IBM Vice Chairman and former Chief Economic Advisor to the U.S. President, Gary Cohn, stated that persistently rising oil prices will directly reduce American consumers' disposable income, posing a serious threat to the overall economy.
In an interview, Cohn pointed out, "There is nothing more direct than the experience of a consumer holding the fuel nozzle and watching the numbers jump on the pump." He gave an example: if a consumer spent $80 to fill up their tank last week, $85 this week, but only $60 a month ago, they immediately realize that "filling up this tank cost me $20 in disposable income." Cohn added that if refueling occurs four times a week, it equates to an $80 reduction in after-tax disposable income, which "is enough to determine whether you take your family out to eat a few times a week."
Cohn worked at Goldman Sachs for over 25 years, rising from a commodities trader to President and Chief Operating Officer. After joining the Trump administration in 2017 as Director of the National Economic Council, he became one of the principal architects of the 2017 Tax Cuts and Jobs Act. Discussing the current economic environment, Cohn said, "I think right now... we are more in a state of stagflation—economic growth is stalling, but prices are rising."
Cohn's warning echoes concerns on Wall Street. Brent crude oil continues to hover around $114 per barrel. Cohn believes that while high oil prices alone may not directly cause a recession, the chain reaction they trigger by eroding consumer spending power could be enough to place a heavy burden on the U.S. economy.
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