Happy New Year! We began 2025 with the systemic shock of Donald Trump and DOGE, whose rampage of destruction was enabled by a cowering class of institutional elites and a terminally corrupt Supreme Court bent on enabling total executive power, so long as one of their co-partisans is president. We ended with the public roaring in disapproval, dragging along the wealthy and powerful who were resigned to being ruled by Trump and his oligarch pals.
This year, there’s a built-in understanding of the stakes, and opportunities to take back the country from its malefactors. There are also major economic shifts expected in the year ahead. Here’s what I’ll be tracking the most in 2026.
Wagging the Dog
The danger of a lame-duck, unpopular president is that he will blast his way out of the political corner he created for himself. In this case, the blast can be heard in Venezuela. It started Christmas week with the CIA blowing up a loading dock, and escalated Friday with strikes on Caracas and the apparent capture of Nicolás Maduro, without the authorization or even knowledge of Congress.
Trump said in a hastily arranged news conference that “we are going to run the country until such time as we can do a safe, proper, and judicious transition.” Apparently, they want Executive Vice President Delcy Rodríguez to do the running for them. But Rodríguez has been initially defiant, saying that the Bolivarian Republic will never be a colony.
This decapitation strategy where a pliant Chavismo regime stays in place was not the plan of the architect of this war, Secretary of State Marco Rubio. He has always wanted to hand Venezuela over to right-wing exiles in Florida, who already ruined the country once after an earlier attempted coup. I know the easy assumption is that this is about seizing oil wealth for American business, a replay of Latin American interventions for the likes of the United Fruit Company in decades past. But Rubio has power-hungry friends that he wants to deliver the country to.
Those opposition leaders will not stand by as the Americans switch sides to their kind of dictator. And it is quite unclear how friendly Rodríguez will stay. So if Trump wants his preferred outcome, he may need to get his hands much dirtier than a surgical strike and dictating government operations remotely through threats. While practically nobody in America outside of Rubio wants war, war is likely what we have.
Trump is clearly eager to use his military might. Also on Friday, as strikes in Venezuela were being prepped, he warned that the U.S. would act to protect protesters in Iran if they were attacked, a humanitarian intervention side dish to neoconservative belligerence.
Americans generally ignore foreign-policy issues until they don’t. I feel like this invasion, which unlike the invasion of Iraq has not been sold or argued for in any way, won’t be ignored.
And while it is easy to find some poor country and throw it against the wall, as the late neocon maniac Michael Ledeen once said, when actual nuclear-armed powers get involved, the current American foreign-policy apparatus is way out of its depth. Trump’s attempted force-feed of a Russia-friendly end to the war in Ukraine aside, more bloodshed is likely in that region. The Israel-Gaza “peace” could not be more fragile. And China just encircled Taiwan, threatening military action that would be geopolitically and economically catastrophic. That puts aside the threat of copycat kidnappings of world leaders around the world, as the Trump lesson is learned.
It’s not surprising that with Trump in the nominal seat of leader of the free world, the world is more dangerous and less free.
Internal and External Midterm Battles
By now, it’s ripened into conventional wisdom that Democrats are favored to at least take back the House. The redistricting effort to rig maps for Republicans has mostly been neutralized, though there will be an additional attempt in Florida (likely offset by Virginia) and a potential Supreme Court ruling that could wipe out several seats. Still, House Democrats are confident, and with Republicans damaged by bad policy and corruption, they should be.
Where the Senate was seen as out of reach this time last year because of Democratic struggles on red turf, even that is in play now. Democrats would need to break through in two of Ohio (where Sherrod Brown is attempting a comeback), Iowa (an open seat after Joni Ernst retired), Texas (where a Ken Paxton primary win could make the general election a race), Nebraska (where independent Dan Osborn is running strong), or Alaska (where former Rep. Mary Peltola will be quite competitive if she enters the race) to take the Senate, along with winning toss-ups in Maine and North Carolina.
Two other storylines are fascinating. First, Democratic incumbents are personally chagrined by a large number of primary challenges, from both younger hopefuls and ideological combatants. I expect several of these to break through, despite the difficulty of defeating incumbents. The Democratic base is fed up with its leadership and desperate to find new inspiration and a break from gerontocracy. You can feel a generational shift, a prelude to an uprising. Graham Platner’s race against a two-term incumbent governor in the Maine Senate contest could be a bellwether.
Second, will the money cannon that propelled Israel- and crypto-aligned candidates the past two cycles see diminishing returns? Amid revulsion over the Gaza brutality, AIPAC hasn’t made a single new public endorsement yet and is retreating to an underground influence campaign. The AI industry is attempting to imitate crypto’s flood of campaign spending in 2024—the head of the lead AI super PAC actually held the same role for the main crypto PAC—but this effort actually has a counterweight from an AI safety coalition with money to burn.
That Elon Musk is thundering back into midterm spending I take as a good sign: He’s one of the few figures in politics more unpopular than Trump, and it will only re-emphasize the historic billionaire corruption we’ve seen over the past year. Ultra-rich shrieking about a billionaire wealth tax in California will amplify an inequality backlash that’s been building for years.
An Economy Pulled in Two Directions
You can talk yourself into a story Treasury Secretary Scott Bessent has been peddling, namely that 2026 will be a bounce-back year for the economy. Productivity growth, in this case partially from AI (more on that later), usually boosts economic output, and a tax cut stimulus from the One Big Beautiful Bill Act (OBBBA) will hit refund checks early in the year. A new Federal Reserve chair is likely to bully the central bank into more interest rate cuts to free up investment. And last year’s tariff shock can be seen as a one-time price level rise: Now built into the landscape, tariffs should not dampen growth. (Trump is even bowing to affordability concerns by rolling back some tariffs, which would brighten the outlook further.)
Certainly, Wall Street is excited for another big year, as deregulation juices corporate profits. But I do think they’re overlooking some of the inflation drivers that could finally shut the wallets of an American consumer who continues to spend freely.
With the new year, we’ve gone over the Obamacare cliff, and health insurance costs for tens of millions will close to double on average. Maybe Congress will fix that, but uncertainty in the sector comprising one-sixth of the U.S. economy can be disruptive, something that will only worsen as OBBBA cuts harden. Electricity and heating prices are also poised to jump, with Trump’s war on renewables exacerbating that. Millions of defaulted student loan borrowers could see their wages garnished. AI demand for semiconductors will make consumer electronics far more expensive. Put this together and a large share of people will be hit by price shocks on top of higher-than-average inflation.
That combines with the biggest expected headwind in 2026: Nobody is hiring. At the end of last year, we saw solid GDP growth with barely any job gains, manufacturing has almost totally flatlined, and large firms aren’t planning on any job additions this year. DOGE’s legacy might be more visible in the private sector than in government, as everyone tries to get by on glue and AI.
It’s hard to square an economic boom with inflation and an unhealthy labor market. The consumer will falter at some point if the latter two trends continue, and consumer spending still makes up two-thirds of economic activity. And this all assumes that the seeming funny money financing the AI build-out doesn’t turn to dust.
Data Center Backlash
In his outlook for 2026, Goldman Sachs economist Jan Hatzius noted that AI’s contribution to economic growth last year was “pretty close to zero,” primarily because most of the goods used to build out infrastructure are imported, and semiconductors don’t actually count in that calculation. One read of this is that the rest of the economy must be humming along decently if the industry getting all the headlines isn’t a factor. But the other takeaway has to be why exactly are we pouring hundreds of billions of dollars in capital expenditure and taking over much of the built environment for something that isn’t contributing to the economy now, based on a rickety supposition that it will in the future? “Economic productivity” is not the phrase that comes to mind regarding Elon Musk’s AI bot.
Certainly, you’re not going to blunt the intensity of the data center backlash with charts showing that the build-out has nothing to do with growth. Concerns about secret dealmaking and the impact on energy resources (including beginning to reverse the historic reduction in greenhouse gas emissions) have set communities into action to block projects, with early successes and more resistance planned. I don’t think any amount of messaging is going to make people believe that plastering server farms all over their towns is a good idea. Maybe the tech barons will have better luck convincing aliens in space.
Paradoxically, an expected deceleration of data center growth could save the economy. Debt investors are already looking warily at prodigious financing requests from tech companies, and even shorting companies like Oracle that look the shakiest. The construction delays could make this skepticism prescient, and dampen the AI bubble before it can grow to a world-shattering size. The fact that AI modelers are stepping away from fanciful “building God in the machine” theories and reverting to sponsored ads just adds fuel to the skeptics, wondering why we’re wildly overbuilding computing power that will lie fallow in a matter of years. The other option, the one the voters want, is just to not build it at all.
The Break From Trump
It’s easier to welcome your new overlord when a majority of the country supports him than when he’s in the low 40s or less. Predictably, we’re seeing green shoots of pushback from onetime allies.
The Supreme Court’s year-end rejection of the deployment of National Guard troops in American cities was an important turning point, one Trump grudgingly complied with. Despite indulging a broad expansion of executive power in 2025, the Roberts Court is poised to frustrate Trump on his emergency tariff regime and removal of Federal Reserve board members this year.
While some Republicans are pushing for a second reconciliation package as a health care and immigration enforcement vehicle, the party may not have the unity needed to get that done. House Republicans don’t even have control of their own floor, with discharge petitions regularly getting a majority of members. Trump is needlessly antagonizing potential votes he’d need by vetoing strongly bipartisan bills as retaliation for crossing him, like a Colorado water project prized by Republicans like Lauren Boebert.
And of course there’s this mass internal struggle between the traditional conservative profile (strong defense, low taxes, social conservatism) and MAGA’s far-right populism (“cool-sounding ship” defense, even lower taxes, online Nazi memes). JD Vance is the only one in position to paper over this implosion, which has already consumed the Heritage Foundation. Whether he can manage this is a big 2026 story.
The Future of Hollywood—and Corporate America
The bidding war for Warner Bros. has become something of an avatar for the direction of corporate power in the Trump second term. Both suitors, Netflix and Paramount, have chosen hired guns with MAGA ties. Lobbying dollars are flying around. The Warner Bros. board plans to reject the Paramount bid and stick with Netflix, despite a personal guarantee of funding from Larry Ellison on the other side. And some of Paramount’s golden halo has been dented by Trumpworld pulling away. But money, and Trump’s desire to control media and block inconvenient stories, is still likely to drive the federal response.
If it ends there, the case for another year of blockbuster deals, weird structures to neutralize competition, and pay-to-play corruption, with great damage to the non-giants of the business world (in the case of Hollywood, the possible end of movie theaters), is on the agenda. Even tiny, unassuming startups like OpenAI are frightened at the possibility of the big boys taking over industries.
But that presumes the lack of a counterattack. What state attorneys general do on the Warner Bros. situation will be critical, as will a March hearing that could blow up a corrupt deal the Justice Department made to wave through a Hewlett-Packard merger. More broadly, as Matt Stoller points out, the public is waking up to systemic, arbitrary coercion and the oppressive weight of corporate America’s dominance, and those moments can actually lead to real change. Even if 2026 gets worse, this public recognition can build a movement to make things better. Politics is starting to become about tangible circumstances again, which should scare the C-suites a bit.