Trump's grudge against the Fed's Jerome Powell

0:02President Donald Trump is seriously weighing something that no president has ever done before. He wants to fire the Federal Reserve Chairman, Jerome Powell. Trump's been going back and forth on this. On Wednesday, he denied that he was considering kicking Powell out. But if he did, it's a move that has major repercussions for the U.S. economy. It's important because the Fed was set up to be independent of the White House and from lawmakers. It's designed to be able to make decisions on its own based on economic data and not by politicians who are always going to want lower interest rates to juice the economy.

0:38Andrew Ackerman is an economics reporter for The Post. He's been following this unfolding drama between Trump and the Fed chair. Andrew said they're butting heads on a key part of the Fed's job, and that's whether to raise interest rates. Trump wants them lowered, but the Fed says not so fast.

0:58From the newsroom of The Washington Post, this is Post Reports. I'm Kolbie Echowitz. It's Wednesday, July 16th. Today, I talk with Andrew about Trump's escalating threats to the Federal Reserve. He explains what Trump wants and why the Fed has pushed back so hard. And later in the show, we'll talk about why these threats are just the tip of the iceberg when it comes to worries about the U.S. economy.

1:30Andrew, hey, thanks for being here. You're welcome. Thanks so much for having me. So, Andrew, let's start with some of the basics here before we get into the drama of what's going on with the Fed. What does the Federal Reserve, what does it actually do? The Fed has this dual mandate to ensure low inflation and plentiful jobs or maximum employment. And the way they ensure that that happens is by setting what are called short-term interest rates. So basically the interest rates for banks to borrow among each other. And that rate that's set by the Fed, that influences long-term rates or the rates that millions of people and businesses pay for loans like mortgages, auto loans, etc.

2:12So what they do has a huge effect on the overall economy. But Andrew, Trump has been making like a ton of comments about the Federal Reserve lately. What has he been saying? Why is he so fixated on the Federal Reserve? So the president has been relentlessly attacking the Fed and particularly its chairman, Jay Powell. But we have a guy that's just a stubborn mule and a stupid person that is making a big mistake. He's making a mistake and it lasts for years. They've argued that the economy is doing great, that growth is terrific, but interest rates, the president says, have to be reduced immediately by three percentage points.

2:55So to go from like four, four and a half percent of where the interest rates are right now to about one percent. That's what the president wants. They only really do that in times of emergency when there's a crisis. There is not a crisis right now, but the president wants low rates. He is not unique in that. Most presidents have wanted lower interest rates to juice the economy while they're in office. Trump is no different. He just has the bullhorn that is social media now. And, you know, he has also in comments pretty much on a daily basis when he is talking to reporters, he will attack Jay Powell.

3:31He's a knucklehead. Stupid guy. He really is. It's a very difficult situation for the Fed because you want the markets to take you credibly. If inflation is there, you're going to fight it. You're going to raise rates or you're going to keep rates steady. You're not going to lower them. So if they cut now, it looks like they capitulated to Trump's threats. If they don't cut, which is what they're doing right now, if they remain in this like pause mode and the economy, either the labor market or growth deteriorates, it looks like it's their fault. So they're in this tricky position where they don't have a lot of great options when the president's attacking them on a daily basis.

4:14It sounds like what Trump can do is kind of use his major platform to kind of bully Powell and hope that maybe Powell will step aside because that's what he really wants, right? Yeah. Yeah, he's using the bully pulpit to bully. Powell said that repeatedly, stridently, that there's no reason why he will leave early. His term as chairman is up in May, and you have a seven-member Fed board. Powell is one of those seven, and his term as chairman is up in May, but he can remain a Fed governor until 2028. But Andrew, can Trump fire Powell? Can he actually fire Powell? There was so much buzz on Wednesday that he was going to fire Powell, that it was imminent.

5:02But I've been thinking, can he actually do that? It's a great question. Powell and the Fed say he cannot. The Supreme Court says he cannot over a policy dispute, that it has to be a for-cause firing, meaning some form of malfeasance or inappropriate conduct. And that's basically the crux of the issue right now. Trump has repeatedly toyed with the idea of trying to fire Powell. And his advisors have convinced him for years either he doesn't have the authority to do that or that doing so would, you know, basically trigger a market meltdown of some kind. Is Trump trying to make the argument that Powell's potential slow walking of lowering interest rates would be cause?

5:50I mean, he's definitely argued that this guy doesn't know what he's doing. Trump says he knows better than Powell and the Fed, that they're hurting the U.S., that they're causing the U.S. billions of dollars in interest costs. It's basically he's saying the Fed needs to make it cheaper for the U.S. government to borrow. That's not really the job of the Fed to provide cheap sources of funding for the government. Like I said, they're focused on low inflation, low and stable inflation and full employment. But the president's argument revolves largely lately around cheaper funding. And this coincides with the passage of this expensive tax bill where borrowing is going to go up a lot in the ensuing years.

6:34And so an understandable focus for the White House and the president is how can we lower these borrowing costs? And one way to do that is to pressure the Fed.

6:47But then Andrew, Trump was asked about it today. What did he say? It's still really confusing to me what has just happened in the last few hours. We're recording this on Wednesday early afternoon. According to our sources, there was a meeting last night where Trump polled GOP lawmakers about whether he should fire Powell. According to those sources, most people said he should. And then Trump himself signaled that he would do so soon. Fast forward to today, and he's asked about this. In his remarks today, Trump said that it was highly unlikely that he tries to fire Powell. He's doing a lousy job, but no, I'm not talking about that.

7:24We get fortunately we get to make a change in the next, what, eight months or so. And we'll pick somebody that's good and we'll pick somebody. I just want a fair job. We want to see lower interest rates. Our country deserves it. But then he also suggested that Powell might have to be might have to leave if he's found to be involved with some kind of fraud, which seemed like a reference to this other issue, which is the renovation of the Fed's headquarters building, which is a two point five. billion dollar project. It's a massive project in D.C. And Trump and his allies, people in his cabinet have been hammering him for a while now, maybe a couple of weeks, about whether that project's too expensive and whether it's appropriate.

8:11Is that a way that Trump could look for a cause? Yeah. According to Fed watchers that we've talked to, they all think that the president is laying the groundwork for a four-cause removal by saying, you know, he didn't appropriately manage this massive project. You know, the Fed watchers I've talked to say they think it's pretty thinly bailed. This is really just a dispute over interest rates. So if Trump was able to replace Powell at some point, who has he talked about putting in his place? Well, there's a group of four people he's talked about. His National Economic Council director, Kevin Hassett.

8:51He is one of the front runners, we think, for this job. And there's a few other people. There's Treasury Secretary Scott Bessent, Kevin Warsh, who's a former Fed governor who was sort of a runner up when Trump elevated Powell in 2017. And then there's a fourth person named Christopher Waller, who's a Fed governor, who is one of the governors who said he could see cutting rates as soon as this month. So Andrew, why are these specific individuals the ones up for consideration? Well, there's this expectation, I think, that the president is going to nominate someone who will do what he wants on interest rates.

9:30You know, Trump in 2017 actually elevated Jerome Powell to his current job and made him the chairman. And he immediately regretted that decision or pretty quickly thereafter thought, you know, he wasn't doing what he wanted on interest rates to lower them. And so there's this expectation that these months of attacks on J are setting up, you know, whoever succeeds him to be someone who's a bit more malleable on on interest rate policy and will push for lower rates. If I think somebody is going to keep the rates where they are or whatever, I'm not going to put them in. I'm going to put somebody that wants to cut rates.

10:07There are a lot of them out there. You know, the people who are in his cabinet, a lot of them historically have said things like, you know, that the Fed should be independent and they want to protect Fed independence. They've all done U-turns to some extent where they've said, you know, they've really beaten up on the Fed and have amplified a lot of the president's criticisms. Yeah, I imagine there must be some concern that whoever Trump would pick, he would want to pick someone who's going to just do what he wants when it comes to the economy and interest rates. I mean, that's going to be an issue.

10:43The next person who gets this job has probably the most difficult economic policy job ever. They're going to have to manage the president who wants low rates, but also managing this job running the Federal Reserve. And again, you have to manage expectations with the market that you're going to be serious that if inflation comes back, you will tackle it. and it's hard to do if you're seen as somebody who is there because they're friends with the president.

11:15After the break, we talk more about why experts are increasingly worried about the U.S. economy and the accuracy of the data that informs it. We'll be right back.

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12:07Okay, Andrew, there's all this Federal Reserve drama that's going on, but I know you've also been reporting on this idea that there are concerned about the country's economic data and how reliable it is. So I want to first break down what's the data that we're talking about here? How do we gather this information? The concerns revolve largely around the Bureau of Labor Statistics, this agency that's part of the Labor Department. And they mine the economy for data on inflation, on the job situation, the labor market, things like that. And is it complicated to gather this data? It's extremely complicated.

12:44The unemployment report that comes out on a monthly basis is actually two separate surveys. They have to survey thousands of businesses and then thousands of households to come up with the figures that they have on the unemployment rate and the number of new jobs every month. And with CPI, they actually have, you know, this whole army of people who go out and physically check the prices of the products that we pay for. CPI is the Consumer Price Index. It's the most important report on inflation that comes out every month. Most of that information was collected by actually going to stores and saying, OK, you know, if we're talking about food and one kind of food is tuna fish, canned tuna fish, then let's go to some stores.

13:32Erica Groshen was a former commissioner at the Bureau of Labor Statistics under President Obama. I was the only presidential appointee in the agency. Everybody else is a dedicated data nerd there. She explained the excruciating process it takes to get this kind of data. So we will randomly choose some stores. We will talk to the people in the stores and figure out what would be a representative can of tuna fish from that store. and then every month we're going to go back and look for exactly that brand and exactly that size can and we're going to see what happened to the price of that. And we're going to do this all across a number of the major cities in the country and in the major grocery stores and other kinds of outlets that sell tuna fish.

14:25And we're going to go back on a regular basis and check what's happening to those cans. Why do we need this economic data? The government mines the economy for data because they need to know which way inflation is heading. They need to know how big the economy is, how much it's growing. And they have data on everything from imports and exports to GDP to the employment situation. So the Fed is sort of what everyone thinks about when they talk about the data and how it affects government decision making. But it's also important for the private sector, too, and the public sector. I mean, a lot of teachers throughout the country, their raises revolve around the CPI, the Consumer Price Index.

15:13So across the labor market, a lot of people's raises depend on what CPI is doing in a particular year. And historically, from what I understand, our economic data reporting has been extremely strong. Yeah, the U.S. is known to be the gold standard in economic statistics. And Jerome Powell made some comments recently, right, warning lawmakers that you don't want to see a decline in that gold standard of our statistics, right? Yeah, yeah. And it was notable because the Fed really doesn't stray too often outside of its mandate. They talk about, you know, where interest rates are going to go and they talk about the size of the economy.

15:51They generally don't weigh in on fiscal policy like government spending plans. And so it was notable at a hearing last month that Powell said that he was worried. We can still do our job. I would not want anyone to think that the data have deteriorated to a point where it's difficult for us to understand the economy as well as we can understand it, which is not perfectly. But the direction of travel is concerning. He stressed also that nobody needs to think that the data has deteriorated to a point that they can't get an accurate read of the economy. I don't like to see any deterioration in the public data, which has been the gold standard.

16:32What is making him worried? What he's worried about, I think, is a trend here that we've seen where the BLS doesn't get significant additional funding. They've had to make cuts to their staff. They've stopped publishing certain data. The government's disbanded advisory committees that help the government agencies formulate statistics. and then perhaps pressingly or most notably in the news, the number of statistical estimates that are used in the inflation data open them up to being more volatile. And that's been a particular problem with the unemployment report that comes out monthly. And they've already had big revisions in the number of people who joined the labor market every month, the number of people who got jobs.

17:21So we added 228 ,000 jobs in March, and that was 100 ,000 jobs above economists estimates going into this report this morning. So on the downside, we did revise down the last two months, so January and February, by 48 ,000. So this is a better than expected picture that we got today, but sort of a worse than thought picture for the last couple of months. And they had in April and March, they had pretty significant downward revisions. Last month, they had a more modest upward revision. Breaking just moments ago, the June jobs report showing stronger than expected growth. The jobs market is still palming along.

18:03But they reported something like 79 ,000 private sector jobs, new jobs last month in the month of June. And I've heard sort of anecdotally from economists, people who know this stuff, that they expect that to be downward, really revised significantly, maybe even by half. Oh, wow. So it just kind of like clouds your vision of what's actually going on in the economy. What looked like a, you know, not a terrible labor market report, not a great one, could be kind of meh once we're done with these revisions. And that could just get worse as time goes on if the resources aren't increased.

18:47Yeah, Andrew, about those resources. So is it the lack of resources that is causing the Bureau to have to make more educated guesses like this? Yes. The bureau hasn't said a ton about what's going on, but they did issue a statement saying, you know, we don't have the people in a few cities where we're making more estimates than we otherwise would. They haven't answered a lot more questions or provided a lot of details. That statement alone would have been fine if they had been more forthcoming, according to the economists I talked to. But there was a guy at UBS. It's a big Swiss bank, but they have operations here in the US.

19:23he was going through the CPI data and it looked like there were more estimates and he wrote a report about it. And after the report came out, that's when BLS put out this statement saying, oh yeah, we've had more estimates, but they weren't, they weren't proactive about it. So that made people even more suspicious. And am I correct that BLS has been dealing with kind of chronic underfunding for a while, but that the cuts by the Department of Government Efficiency has made that worse? Yeah, all of that's completely right. This This is a longstanding problem. This was not a problem created by Trump coming into, you know, returning to office in January.

19:58The statistical agencies have been stretched for a long time. The revisions have been a problem for a long time. But you had Doge come in and ask, you know, the fork in the road emails. They had multiple emails to people asking them to take these early retirements, deferred resignations. Someone at the White House told us for a story we did a few weeks ago that, you know, that they stopped a second fork in the road offer from being extended to BLS staff in the field because they were cutting into the muscle at that point. They couldn't really survive additional cuts. Putting this all together, you've got distrust in some of our economic reporting data.

20:39You've got a president who has been threatening and bullying the Federal Reserve chairman and is hoping that he'll step aside. Where do we go next with all of these things put together? Well, I think that you have to take each of those issues one at a time. On the data point, there's a fair amount of pushback, I think, from Capitol Hill on additional cuts to the BLS. On the Fed and Fed independents, it's not really clear. I mean, you have a president who's acted like other presidents and pushing for lower rates. It remains to be seen if he's going to nominate somebody as early as this month or at least name them to replace Jay Powell.

21:20The White House is sort of hemmed in a little bit by the market and how the market reacts. So that's a factor that we're watching closely. Great. Well, Andrew, thank you so much for being here. Thank you.

21:37Andrew Ackerman is an economics reporter for The Post. That's it for Post Reports. Thanks for listening. If you love the show, help other people discover it by leaving a rating on Spotify or a rating and review on Apple Podcasts. Today's show was produced by Tadeo Ruiz Sandoval. It was mixed by Sean Carter and edited by Reena Flores. Thanks to Jen Liberto. I'm Colby Ickowitz. We'll be back tomorrow with more stories from The Washington Post.

22:23Get answers you don't have to question with Ask the Post AI, trained exclusively on post journalism with clear sourcing. And if we don't know the answer, we'll tell you. Ask the Post AI. Find it on WashingtonPost.com or in the app.