated and lower-income households and households with young children.” But it’s not just low-income households feeling the pressure – middle-income Americans are feeling it now, too. While many economic indicators appear relatively stable (for example, unemployment remains relatively low and overall GDP growth has avoided outright contraction), consumer confidence continues to slide. Inflation may have slowed statistically, but the financial shock of permanently elevated prices has never truly disappeared – and new challenges are about to make it worse.
The Wheel of Credit
The New York Times recently described Americans as becoming trapped in a “hamster wheel of credit,” and the phrase accurately captures what is happening across much of the country. Consumers are not borrowing for luxury spending or discretionary purchases, but for ordinary recurring expenses like groceries, gas, utilities, or even rent. The cycle is this: households use credit cards or installment plans to absorb rising costs, spend the following month trying to pay down those balances, and then borrow again when the new bills arrive. The wheel keeps moving, but the families never make financial progress without finding new sources of income.
According to Bankrate’s 2025 Annual Emergency Savings Report, only 44% of Americans said they could cover a $1,000 emergency expense from savings, while more than one-third said they would need to borrow the money somehow. Meanwhile, a LendingTree survey published this year found that almost a third of “Buy Now, Pay Later” (BNPL) users had used the services to purchase groceries, and that one in four BNPL users had three or more active such loans at one time.
Things Don’t Look Good for Struggling Families
Americans are also falling behind on their ordinary monthly obligations. The Philadelphia Federal Reserve warned last year that the share of credit card accounts making only minimum payments had climbed to the highest level in more than a decade, a sign that many households are no longer meaningfully reducing balances at all. At the same time, delinquency rates on auto loans and lower-tier consumer debt continue to rise, particularly among working-class borrowers already struggling with housing and food costs.
The problem is not simply the debt itself, but the fact that credit is being used as a substitute for wage growth. Combine that with a potential oil crisis on the way (if we’re not already amid one), and 99% of CEOs planning AI layoffs over the next two years, things are not looking good for those families who are struggling.
What Happens With Hormuz?
Meanwhile, the war in Iran continues to put pressure on global economies. Around 20% of the world’s oil normally passes through the Strait of Hormuz, and even if a diplomatic deal reopened the waterway tomorrow, the economic damage would not disappear overnight.
Gulf refinery shutdowns caused by military strikes, reduced tanker traffic, and shipping insurance rates could take months to normalize. It could take months for refineries to fully restart once shipments continue – if, indeed, they continue – and fuel and transportation costs could well remain elevated into 2027.
Between debt, jobs, and a possible oil crisis, it’s hard to imagine the Trump administration’s promised “Golden Age” arriving any time soon.
About the Author: Jack Buckby
Jack Buckby is a British researcher and analyst specializing in defense and national security, based in New York. His work focuses on military capability, procurement, and strategic competition, producing and editing analysis for policy and defense audiences. He brings extensive editorial experience, with a career output spanning over 1,000 articles at 19FortyFive and National Security Journal, and has previously authored books and papers on extremism and deradicalization.
