Fed independence does not mean they can avoid accountability, economist says

Discussion on Jerome Powell, the Economy, and Economic Indicators

Key Concepts:

• Jerome Powell: Current Federal Reserve Chair, criticized for performance and potential overreach.
• Federal Reserve (The Fed): The central banking system of the United States, responsible for monetary policy.
• Inflation: A general increase in prices and fall in the purchasing value of money.
• GDP (Gross Domestic Product): The total monetary or market value of all finished goods and services produced within a country's borders in a specific time period.
• Productivity: A measure of economic output per unit of input.
• Household Survey vs. Establishment Survey: Two different methods of measuring employment, with discrepancies noted in recent data.
• Price Controls: Government-imposed limits on how high prices can be charged.
• Immigration Impact on Labor Force: Discussion of how changes in immigration patterns affect employment statistics and productivity.
• Positive Shocks: Unexpected events that boost economic activity (e.g., falling oil prices, technological advancements).

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Criticism of Jerome Powell and the Federal Reserve

The discussion centers heavily on criticism of Jerome Powell’s performance as Federal Reserve Chair. While acknowledging the desire to avoid “making a martyr” out of him, all participants agree he has been a “terrible” Fed Chair, potentially the “worst since Gene William Miller.” Art Laffer specifically points to Powell’s poor leadership and political leanings, stating he’s done “a lot of bad left-wing things.”

A significant concern raised is the lack of accountability and oversight within the Federal Reserve. Steve Moore highlights internal issues, citing five governors with questionable stock trades and a lack of oversight, stating, “The Fed is not accountable to anyone.” The $2.5 billion refurbishment of the Fed is also deemed “ridiculous” given the lack of transparency. Powell is suggested to resign to “keep his nose clean.”

Economic Performance and Positive Indicators

Despite the criticism of Powell, the conversation shifts to a remarkably positive assessment of the current US economy. The participants emphasize a “booming economy” characterized by “peace, prosperity… a beautiful picture.” Specifically, they point to:

• Falling Budget Deficit: A new report indicates the budget deficit is decreasing, attributed to economic growth and increased revenue.
• Approaching Inflation Target: Inflation is trending towards the desired “sweet spot” of 2%.
• Strong Employment Numbers: While initial reports of 600,000 jobs added for the year were considered underwhelming, Larry Kudlow highlights the Household Survey showing 2.4 million new jobs. This discrepancy is attributed to changes in the composition of the labor force.
• Rising Wages for Production Workers: Wages are increasing for those in production roles.
• Projected High GDP Growth: Participants predict GDP growth of 5-7%, potentially even 3.5-4%, significantly exceeding previous forecasts.
• Productivity Gains: Productivity is “gunning at 4% or better,” a historically high level.
• Positive Shocks: The economy is benefiting from a “positive oil shock” (falling oil prices), a “positive technology shock” from Artificial Intelligence (AI), and the impact of tax cuts.

Discrepancies in Employment Data and Immigration’s Role

A key point of discussion revolves around the discrepancy between the Establishment Survey and the Household Survey regarding job creation. Larry Kudlow emphasizes the Household Survey’s 2.4 million new jobs figure, arguing it’s more accurate due to shifts in the labor force composition.

Art Laffer connects this to immigration patterns, stating that 3.5 million illegal immigrants entered the US in 2024, while approximately 2 million left. He argues that domestically-born American employment numbers have risen dramatically, while immigrant employment has seen a marginal drop, contributing to the overall productivity gains. He asserts that understanding these demographic shifts is crucial for interpreting employment data accurately.

Concerns Regarding Price Controls and Future Economic Outlook

Art Laffer expresses strong opposition to proposed price controls on credit cards, warning they could lead to the removal of credit cards from circulation. He reiterates the historical failure of price controls.

The group expresses optimism about the future, with Steve Moore suggesting Powell will be “gone in three or four months.” Larry Kudlow envisions continued economic success, fueled by positive shocks and potentially even influencing geopolitical dynamics (“Drill, baby, drill… might wind up changing communist regimes all over the world”). He describes the current economic situation as “the darnedest thing I’ve ever seen… a terrific thing.”

Powell’s Economic Forecasts and Their Inaccuracy

Steve Moore points out that Powell has consistently been wrong in his economic forecasts. He cites Powell’s 2025 forecast of 2% growth, contrasting it with the actual growth of 4% over the last nine months. He predicts a “blowout number” for the current year, anticipating growth of 3.5-4%.

Notable Quotes:

• Art Laffer: “Price controls never work.”
• Steve Moore: “The Fed is not accountable to anyone.”
• Larry Kudlow: “Let Powell, let him die an ignominious, quiet, muted death, and let’s get somebody good in there as soon as possible and not martyr him.”

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Conclusion:

The discussion paints a picture of a surprisingly robust US economy despite criticisms of the current Federal Reserve Chair. While there is a strong desire to replace Jerome Powell, the focus shifts to celebrating the positive economic indicators – falling deficits, approaching inflation targets, strong employment numbers (when viewed through the lens of the Household Survey and immigration data), and significant productivity gains. The participants attribute this success to a confluence of positive economic shocks and policy decisions, expressing optimism for continued growth in the near future. The core argument is that the economy is thriving despite Powell’s leadership, and that removing him would allow for even greater prosperity.