Brian Dake

The University of Michigan Surveys of Consumers on Friday released its consumer sentiment index which dropped from 71.7 in January to 64.7 in February. That’s the lowest reading since November 2023 and was weaker than the preliminary reading of 67.8.

Surveys of Consumers Director Joanne Hsu noted that while sentiment fell for both Democrats and Independents, it was unchanged for Republicans, which she wrote was reflective of “continued disagreements on the consequences of new economic policies.”

Hsu added that the current reading of inflation expectations is “now well above the 2.3-3.0% range seen in the two years prior to the pandemic.”

Over the next five years, households said they expect inflation to run at 3.5%, which was the highest since 1995 and an increase from 3.2% in January. Hsu noted that was the largest month-over-month increase in the metric since May 2021.

“For both short- and long-run inflation expectations, this month’s increases were widespread and seen across income and age groups. Inflation expectations rose this month for Independents and Democrats alike; they fell slightly for Republicans,” Hsu wrote.

Permits for hundreds of energy projects may be fast-tracked by the U.S. Army Corps of Engineers under the Trump administration, including plans for a pipeline project in the Great Lakes and a fossil fuel plant in Superior.

The Army Corps designated the projects as eligible to receive an emergency permit following President Donald Trump’s executive order that declared a national energy emergency. They include Canadian energy firm Enbridge’s proposal to build a $750 million tunnel to house Line 5 in the Straits of Mackinac, which connects Lakes Michigan and Huron. A roughly $1 billion gas-fired power plant in Superior proposed by several utilities is also on the list.

The Army Corps is reviewing federal permits for both projects under the Clean Water Act and River and Harbors Act. An Army Corps spokesperson said the agency is reviewing permit applications in relation to Trump’s executive order. No details were shared on how the list was developed or how it would affect permitting.

The agency has previously fast-tracked permits in emergencies, such as natural disasters. Federal regulations say the Army Corps can expedite permits if it would create “an unacceptable hazard to life, a significant loss of property, or an immediate, unforeseen, and significant economic hardship” to follow the agency’s standard process.

Enbridge’s Line 5 runs 645 miles and carries up to 23 million gallons of oil per day from Superior to Sarnia, Ontario. In a statement, Enbridge spokesperson Juli Kellner noted the company first applied for a permit with the Army Corps in 2020 for the proposed tunnel, calling it critical energy infrastructure. The project aims to reduce the risk of spills in a 4-mile span of the 72 year-old Line 5, which has been damaged by anchor strikes in recent years.

“However, after nearly five years, the project still awaits action by the U.S. Army Corps of Engineers on an environmental impact statement and a permitting decision,” Kellner said.

President Trump signed an executive order Tuesday aiming to expand the White House’s authority over various independent regulatory agencies.

Trump issued an order titled “Ensuring Accountability for All Agencies” that would require independent agencies such as the Securities and Exchange Commission, the Federal Trade Commission and the Federal Communications Commission to submit proposed regulations to the White House for review.

The order also calls for the head of the Office of Management and Budget, currently Russell Vought, to review the agencies’ spending to ensure it aligns with the president’s priorities.

“These regulatory agencies currently exercise substantial executive authority without sufficient accountability to the President, and through him, to the American people,” the order states. “Moreover, these regulatory agencies have been permitted to promulgate significant regulations without review by the President.”

The executive action is expected to trigger a legal battle, as Congress established that the agencies affected by the order would operate with some independence from the White House.

Governor  Tony Evers Tuesday night called for boosting funding to Wisconsin schools by $3.4 billion, creating a new program to audit health insurance companies that deny too many claims and passing a series of tax cuts.

The tax cut package totals $2 billion in relief via cutting local property taxes, eliminating the income tax on tips, and exempting products such as diapers and utilities from Wisconsin’s sales tax. And he called for a new individual tax rate that would hit millionaires. He again called for a cap on a tax break for manufacturers. The moves would generate more than $2 billion in new revenue for the state.

Altogether, Evers’ plan would spend $50.5 billion in general purpose revenue, money the state collects through things like individual, sales and corporate taxes. That’d be an increase of 18.1%, leaving the state with a gross balance of $646.3 million in the general fund at the end of 2025-27.

When factoring in federal money and other sources of revenue, the Evers budget would spend $118.9 billion, an increase of 20.3%.

Assembly Speaker Robin Vos quickly dismissed Evers’ calls for “wasteful new programs,” additional regulations and income tax increases as “dead on arrival.”

GOP legislative leaders said they will work off current law, not Evers’ proposal, as they put together their version of the two-year budget. They have made similar moves before.

“As we have done in the past, we’ll take his irresponsible budget, turn it into a responsible budget that invests in education and invests in health care, but doesn’t overspend and grow the size of government,” said Senate Majority Leader Devin LeMahieu, R-Oostburg.

The head of the MMAC says a recent air quality classification change for southeastern Wisconsin is likely the “most significant threat” to the regional economy, and could drive away companies looking to set up shop in the area.

Speaking Friday during an online briefing, Metropolitan Milwaukee Association of Commerce President Dale Kooyenga said the group is already seeing the consequences of the EPA’s classification change.

The agency in January changed a regional ozone nonattainment classification from “moderate” to “serious,” creating new emissions requirements for industry in the region. But the MMAC, chambers of commerce and economic development groups in the state are fighting the change, arguing the vast majority of the emissions that led to the change are coming from outside of Wisconsin.

The MMAC in January announced a coalition to counter the EPA’s classification change. The group is spearheading a national lobbying effort to amend the Clean Air Act of 1963, tapping Michael Best Strategies for the endeavor.

MMAC leadership has been meeting with the state’s congressional delegation to discuss the issue, and Kooyenga said both U.S. Sens. Tammy Baldwin, D-Madison, and Ron Johnson, R-Oshkosh, “in particular have been very helpful.” He added U.S. Rep. Bryan Steil’s 1st Congressional District is “arguably most proportionately impacted” by the change; he said the Republican lawmaker from Janesville will likely take a leading role in addressing it.

For member businesses in the region, Kooyenga said “the cost and uncertainty” associated with the new classification is a major concern. The “serious” ozone classification for the area carries increased regulatory burdens, according to Michael Best Partner Todd Palmer, affecting up to 450 industrial emissions sources.

Palmer described the new requirements as “Draconian,” noting companies that want to move to or expand in the region will need to deploy advanced emissions controls “without any consideration of cost,” among other restrictions.

Under an earlier, lower EPA classification, many industrial sources in the region were permitted at 99 tons of certain emissions or less, as the major source threshold under the federal program was 100 tons. But the latest classification shift moved that threshold down to 50 tons, according to Palmer.

“When that happened, all of those sources that received permits at 99 tons instantly became major sources under the federal Clean Air Act, yet they did not have permits that limited them to emissions less than that new 50-ton threshold,” he said. “They were essentially caught in this regulatory snafu, where they hold permits that they think keep them out of the federal program, but in fact no longer do.”

Palmer expects most affected companies “have no idea” that this has happened to them. For those that need new permits, some may take only a few weeks, but others could take up to 18 months, he said.

“All that time, they’re out of compliance. The maximum penalty for violating the Clean Air Act is over $100,000 per day,” he said. “They don’t seek that amount of penalty when they sue these companies, if they were to sue them, but that’s the maximum exposure they have.”

The framework for the higher classification comes from the Clean Air Act’s National Ambient Air Quality Standards, which define the maximum acceptable level of pollution in the air, Palmer explained Friday. But he said controlling emissions within metropolitan Milwaukee “has little, if any” effect on the ozone levels for the region, adding “it really is all attributable to transport.”

Palmer said Lake Michigan acts as an “ozone cooker” for the upper Midwest, as environmental factors drive pollutants from Chicago, Indiana and elsewhere upward over the lake, where they mix to form “extremely high levels” of the pollutant. That ozone then is blown onshore by lake breezes and picked up by monitors along the shoreline.

As Governor Tony Evers puts the finishing touches on his next state budget proposal, projections show Wisconsin is expected to see a surplus of around $4.3 billion.

It sets the stage for a familiar battle, with the Democratic governor calling for investments in priorities like education and child care and leaders of the Republican-controlled state Legislature calling for tax cuts.

The $4.3 billion projection comes from an analysis by the nonpartisan Wisconsin Legislative Fiscal Bureau, which suggests state tax revenues will be nearly $895 million higher than expected throughout the next two-year budget cycle. The report credits that to a national economy that grew faster than expected in 2024 and modest increases in state sales tax revenue.

Governor Evers will give his two-year budget address on Tuesday, but he’s already given indications of how he’d like to spend some of the state’s excess money. During his State of the State Address on January 22, Evers vowed to put hundreds of millions of dollars toward student mental health services, child care and violence prevention.

After Evers’ speech, Wisconsin Assembly Speaker Robin Vos, R-Rochester, said it amounted to “a whole lot of things that are not going to happen in Wisconsin.”

The Republican-controlled Joint Finance Committee has all but scrapped Evers’ recent budget proposals and written their own. In a statement reacting to the state’s revenue projections, Sen. Howard Marklein, R-Spring Green, and Rep. Mark Born, R-Beaver Dam, who co-chair the panel, said they are encouraged but cautious about the future.

“Our cost-to-continue remains substantial and even with these expected revenue increases, we must remain vigilant when crafting a budget for Wisconsin,” their joint statement said.

They also said the multi-billion dollar surplus “remains here in the state coffers instead of the pockets of hard working Wisconsinites” because Evers has vetoed the bulk of GOP tax cut legislation.

“These estimates show that not only can we continue to fund our obligations and priorities, but that we can also give substantial tax relief to hard-working Wisconsinites,” they said.

Consumers sharply curtailed their spending in January according to a Commerce Department report Friday.

Retail sales slipped 0.9% for the month from an upwardly revised 0.7% gain in December. The sales totals are adjusted for seasonality but not inflation for a month, in which prices rose 0.5%.

Excluding autos, prices fell 0.4%, also well off the consensus forecast for a 0.3% increase. A “control” measure that strips out several nonessential categories and figures directly into calculations for gross domestic product fell 0.8% after an upwardly revised increase of 0.8%.

Receipts at sporting goods, music and book stores tumbled 4.6% on the month, while online outlets reported a 1.9% decline and motor vehicles and parts spending dropped 2.8%. Gas stations along with food and drinking establishments both reported 0.9% increases.

Two Republicans who chair state legislative committees on energy and utilities say they want to bring more nuclear power online in Wisconsin in the coming years.

To start that effort, they introduced a resolution calling on the Legislature to publicly support nuclear power and fusion energy.

“The resolution, more than anything, makes a formal declaration that Wisconsin is open for business — it is open for nuclear,” said Rep. David Steffen, R-Howard, who chairs the Assembly Energy and Utilities Committee.

He’s working with state Sen. Julian Bradley, R-New Berlin, chair of the Senate Utilities and Tourism Committee, on the effort.

In addition to the resolution, they plan to propose a nuclear siting study to identify locations around Wisconsin that make sense as sites for nuclear power plants. They also hope to bring an international nuclear summit to the state in the coming years that would help market Wisconsin for development and research opportunities, Steffen said.

He said completing a siting study could take two years off the development time for a new nuclear plant, which can take a decade or more to bring online.

Wisconsin has one active nuclear power plant, located in Two Rivers. The Point Beach Nuclear Plant came online in the 1970s and has a generating capacity of 1,200 megawatts. In 2020, the plant’s owners applied for a license renewal with federal regulators to keep the plant running through 2050. The U.S. Nuclear Regulatory Commission has a decision in that case scheduled for this December.

The state already has assets that it can build on to expand investment and research around nuclear energy, Steffen said.

He said the University of Wisconsin-Madison has one of the nation’s best nuclear engineering programs, and there are several companies that have spun off from the university working on nuclear technology.

“Beyond it being a necessary part of our energy production portfolio, it can also be an incredible economic development opportunity for the state of Wisconsin,” Steffen said.

The consumer price index (CPI) increased by 0.5 percent in January to hit an annual increase of 3.0 percent after advancing by 2.9 percent in December.

January is the fourth-straight month in which inflation has ticked up, rising from a 2.4 percent increase in September.

Shelter costs rose 0.4 percent on the month, climbing to a 4.4-percent annual increase and making up around 30 percent of January’s inflation over all, the Labor Department noted.

Perhaps most concerning for economists, “core” inflation – which removes the particularly volatile categories of food and energy and is seen as a more fundamental measure of price pressures in the economy – rose by 0.4 percent, its largest uptick in at least six months. Core inflation was up 3.3 percent in January on an annual basis.

While food inflation is running below the headline at a 2.5-percent annual increase, it jumped by 0.4 percent on the month, the biggest increase in at least six months.

President Trump announced Sunday that he is telling the Treasury Department to stop minting pennies, ending a 233-year run of the 1-cent coin.

For the 2024 fiscal year, the annual U.S. Mint report said that it takes about 3.7 cents to produce and distribute one penny, a 20% increase from the previous year. The increase has been partly driven by the rising costs of metals like zinc and copper, according to the report.

Rising production costs have spurred other countries to eliminate small denomination coins. Canada stopped making pennies in 2012, and Australia stopped circulating one and two-cent coins back in 1992. In the U.S., discontinuing the penny entirely may require congressional approval.