President Trump is irate at Federal Reserve Chairman Jerome Powell:
Stephen Moore, in his Unleash Prosperity Hotline, says that Trump has a point:
Anyone remember when the Federal Reserve Board was supposed to be politically independent? Well, never mind.
Powell’s rant yesterday against Trump and tariffs warning of “higher inflation and lower growth” sent the Dow tumbling by more than 500 points. This was arguably the most partisan tantrum by a Fed chair in modern times – attacking a new president’s policies so aggressively and adding to market turmoil when the Fed’s job is to calm markets. Instead he screamed “Fire” in a crowded movie theater.
We are not fans of many of Trump’s tariff strategies. But the idea that inflation is raging out of control is counterfactual. So far commodity prices are LOWER than they were when Trump entered office and the latest inflation report showed consumer prices coming down.
Does anyone recall these apocalyptic predictions when Biden was adding $5 trillion to the debt and inflation skyrocketed to 9.1%? We don’t.
Trump now has good reason to fire Powell for cause – immediately.
Whether Powell’s actions justify for-cause termination from his position as Chairman of the Board of Governors of the Federal Reserve is, of course, debatable. My guess is that if tested legally, courts would construe Powell’s conflict with Trump as a political or policy disagreement, not the sort of malfeasance that justifies termination for cause.
How about without cause? Democrats are circling the wagons, worrying publicly that President Trump might undermine the storied independence of the Fed by replacing Powell as Chairman. Of course, the whole idea of an independent executive agency is constitutionally dubious (see, for example, Wilcox v. Trump). But when President Trump asserted control over the “independent agencies” in an executive order, he explicitly excepted the Federal Reserve as it relates to monetary policy.
Currently the Wilcox case, addressing the President’s constitutional authority over “independent” agencies, is before the Supreme Court. The Solicitor General discourages the idea that the Court’s ruling should apply to the Fed:
“While respondents focus heavily on other agencies such as the Federal Reserve Board, they ignore Seila Law’s observation that the Federal Reserve’s tenure protection presents a distinct question with a unique historical pedigree,” said Sauer. “That question is not at issue here.”
Can the Fed’s independence legitimately be separated from that of other, perhaps more clearly executive, agencies? I don’t know.
That is where the Powell matter sits at present. My guess is that Trump will not try to fire Powell for cause, and the question of his Article II authority over the Fed will be dodged, at least for now.
