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The bold Texas plan to stop migrants has hit a wall

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HUGO AND MAGALI Urbina used to consider Greg Abbott, Texas’s governor, a kindred spirit. At the start of the summer the conservative Christian retirees could be found fishing on the banks of the Rio Grande in Eagle Pass, where their pecan orchard abuts Texas’s border with Mexico. Migrants would wade through the water onto their land, where federal border agents usually picked the intruders up without much drama.

In July everything changed. Texas seized the strip of land along the river against the Urbinas’ will. State troopers laid down razor-wire and migrants bleeding from cuts began to climb ashore. Unlike the federal agents, state police were directed not to help the new arrivals and, by some accounts, were told to push them back into the river. By Christmas the couple had grown accustomed to finding little girls wandering alone in their orchard and seeing dead bodies beneath the trees. They blame Mr Abbott.

Three years ago, shortly after Joe Biden’s inauguration, the Texas governor launched “Operation Lone Star”. As migrant arrivals at the border surged, Mr Abbott reckoned it was up to Texas to use state power to stanch the crisis. He declared a “disaster” in dozens of Texas counties and deployed the Texas National Guard as well as state police officers. They had no power to enforce federal laws, but they arrested thousands of people for criminal trespass.

As a partisan gambit, the plan worked brilliantly. Texas Republicans have ignited a constitutional battle with Washington over whether their state has the right to police its own international border and even displace federal border agents. Mr Abbott meanwhile bused asylum-seekers to cities run by Democrats, contributing to a surge of arrivals that overwhelmed shelters and drained social-service budgets.

Democrats dismissed the busing as a stunt, which it unarguably was. Yet it compelled big-city mayors to confront the realities of skyrocketing migration and to lobby the Biden administration for help. In December Mr Abbott signed SB4, a law which allows Texas to arrest and deport people who have entered the state illegally. Most recently, state police blocked federal officers from entering Shelby Park, a busy stretch of the border near the Urbinas’ property in Eagle Pass.

Mr Abbott sometimes talks like an Old West marshal who must stand up for Texas citizens because Democrats in Washington won’t. “The only thing that we’re not doing is we’re not shooting people who come across the border because, of course, the Biden administration would charge us with murder,” the governor said on a talk-show in early January.

Texas’s actions are begging for constitutional review. In 2012 the Supreme Court struck down much of Arizona’s SB1070, a law that made illegal immigration a state crime and allowed cops to ask people to prove citizenship on demand. The recent policing in Texas constitutes a far more aggressive interpretation of state power, says Denise Gilman of the University of Texas at Austin. On January 22nd, in one of several cases challenging Operation Lone Star, the Supreme Court issued an emergency 5-4 ruling against Texas and for the Biden administration, holding that federal border agents had the right to cut razor-wire installed by Texas police.

More such litigation awaits, and the narrow margin in the razor-wire matter suggests the court’s expanded conservative majority may be unsettled about how far to go. In this instance, Justices John Roberts and Amy Coney Barrett were the only conservatives to join the court’s liberal minority in backing federal power. “This is not over,” Mr Abbott posted after the decision. Troopers could be seen installing more razor-wire in Shelby Park the next morning. A federal lawsuit challenging buoys erected by Texas in the Rio Grande is before the Fifth Circuit and another on SB4 sits with a district judge in Austin.

Mr Abbott’s political instincts may be sound, but state police have done no better than the feds at deterring migration. Last month, a record 10,000 people crossed into America from Mexico each day and around 40% came through Eagle Pass. There, a string of buoys takes up less than a fifth of a mile in a 1,200-mile-long river border. “It’s like putting a postage stamp in the middle of a football field and saying, hey, stop this running back that’s coming at you,” says Henry Cuellar, a Democratic border congressman. Shelby Park, where federal agents were expelled, is about the size of a small golf course. Though fewer migrants arrived in January, experts attribute the slowdown to seasonal ebbs and flows and to Mexico detaining more migrants across the river in Piedras Negras.

Texas has so far expended more than $4bn on its plan, but under prevailing rules, border counties can apply for grants only for law enforcement, jail operations, court administrations, lawyers for indigent defendants and human-remains processing. That has left many social and humanitarian needs unmet. The hospitals in Eagle Pass and El Paso are staggering under the burden of caring for wounded migrants. Eddie Morales, a Democrat who represents a border district, wants to pause asylum-processing to discourage arrivals until the frenzy calms. Texas officials defend their barriers as necessary deterrents to prevent crossings of a ‘‘dangerous river where many have lost their lives”, Christopher Olivarez, a spokesperson for the Texas Department of Public Safety, wrote on X (formerly known as Twitter) recently.

These days the banks of the Rio Grande are strewn with enough clothing and shoes to fill a shopping mall. Haribo wrappers and stray baby-socks are a reminder of the children coming through. On warmer days Mexicans wade into the water to collect items that they can sell back home, calling out to American soldiers to throw more garments over the razor-wire. The detritus is evidence of the ongoing toll of failed public policies. And politicians at every level of American government bear some responsibility.

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Economics

The low-end consumer is about to feel the pinch as Trump restarts student loan collections

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Wall Street is warning that the U.S. Department of Education’s crack down on student loan repayments may take billions of dollars out of consumers’ pockets and hit low income Americans particularly hard.

The department has restarted collections on defaulted student loans under President Donald Trump this month. For first time in around five years, borrowers who haven’t kept up with their bills could see their wages taken or face other punishments.

Using a range of interest rates and lengths of repayment plans, JPMorgan estimated that disposable personal income could be collectively cut by between $3.1 billion and $8.5 billion every month due to collections, according to Murat Tasci, senior U.S. economist at the bank and a Cleveland Federal Reserve alum.

If that all surfaced in one quarter, collections on defaulted and seriously delinquent loans alone would slash between 0.7% and 1.8% from disposable personal income year-over-year, he said.

This policy change may strain consumers who are already stressed out by Trump’s tariff plan and high prices from years of runaway inflation. These factors can help explain why closely followed consumer sentiment data compiled by the University of Michigan has been hitting some of its lowest levels in its seven-decade history in the past two months.

“You have a number of these pressure points rising,” said Jeffrey Roach, chief economist at LPL Financial. “Perhaps in aggregate, it’s enough to quash some of these spending numbers.”

Bank of America said this push to collect could particularly weigh on groups that are on more precarious financial footing. “We believe resumption of student loan payments will have knock-on effects on broader consumer finances, most especially for the subprime consumer segment,” Bank of America analyst Mihir Bhatia wrote to clients.

Economic impact

Student loans account for just 9% of all outstanding consumer debt, according to Bank of America. But when excluding mortgages, that share shoots up to 30%.

Total outstanding student loan debt sat at $1.6 trillion at the end of March, an increase of half a trillion dollars in the last decade.

The New York Fed estimates that nearly one of every four borrowers required to make payments are currently behind. When the federal government began reporting loans as delinquent in the first quarter of this year, the share of debt holders in this boat jumped up to 8% from around 0.5% in the prior three-month period.

To be sure, delinquency is not the same thing as default. Delinquency refers to any loan with a past-due payment, while defaulting is more specific and tied to not making a delayed payment with a period of time set by the provider. The latter is considered more serious and carries consequences such as wage garnishment. If seriously delinquent borrowers also defaulted, JPMorgan projected that almost 25% of all student loans would be in the latter category.

JPMorgan’s Tasci pointed out that not all borrowers have wages or Social Security earnings to take, which can mitigate the firm’s total estimates. Some borrowers may resume payments with collections beginning, though Tasci noted that would likely also eat into discretionary spending.

Trump’s promise to reduce taxes on overtime and tips, if successful, could also help erase some effects of wage garnishment on poorer Americans.

Still, the expected hit to discretionary income is worrisome as Wall Street wonders if the economy can skirt a recession. Much hope has been placed on the ability of consumers to keep spending even if higher tariffs push product prices higher or if the labor market weakens.

LPL’s Roach sees this as less of an issue. He said the postpandemic economy has largely been propped up by high-income earners, who have done the bulk of the spending. This means the tide-change for student loan holders may not hurt the macroeconomic picture too much, he said.

“It’s hard to say if there’s a consensus view on this yet,” Roach said. “But I would say the student loan story is not as important as perhaps some of the other stories, just because those who hold student loans are not necessarily the drivers of the overall economy.”

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Economics

Consumer sentiment falls in May as Americans’ inflation expectations jump after tariffs

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A woman walks in an aisle of a Walmart supermarket in Houston, Texas, on May 15, 2025.

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U.S. consumers are becoming increasingly worried that tariffs will lead to higher inflation, according to a University of Michigan survey released Friday.

The index of consumer sentiment dropped to 50.8, down from 52.2 in April, in the preliminary reading for May. That is the second-lowest reading on record, behind June 2022.

The outlook for price changes also moved in the wrong direction. Year-ahead inflation expectations rose to 7.3% from 6.5% last month, while long-term inflation expectations ticked up to 4.6% from 4.4%.

However, the majority of the survey was completed before the U.S. and China announced a 90-day pause on most tariffs between the two countries. The trade situation appears to be a key factor weighing on consumer sentiment.

“Tariffs were spontaneously mentioned by nearly three-quarters of consumers, up from almost 60% in April; uncertainty over trade policy continues to dominate consumers’ thinking about the economy,” Surveys of Consumers director Joanne Hsu said in the release.

Inflation expectations are closely watched by investors and policymakers. Federal Reserve Chair Jerome Powell has said the central bank wants to make sure long-term inflation expectations do not rise because of tariffs before resuming rate cuts.

A final consumer sentiment index for the month is slated to be released on May 30, and will likely be closely watched to see if the tariff pause led to an improvement in sentiment.

This is breaking news. Please refresh for updates.

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Economics

JPMorgan Chase CEO Jamie Dimon says recession is still on the table for U.S.

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Jamie Dimon, chief executive officer of JPMorgan Chase & Co., speaks during the 2025 National Retirement Summit in Washington, DC, US, on Wednesday, March 12, 2025.

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Wall Street titan Jamie Dimon said Thursday that a recession is still a serious possibility for the United States, even after the recent rollback of tariffs on China.

“If there’s a recession, I don’t know how big it will be or how long it will last. Hopefully we’ll avoid it, but I wouldn’t take it off the table at this point,” the JPMorgan Chase CEO said in an interview with Bloomberg Television.

Specifically, Dimon said he would defer to his bank’s economists, who put recession odds at close to a toss-up. Michael Feroli, the firm’s chief U.S. economist, said in a note to clients on Tuesday that the recession outlook is “still elevated, but now below 50%.”

Dimon’s comments come less than a week after the U.S. and China announced that they were sharply reducing tariffs on one another for 90 days. The U.S. has also implemented a 90-day pause for many tariffs on other nations.

Thursday’s comments mark a change for Dimon, who said last month before the China truce that a recession was likely.

He also said there is still “uncertainty” on the tariff front but the pauses are a positive for the economy and market.

“I think the right thing to do is to back off some of that stuff and engage in conversation,” Dimon said.

However, even with the tariff pauses, the import taxes on goods entering the United States are now sharply higher than they were last year and could cause economic damage, according to Dimon.

“Even at this level, you see people holding back on investment and thinking through what they want to do,” Dimon said.

— CNBC’s Michael Bloom contributed reporting.

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