By Haddon Libby
For the Trump administration, a “soft landing” for the economy was never the goal. While most economists hoped for a gentle glide path to 2% inflation from peaks reached in 2022, the current White House has set its sights on a far more aggressive horizon: “The Golden Age of America.”
The objective is not just stability, but explosive, private-sector-led growth. Unfortunately, the administration’s high-octane ambitions are colliding with a stubborn reality. The latest numbers from the Bureau of Economic Analysis (BEA) confirm a significant speed bump in that the U.S. economy advanced at a 0.7% annual rate in the final quarter of 2025.
Blame the Democrats!
The White House has been quick to push back against the “stagflation” label. Stagflation is an economic condition characterized by the simultaneous occurrence of stagnant economic growth, high unemployment, and persistent inflation. In recent statements, officials have called the 0.7% figure a “self-inflicted wound” caused by the 43-day government shutdown late last year. Deputy Press Secretary Kush Desai noted that despite this “Democrat Shutdown” dragging down the GDP numbers, the administration’s agenda of tax cuts, deregulation, and energy abundance is “poised to surge even higher in 2026.”
Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick are already looking past the stall and the war with Iran. Lutnick has boldly forecasted that the U.S. will exceed 5% growth in early 2026 and might reach 6% by year-end. If that occurs, it will be the fastest growth rate in decades.
K-Shaped Collision
For the 70% of Americans currently struggling to afford basic necessities, a 6% GDP target feels worlds away from their own realities – particularly now with gas prices surging. We are witnessing a collision between the administration’s “Golden Age” projections and a “Stagflation Signal”. While the White House touts a “roaring economy,” the unemployment rate is heading toward 5%.
Despite the administration’s “Day 1” promise to end inflation, inflation is trending toward 3.1%. Rising energy costs caused by the Iran War are acting as a “stealth tax” on the very workers the administration has promised to champion.
The “America First” Gamble
The Trump strategy to break this Stagflationary cycle is a “Big Bang” of supply-side moves. The administration is banking on a massive increase in domestic drilling to “slash energy costs,” which, they argue, is the only way to truly defeat inflation. So far, U.S. oil companies have been hesitant to oblige and erode profit margins.
New tariffs intended to revitalize American manufacturing are serving as a tax on the American consumer. The deregulation push by the administration is hoped to move GDP from its current 0.7% level to something in the 3-4% range
The Great Divide
The 8.1% Misery Index is now the ultimate scorecard. The Misery Index is calculated by adding unemployment and inflation together. In the past, a number below 10% was viewed as an okay number with a good number between 6 and 7 (insert hand moves). Things changed following COVID as the U.S. now had a K-shaped economy. This meant that about 30% of Americans saw their financial position improve greatly as if they were in the top line of the K. The other 70% of Americans end up on the bottom line where it is becoming harder and harder to make ends meet.
To the Trump administration, this 8.1% number is a temporary glitch caused by political obstruction and “expert” pessimism. To the 70% of Americans on the lower arm of the K-shaped economy, it is a daily reality of declining purchasing power and increased difficulty in paying for the basics.
If Secretary Lutnick is right (which he isn’t) and growth hits 6%, Misery will plummet as the economy “outgrows” its problems. If inflation stays at 3% (or higher) while unemployment hits 5%, the “Golden Age” may remain a projection while the “Stagflation Trap” becomes the reality. With an ever-increasing use of AI agents in business, expect the unemployment level to move higher until new AI-related jobs grow at a faster pace than AI-eliminated jobs.
Haddon Libby is the Founder and Chief Investment Officer of Winslow Drake Investment Management. For more information, please visit www.WinslowDrake.com.
