Ignoring Plunging Confidence Risks Repeating the Great Depression's Errors

Anxiety has taken root across America, gripping households and businesses alike. Federal Reserve Chair Jerome Powell recently highlighted this unease, noting that widespread concerns are prompting people to delay major decisions, from home purchases to business expansions. If these fears persist, Powell warns, the economic fallout will surface in data within weeks or months. The numbers already paint a stark picture: the Conference Board’s Consumer Confidence Index dropped to 86.0 in April 2025, a level not seen since the early days of COVID, while business optimism falters under the weight of tariff uncertainties and borrowing costs hovering near 7%.

This moment reflects more than fleeting worry. Families are skipping essentials like meat and dairy to make ends meet, while small businesses, rattled by unpredictable trade policies, hesitate to grow or hire. The Expectations Index, a critical measure of future optimism, sank to a 13-year low of 54.4, a warning sign that recessions often follow. When confidence erodes, spending stalls, and the economy grinds to a halt. How can we pull back from this brink before the damage deepens?

The path forward demands bold, people-centered policies. Advocates for decisive government action see this as a pivotal opportunity to protect vulnerable families and restore faith in the future. Waiting for markets to self-correct, as some suggest, ignores the urgent needs of workers and communities. Their cautious approach, rooted in fiscal restraint, overlooks the human cost of inaction and risks prolonging this economic paralysis.

History offers clear lessons. The prolonged suffering of the Great Depression stemmed from delayed responses, and the 2008 recovery faltered when stimulus efforts fell short. Today, with confidence teetering on the edge, repeating those errors would be unforgivable. The stakes—jobs, livelihoods, and opportunities for millions—demand urgency and vision.

We need policies that prioritize families and workers, not abstract market signals. Decisive action can break this cycle of fear, but only if we reject timid half-measures and embrace a strategy that puts people first.

Economic uncertainty reshapes lives in tangible ways. Low-income households, squeezed by rising prices, are cutting back on basics, opting for cheaper goods to stretch their budgets. Businesses, wary of tariffs and erratic trade policies, are scaling back ambitions. Late 2024 saw machinery and equipment spending fall 7.8%, while job openings hit a yearly low. Companies like UPS and Intel announced over 105,000 layoffs in April 2025, with federal job cuts adding to the toll. These are not just statistics; they represent families losing security and workers facing an uncertain future.

The Federal Reserve’s choice to hold interest rates at 4.25–4.50%, citing tariff-driven inflation risks, has deepened this gloom. Research since the 1970s confirms that sustained drops in consumer and business confidence, like those we’re witnessing, foreshadow weaker GDP growth and rising unemployment within months. The Expectations Index’s plunge below 80 signals a recessionary risk. Why, then, are we hesitating to act decisively?

Advocates for robust fiscal intervention propose a clear solution: direct stimulus payments, extended unemployment benefits, and investments in infrastructure and clean energy. These measures would bolster demand, support struggling households, and encourage businesses to invest. Historical successes, like the New Deal’s job programs and the 2009 Recovery Act, demonstrate that targeted government action can stabilize economies and rebuild trust.

Some policymakers, however, favor minimal intervention, advocating for modest tax cuts or tariff adjustments. They argue that lean government fosters confidence, but evidence undermines their case. The 1980–82 recession showed that supply-side tax cuts did little to curb unemployment, and the 2001 tax rebates failed to counter post-9/11 uncertainty. Banking on market-driven solutions now, when families are tightening belts and businesses are freezing plans, invites further economic drift.

A clear strategy exists to counter this crisis: policies that empower people and restore optimism. Direct cash payments to struggling families would boost spending and ease financial strain. Expanded unemployment benefits would protect workers hit by layoffs, while investments in infrastructure and green technology would create jobs and signal long-term growth. Progressive taxation could fund these efforts, ensuring that those with the most resources help rebuild an economy that serves everyone.

These approaches draw on proven successes. The Social Security Act of 1935 and Great Society initiatives of the 1960s lifted millions and stabilized markets. The 2009 stimulus, though limited, preserved jobs and fueled recovery. With consumer confidence at multi-year lows and business investment projected to grow just 3.4% in 2025, we need that same resolve today. Incremental steps will not suffice.

Critics of bold action raise concerns about deficits and inflation, but history counters their caution. Deficit spending during crises, like the post-World War II boom and post-2009 recovery, has driven growth. Inflation risks can be managed through careful monetary policy, not by withholding investment. The greater danger is inaction, which could entrench low confidence, stall growth, and widen inequality.

America faces a defining moment. The anxiety gripping households and businesses, reflected in a consumer confidence index of 86.0 and mounting layoffs, signals a critical need for action. This is no time for half-hearted policies or blind trust in markets. We need leaders who will champion workers, support families, and rebuild an economy that lifts everyone.

Targeted fiscal policies—stimulus payments, job-creating investments, and robust safety nets—can break this cycle of fear. Decades of evidence, from the New Deal to the 2009 recovery, prove their effectiveness. Policymakers who act with courage and prioritize people will guide us toward a fairer, stronger future.

Will we seize this opportunity, or let fear chart our course? The answer depends on our willingness to act boldly, and the time to do so is now.