WSJ What’s News - Why Earning More Isn’t Saving Some American Families From Poverty

Episode Date: August 5, 2025

P.M. Edition for Aug. 5. Nearly 10 million American children are living in poverty, the most since 2018. Tens of millions more are precariously close, their families pushed to the brink by a storm of economic factors. Dan Frosch, who covers the U.S. economy with a focus on income inequality and poverty for the Journal, talked with a number of families in this position and joins us to discuss. Plus, with the resignation of a Federal Reserve official, President Trump has an opportunity to reshape the Fed. We hear from WSJ chief economics correspondent Nick Timiraos about what the president might do. And a House committee has subpoenaed the Justice Department for reports of its investigation into Jeffrey Epstein. Alex Ossola hosts. Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

Omada Health makes managing chronic conditions easier by supporting members between doctors' visits. Members are paired with a health coach empowered by insights from smart devices and AI-powered tools. Learn more at omadahealth.com. Omada Health is proudly NASDAQ listed. How an unexpected resignation offers President Trump an opportunity that could reshape the Fed. Plus, why many American working families are struggling to stay out of poverty. You have this confluence of factors subsequent to us coming out of the pandemic, that being the end to these temporary assistance programs coupled with inflation and rising housing

costs that have created this storm of economic factors that are pushing people to the edge. And a House committee subpoenas the Justice Department for records of its investigation into Jeffrey Epstein. It's Tuesday, August 5th. I'm Alex O'Sullivan for the Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. President Trump has ruled out tapping Treasury Secretary Scott Besant as chairman of the Federal Reserve. During an interview with CNBC, the president said that Besant wants to stay where he is, adding that he would take him off the shortlist of candidates to succeed Fed Chair Jerome

Powell when his term ends next year. And though Trump said he didn't plan to make his decision about who will replace Powell anytime soon, he does have an unexpected opportunity, a vacancy to fill on the Fed's board, after Adriana Kugler, a Biden appointee, said last week she would resign from the central bank's board of governors this Friday. For more on this, I'm joined by WSJ chief economics correspondent, Nick Timmeros. So Nick, we have this resignation coming. What does this mean, really? Well, it's a surprise that Coogler is resigning, and it accelerates potentially this whole succession process. So Jay Powell's term as chair does not end until May.

That's a long time from now, but because of the way the Fed is structured, this might be the only vacancy that Donald Trump will have to put his new Fed chair pick on the board between now and then, unless somebody else leaves. And what are the advantages for President Trump to put his next Fed pick on the board now versus waiting? Last year, before he was the Treasury Secretary, Scott Bessent floated this idea of a shadow chair. The idea would be you could end the influence of Jay Powell prematurely because markets care

not just about what the feds are gonna do at their next meeting. They care about what's gonna happen over the next year or two. And so if you told everybody, this is the new chair, this is who it's going to be after Powell, pay attention to this person. You could undermine Powell, especially as you got closer to May. Donald Trump went on CNBC and talked about this.

He said he's considering four different people for the Fed chair. Two of them are well-known. Kevin Warsh, a former Fed governor and Kevin Hassett, who's his economic adviser. He didn't name who the other two were. He also was asked about the Kugler vacancy, and he noted there's a possibility he could put his future chair pick into that seat, but he entertained a different idea because this position, no matter who has it, the term ends on January 31st next year. So there's another idea now. Don't put the future chair on the board. Put

someone else. Maybe it would be more of a firebrand, someone who would be very publicly critical. So you could have another battering ram critical of the Fed, antagonistic towards Jay Powell. And that may be what Trump wants, someone who will just light up the Fed in a way that he's been doing for the last several weeks. What are the implications for the Fed then? Well, you know, monetary policy is set by a 12-person committee, 11 people after Kugler's vacancy. And so one person won't on their own be able to change what the Fed is doing. But it tells you something about

where the president's head is on this. Does he want someone who's going to make coherent, analytically sound arguments for cutting rates? Or does he want somebody who's just gonna be on TV, very public, maybe you don't win the hearts and minds inside the Fed, but maybe you change public opinion outside the Fed? There are two very different strategies that the president could take here with this seat. That was WSJ Chief Economics Correspondent, Nick Timuros.

Thanks so much, Nick. Thank you. Activity in the U.S. services sector only marginally expanded in July, as employment contracted at a faster pace and U.S. trade policy continued to cause concern for businesses. The Institute for Supply Management said today that its purchasing managers index for services providers fell to 50.1 in July from 50.8 in June. That was lower than economists' expectations. The reading just above 50 points to an expansion of activity. And the US trade deficit in goods and services

shrank to $60.2 billion in June, the lowest level since September 2023. According to the Commerce Department, total imports fell 3.7% from May. Exports were roughly flat, dropping half a percent. The result was roughly in line with economists' forecasts. Major U.S. indexes fell today. The Dow slipped about 0.1 percent, the NASDAQ dropped about 0.7 percent, and the S&P 500 dipped about half a percent. In Washington, the House Oversight Committee has subpoenaed the Justice Department for records related to its Jeffrey Epstein investigation.

It's also seeking to question Bill and Hillary Clinton, along with a host of former officials has subpoenaed the Justice Department for records related to its Jeffrey Epstein investigation. It's also seeking to question Bill and Hillary Clinton, along with a host of former officials over the disgraced financiers' crimes. The subpoenas sent today by the Republican-controlled committee intensify pressure on the Trump administration after weeks of criticism over its initial refusal to release documents from the investigation, which some believed would show links between Epstein and other powerful individuals. Recipients of the subpoenas and their representatives didn't immediately respond to requests for comment. A Justice Department official confirmed receipt of the subpoena but had no immediate comment.

Coming up, what Trump's new tax law could mean for families living on the brink of poverty. That's after the break. Pre-plan and prepay a celebration of life with us. Every detail will be handled with simplicity and professionalism, giving you the peace of mind that you've done all you can today to remove any burden from your loved ones tomorrow. We are your local Dignity Memorial provider. Find us at DignityMemorial.ca. The Dignity Memorial branding is used to identify

a network of licensed funeral cremation and cemetery providers owned and operated by affiliates of Service Corporation International. owned and operated by affiliates of Service Corporation International. Nearly 10 million American children are living in poverty, the most since 2018. That's according to the latest Census Bureau figures from 2023. But these children aren't the only ones struggling. Tens of millions more are precariously close to the official poverty level. All told, nearly half of kids in the US live in households below the middle class. Their families have been pushed to the edge

by a storm of economic factors. Dan Frosch covers the US economy with a focus on poverty and income inequality for the journal and has been reporting on this. Dan, how did we get here? What are some of the factors affecting these families? Most recently, we have factors such as inflation, which impacted both housing and also food prices. We do know that lower income folks typically are spending a greater share of

their earnings on food and sometimes housing as well that impacted some of these families who are really right above the poverty line, but still struggling. And then the other thing is that during the pandemic, the federal government dispersed an unprecedented amount of aid to address the really sort of unusual circumstances that people were facing. So food benefits, housing assistance, unemployment assistance, all dispersed for a very short period of time during the pandemic. And during that time, that helped folks, but it's all gone away. So you had this storm of economic factors that are pushing people to the edge. The stats tell part of the story, but you really saw a lot of this on the ground. You spent some time in Broome County, New York, near Binghamton,

and you spoke with a number of families who were living slightly above the poverty line. What is life like for them? Life for them is a constant grind of trying to figure out how to live paycheck to paycheck. The families that I spoke with, both of whom were led by mothers who would stay up late trying to figure out which bills they could afford to forego for a little while, which government aid programs they could apply for to get them enough assistance to last them through the month, and how they could really afford to get enough food to feed their kids. And these were working families, women, in the case of this story, who had seen their

earnings go up, seen themselves get promotions, yet were dealing with harder economic circumstances than they had ever encountered. You mentioned the role of some of these government programs for these families. Last month, the big, beautiful tax and spending bill was signed into law, and that has an impact on social programs like Medicaid and food benefits. So what does that mean for these families? In general, it means there is a chance families who were getting food stamps or receiving Medicaid might not get as much anymore or might lose some of the coverage they were receiving.

At the very least, it adds an additional level of economic uncertainty to situations that are very precarious and already are leaving families teetering on the edge of economic free fall. Among the demographics of Americans, the sharpest increase in terms of poverty are children, according to the Census Bureau's supplemental poverty measure. That is something to be mindful of when we are looking at the potential impacts of further social safety cuts, whether that's to food benefits or Medicaid. And it's a particularly vulnerable population right now, children

and families with children. That was Wall Street Journal reporter Dan Frosch. And finally, have you noticed when you interact with an artificial intelligence chatbot that it tends to agree with you, maybe a little too much, and even when you're wrong? Turns out there's a term for that, AI sycophancy. Melihe Alinkhani, an assistant professor of AI at Northeastern University's Corey College of Computer Sciences, told our tech news briefing podcast why this can be an issue.

We define AI sycophancy as the tendency of large language models to overagree with users and display flattering behaviors, especially when users sound confident or present incorrect information. It might seem like the AI is just being polite or easy to talk to, but our research shows that this can lead to real harm. Instead of challenging us or asking clarifying questions, the AI just ends up reinforcing our biases. Imagine a doctor describing a patient's symptoms and the AI just confirms the diagnosis without exploring alternatives, or a

lawyer inputting potentially incorrect facts or biased facts and the AI just ends up reinforcing those in the decision-making process. Because AI sounds smart, we often trust it without questioning it. We often engage with it without expressing our own uncertainties, which we tend to do when we interact with each other. To hear more of this story, check out today's episode of Tech News Briefing. And that's What's News for this Tuesday afternoon.

In case you missed it, we've got a bonus episode out today. In What's News and Earnings, we're looking at so-called Magnificent Seven Companies' earnings reports, how much better it can get for their stocks, and whether they'll continue with their furious pace of capital investment. You'll find it in your What's New speed just before this podcast. Today's show was produced by Pierre Bienamay with supervising producer Michael Kosmides. I'm Alex Osola for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.