Welcome to One Thing Trump Did, available exclusively on the Middle Podcast Feed.

I'm Jeremy Hobson and we're recording this podcast just after the release of the monthly Jobs Report, which is considered the most important economic indicator of the entire month.

It comes from the Bureau of Labor Statistics, which has been around in some form since the eighteen eighties.

The first commissioner back then described the mandate of the Bureau as the fearless publication of the facts.

Well, the head of the Bureau of Labor Statistics, Erica Macintarfur, was recently fired by President Trump after a monthly jobs report came out that he didn't like.

That is the topic of our One Thing Trump Did this week, But we are lumping in another attempted firing of a high ranking federal economic official and another part of the government that is supposed to be a political that being the Federal Reserve.

Trump fired Lisa Cook, a member of the Federal Reserve Board of Governors, from her position over allegations of mortgage fraud.

Cook has filed a lawsuit in response and says she's not leaving.

So why do these two jobs that most Americas don't think much about matter.

Let's bring in our guests in this episode, Justin Wolfer's professor of economics and Public Policy at the Gerald R.

Ford School of Public Policy at the University of Michigan.

Justin is great to have you.

Here, Jeremy, great pleasure in mind.

So let's start with the BLS.

The jobs number came out this morning.

It wasn't very good.

Do you trust it after the firing of Erica macintarfur.

Yes, I trusted.

And I've been asked this question for and for many previous years.

I always said, what a stupid question.

I said, it was a stupid question because we all understand that the Bureau of Labor Statistics is full of independent punks who would never ever try to influence the numbers for political gain, that they were nonpartis and committed to the truth, exactly as your opening quote suggested, and moreover, that they were completely insulated from politics.

And so for many years this question simply didn't make sense.

Of course, it now makes sense.

It makes sense because the President fired the BLS commissioner for publishing a number he didn't like.

And you might say, well, that sounds like a liberal take from someone who doesn't like the president except that's what he said, that's not a take, and is putting in place a remarkably unqualified ideologue.

This is a Bureau of Labor Statistics.

The person he is nominating, Ejntni, has never run a bureau or had any management role, has no interest in labor, and has no background or training in statistics, which is a triple wheremy, when you're going to head up the Bureau of Labor Statistics.

And Tony, by the way, was a part of the Project twenty twenty five.

He was a contributor to Project twenty twenty five from the Heritage Foundation.

He's long been a critic of the Bureau of Labor Statistics.

And by the way, Erica mcintarfur was confirmed in a bipartisan way by people including then Senator J.

D.

Vance and Mark Rubio.

Yeah, because this was just the way of the world, which is it used to be that this is understood to be a wonk's job for a wonk, a nerd who could lead fellow nerds.

And maybe there was a little bit like, you know, under a democratic administration, they'd be more likely to choose someone who'd worked in a left leaning think tank, and under Republican administration they were more likely to choose a nerd from a right leaning think tank, but they were always a nerd.

They were always someone who was on top of the management role the statistics, understanding the role that statistics play in our society, and so on.

The problem with EJ.

And Tony is we do know his views about statistics, which is this man's been on Twitter for a long time, and what is revealed is an enormous design to misrepresent statistics and an incredible ability to misunderstand statistics.

There's a long list of conservative economists who've simply noted to the press the number of times that EJ.

And Tony has simply misunderstood what it is that the data is saying.

I think that Ejntney has every right to exist.

Right wing foundations who want an ideological bomb thrower should definitely employ him.

But the idea that he can be the referee of our national statistics makes no sense whatsoever.

Let me just play Devil's advocate for a second, because one of the criticisms that Antoni and Trump have made is that there are always these wild revisions of the data that you know, the next month and the month after that they say, well, actually we only added one hundred thousand jobs to ago, not three hundred thousand like we originally said.

Is there a legitimate criticism of the fact that the numbers are not that close to reality at the beginning.

There are legitimate criticisms.

That's not it.

So let me explain why that's not it.

You can have just there are three things you might want from your statistics.

You might want them to be accurate, you might want them to be timely, and you might want them to be cheap.

You can't have all three.

So if you want them to be perfectly accurate, we can do it.

Which is what you do, is you interview every employer in the country.

Don't be unbelievably expensive and take a huge amount of money.

So appropriately, we decide to only survey a sample of employers, and we can use statistical methods to figure out at what point would surveying more people yield a reasonable payoff, So we stop at some point.

So that's how we get it cheap and still maintain accuracy.

Now here's that.

But there's a trade off, right, So if you want more more accurate, that's fine, but throw billions of dollars at the problem.

Here's a problem when you serve the way we do it.

As we survey these companies, we say, you know, could you please tell us how many people were on your payroll last month.

Sometimes they're busy, and so what they do is they send back their form late.

So if we waited for every form to come back, we would be publishing statistics several months after the month that we're asking about.

So then we would be more accurate, but less timely.

So what do we do, Well, the FED needs to make a decision right now.

Investors need to figure out what stocks to buy it right now.

Entrepreneurs need to know whether it's a good time to invest right now.

So we take all the forms that have been sent back and we come up with the best estimate we can.

That's what the BLS does, and that's what it printed this morning.

It's imperfect because it doesn't involve every firm in the sample, so that gives us an extraorly timely and cheap statistic that's less accurate.

You might say, well, what I want is a less timely a more expensive one, And that's fine because they wait for the rest of the forms to come in and then they publish an even more accurate number, but several weeks later, the difference there is what's called a revision.

They'll say, we thought it was this, but then we got enough forms and we learned it wasn't quite as good or as bad as we thought.

There's no way to avoid the only way to avoid revisions is either to give no is to make the statistics less timely, or to spend a ton of money on them and make them more accurate.

Right, and what about other ways to figure out how the job market is going?

We get monthly the ADP Report, which is private pay rolls.

It doesn't include the government jobs.

But are there other ways that are as accurate or as trusted as the BLS report.

No, this is the single most closely watched economic statistic, and the reason for that is, despite all its flaws, it is the least flawed.

It is our least imperfect economic statistic.

Now, in countries where the government statistics go haywire become corrupted, people tend to turn to private sector organizations looking for independent, more accurate approaches, and we do have some of those.

There's something called the ADP Report.

Many of your listeners right now, if they looked at their monthly paycheck, will discover it's printed on paper, that's his ADP on it.

Well, basically they look at all of those and they come up with their best estimates.

It is far far less accurate than what the Bureau of Labor Statistics does, and I think mainly because they lack the statistical chops that our official government nerds have.

So these are useful for telling us are the numbers being corrupted by huge orders of magnitude over long periods of time.

But if what you really want to know is is the labor market improving or getting worse than what should the FED do?

These alternative measures just ant as accurate and aren't as helpful.

Okay, let's talk about the other firing or attempted firing at the FED.

Now.

Trump has been saying he wants to have the FED lower interest rates to spur the housing market.

Interest rates, as we remember, had to be raised during President Biden's terms to deal with inflation.

Trump then wanted to fire the FED chair that he appointed, Jerome Powell.

He's kind of backed off of that threat, but now he's trying to fire Lisa Cook, one of the FED governors.

Why her?

So one answer to your question is why not?

Lisa is one of the Federal Reserve governors.

She's in some sense not the most interesting, not the most controversial, not the most anti Trump.

In fact, she, like most of the governors, tends to the Fed's a consensus based organization.

So when the governors get, you know, on the same page, they're all on the same page.

And she's voted with j.

Powell every time, but then he conserted most of the governors.

So why her?

One answer is she's the one they got.

My guess his Bill Poulty went looking through databases to see if there was anything he could try and get her on, and she was the one that came up.

A different answer is that she has thirteen years left on her term, and so getting her would mean potentially a replacement that would stay on the board for a long long time.

And yet another answer that one hears is Trump has had a habit of firing black women, and Lisa is a black woman.

Whatever it is, I think Trump has got a tremendous willingness to try and push aside the existing members of the board so that he can put his stamp on it.

And so I think of this as one important step, but one important step in a longer dance at a more dangerous dance.

Well, and Bill Poulty, by the way, as a federal housing official, who's the one who says that there's mortgage fraud going on?

Although she hasn't been charged with anything.

Can she actually be fired by the president for what he's trying to fire her for?

So often when it comes to employment, lawer, I'd say, ask a lawyer, and in this case, a lawyer would say, as the Supreme Court, So let me try and explain that to your audience.

The Federal Reserve is set up by Congress and as part of a big national compromise if we're all going to share the same money this was a really big debate back in the day, or if all the different states are all going to be and we need to make sure that this is an organization, it's representative of the country.

That's why we have twelve separate Federal Reserve banks around the country.

We need to make sure that this is an organization, it's insulated from political pressure.

That's why these folks are appointed for fourteen year terms.

That's why they don't all get appointed or unappointed at the same time.

And on an one case, the recent Supreme Court case says has said that many of Trump's firings of independent agency folks were legal.

But it's but the Fed's different.

Part of this, I think is real.

The FED is different.

Part of it's an acknowledgment the FED really really matters.

And so my understanding from that is that Lisa Cook can be fired for cause, which would typically be not I disagree with your policy position, but you're taking bribes, you're not turning up to board meetings, some sort of mouthfeasance.

What she's accused of.

It's not clear that it was illegal at the time.

It's extraordinarily common.

Turns out Pro Public had just reported that at least three Trump cabinet members have done the same thing, and he's not taking any action to get them out of the cabinet.

Well.

And by the way, it's not like she is getting a mortgage interest deduction from the government on all of these homes.

It's that she is getting a better interest rate from the bank because she's saying it's her first first.

Home and I took a mortgage around about this time.

And it turned out that the bank wasn't even going to give you a lower interest rate.

It just reduces paperwork as well.

So maybe it's fraud.

Maybe it's not.

Before you fire someone for cause, you usually have to actually add some evidence.

And I'm not saying innocent until proven guilty, but a tweet is not accusing someone of something is not normally thought of as cause.

So big picture, then, what would be the implications if he is successful in either getting rid of Lisa Cook or just finding a way to get a board that will do what he says, which is to lower interest rates when he wants them lower.

Yep, there's many ways of answering that question.

But I think the real issue here is if this is a step towards undermining FED independence, and why would we worry about that?

Because Trump said that's what he wants.

He wants his people, and he's been very clear what his preferred interest rate is, so you might say what would happen?

So, first of all, let's turn to history.

Have we ever seen this play?

Before a popular strong man comes to power?

The popular strong man has an idiosyncratic attachment to low interest rates, believing that to be the answer to all the world's ills.

No matter what the economists around him say, the popular strong man imposes a loyalist on the central bank, and the central bank implements that policy.

We've actually seen exactly this happen before.

This was Turkey.

Erdawan literally wrote this playbook.

And what happened is inflation in Turkey move from the sorts of normal rates you and I used to up to eighty six percent.

And he can still have like a one million Turkish lira bill.

Amazing, you're a millionaire on public radio.

Incredible, they pay you too much, Jaring, I can't believe you buzzed about it too.

It's worth like a dollar.

Yeah, looking for his public radio cred now, Okay, So the millionaire I'm talking to says we don't want inflation.

And by the way, inflation right now in Turkey still above thirty percent, so that is economically disastrous.

If you didn't like nine percent inflation in the post pandemic here, you're really not going to like eighty six percent.

And then Turkey's moved towards a more independent central bank and things have gotten better.

Turkey's a case study of the broader idea that when you put politicians in charge of central banks.

Politicians often do what's in their own short term interests or follow their own idiosyncrasies, rather than what's in the best interests in our case of the American people, and so the consequences of running the fared out of the White House could be history tells us catastrophic.

The other way of thinking about this is actually just listening to the president.

The President has said two things.

First of all, he thinks right now and interest rates should be one percent.

That is the sort of interest rate that would make sense if you thought the economy was in a recession.

Now turns out we might be closer than we one's thought.

But if you set interest rates dramatically lower than most economists would think reasonable, you set them too low, that would set off inflation.

And if you stuck with it would set off a lot of inflation.

And so the Trump what Trump wants his loyalists to do in itself, most economic models would judge to be quite dangerous in terms of setting up perhaps very very high inflation.

And then now I want to teach you a new word.

This is so exciting, Jeremy, I bet you've never heard this.

One word for the day is fiscal dominance.

Oh that sounds exciting.

I no, what does that mean?

Okay, so Trump is really worried that the interest rate on our national debt takes a big chunk out of the budget.

Now, the best way to pay less in interest every year is to borrow less money.

A different way is to set the interest rate, the federal funds rate low, And because all other interest rates tend to move up and down with the federal funds rate, that could push the rate at which the government can burow money to be low, and that would mean there's more money left in the budget.

So fiscal dominance is when you set interest rates in order to keep fiscal government spending on interest rates in order.

What that, in turn means is that you'd be setting interest rates not to balance the ups and downs of the business side.

So we would lose whatever tool we have for keeping the economy on an even keel.

And worse than that, if we had moved to fiscal dominance, it would be enormous pressure to keep interest rates far lower than conditions warrant, which once again would be inflationary.

And that is, in fact, how you end up with eighty six percent inflation.

Pretty quickly, all right.

Well, stand by because in a moment I want to ask you about the state of the economy right now, the threats ahead, which could be part of the reason and all of this is happening, and he wants to lower interest rates so badly.

One thing Trump did with University of Michigan economist Justin Wolfers will be right back.

Welcome back to one thing Trump did exclusively on the Middle podcast feed.

I'm Jeremy Hobson.

This episode, we're talking about the firing of key economic officials by the Trump administration and what that means for our overall trust in the economy.

I'm joined by Justin Wolfer's professor of economics and public Policy at the Gerald R.

Ford School of Public Policy at the University of Michigan.

Justin one of the reasons the Fed is being careful about lowering rates is because many people expect to see inflation because of Trump's tariffs, which are already hitting businesses.

We've heard about it on our show.

We did a show a couple months ago about how the tariffs are affecting you.

I was expecting people saying, I'm not feeling We heard from small businesses all across the country who were really being impacted.

And I think that consumers are going to be hit soon.

What are you expecting.

I'm expecting inflation, de rice, I'm expecting imported goods to become more expensive, and that's already happening.

And then some people say, oh, well, if you buy American, you don't pay the tariff.

But they're forgetting something, which is that American companies compete with foreign companies.

And so one of my favorite case studies is when we impose tariffs on foreign washing machines in twenty eighteen.

It turns out the first things the American washing machine manufacturers did was raise their prices just as much.

So you can't avoid tariffs by buying American because American American prices are kept low by foreign competition.

I worry that there is a substantial chance of a recession.

I'm not predicting one.

I'm worried about one.

I think that's the appropriate stance, and I anticipate what has been quite unpopular so far.

So the first impact of these tariffs has been mostly on corporate profits.

Some people have said to me, well, if tariffs are so bad, how come inflation is not through the roof already.

And this is where I have to remind people that Trump only settled on his tariff agenda in August.

He paused many of the most important tariffs.

He then paused them again, and right now those tariffs are being appealed to the Supreme Court.

They may most of them be illegal as well.

And it's when you raise a business's permanent costs.

So let me go back one step.

Businesses generally don't like moving their prices very much, so prices if their costs go up for a week or two, they tend to just leave their prices where they are.

It's actually more than a week or two.

And so for a long period, we didn't actually know what the tariffs were, and the tariffs hadn't arrived, and the tariffs were changing week to week, right in which case, I'm just going to wait till the air clears before i figure out what I'm going to do with my prices.

And even now, it's unclear how long these tariffs are going to be with us.

So as soon as they become widely understood as a permanent feature, that's when businesses are going to give up on I'm holding my prices to seem like I'm fair to Are you kidding me?

My costs have gone up?

This is unsustainable and so we've seen already the costs that businesses pay going up.

They haven't yet raised their prices very much, which is why their profits are getting squeezed by the way.

You might say, well, that's just companies, but it's also the companies.

Your four oh one K is invested in, right, and so I think this impact is going to move from an effect on your four oh one K to an effect on the price tag in the store.

So I'm asking you something here that you can't possibly know the answer to, but maybe you'll have an idea of what you think will happen at the Supreme Court.

Are they going to allow the tariffs to remain or will they agree with the lower court that they are illegal because there wasn't an emergency that Trump claims that there was in order to put them into place.

I think it depends on what you think the Supreme Court is.

Different people have different views.

Some people think it's a bunch of ideologues appointed on partisan lines to do what their political party wants, in which case it's a majority conservative Supreme Court, in which case they'll do whatever Trump was wants, in which case they're world and legal.

A different view on the one I subscribed to is they're good and serious lawyers who face very very difficult questions and are informed by different underlying theories and ideologies in how they interpret the law.

If that's the case, it's worth noting that the power that first of all, the Constitution gives the power over tariffs to Congress crystal clear.

In fact, we had a whole revolution about kings arbitrarily imposing taxes on American So not surprisingly, our constitution gives that power to Congress.

At various points, Congress has said, well, sometimes Congress isn't very quick or very active, so here's some powers we're going to delegate to the white House.

That's why sometimes the White House gets to make powers, for instance, national security related issues.

What Trump's relying on is the Emergency Powers Act.

So Congress said, we're not very good at dealing with emergencies quickly, we'd like the White House to deal with those.

The Emergency Powers Act does not mention the word tariff once, not ever, so he's relying on a power to tariff from a law that doesn't mention the word tariff and the Constitution's crystal clear that tariffs belong to Congress.

That's the first problem.

And most recently, the Federal Appeals Court basically said, if Congress meant to give up the power over tariffs that the Constitution gives it, it would scream it.

It would be written in block letters.

We're giving you the power to tariff.

It's normally ours.

We're learning it.

To the fact that we don't see the word tariff there tends to suggest that the second problem.

Okay, so he's using the Emergency Powers Act to impose tariffs.

So, first of all, the Emergency Powers Act may not allow you to impose tariff'.

Second, the Emergency Powers Act is about emergencies.

Huh.

Can you think of an emergency that requires the imposition of tariffs right now?

Because I'm an economist and they spend a lot of time worrying.

I worry about a lot of things.

That's so hard to sleep wear.

You're economists, You're always thinking about what might go wrong.

But I got to tell you, the absence of tariffs has not caused me to lose a moment of sleep.

The official reason that the administration gives is what's called a bilateral trade deficit.

I have a bilateral trade deficit.

We traded Joe's, which is I got to trade to Joe's and I buy a lot of goods from them, but they don't buy any goods from me, even though every time at the check but I say, wouldn't you like to buy an economics lecture?

I'm very good at them, and they still won't.

And that's a bilateral trade deficits, a trade deficit.

I am buying more than I'm selling to one partner.

That's administration's official reason for these tariffs.

The other is it's arguing we've used these tariffs to strike these extraordinary deals with countries all around the world.

Except I've read the deals.

They're not extraordinary in your view.

They're not even deals.

They're literally not even deals there pr they're window dressing, and in many cases they literally lies.

The President comes out and says things like Europe has given me six hundred billion dollars to invest however I want.

And then you ask the Europeans and they say, no, we didn't, No, we didn't didn't happen.

And then you read the agreement and the Europeans have written in just enough language to please a man who is somewhat vain not to require it.

If the agreement says it's just a framework.

By the way, it hasn't gone through the European Parliament, hasn't gone through the Congress.

It says European companies are expected expecting to invest a bunch of money in the US over the next few years.

All right, you know, I'm expecting to grow a home.

I just I'm expecting the fairy flush tree.

Oh, that's cotton candy in America.

I'm expecting a cotton candy tree at my front yard.

Yeah, not going to happen.

Just to connect these two things, do you think that if Trump gets what he wants in the FED lowers rates, that he would then blame them for any inflation that might occur because of the tariffs, which he I'm sure knows that the tariffs are going to cause some inflation, even if he claims they will.

I am sort of profoundly uninterested in that game.

Is the president going to say some words that are self serving in the future, Yes, and you'll was a particular version of that, you know, blah blah blah, Economy Fed blah blah, blah, who cares.

At this point in the Trump presidency, it's clear we should pay attention to what the man does.

What he's doing is undermining federal reserve independence that raises inflation in and of itself.

What he's doing is imposing tariffs that raises inflation in and of itself.

So when inflation rises, I can draw the line between those two and I don't need to listen to a self serving claim in between.

When you think Justin Wilfer is about all of the economic headwinds, the ones we've been talking about and the ones that we haven't, like the rise of AI, the immigration crackdown that's been going on, the tariffs that cuts to federal funding, which are quite significant.

What is the most significant in your mind in terms of a threat ahead for the US economy.

Yeah, so great question, Jeremy, and your listeners should feel blissed to have such a great question because the news business spends a lot of time on what's going to happen next week or next quarter or next year, and in terms of the economy, the answer is approximately nothing.

Right On any week, nothing much happens.

But if you look across countries, you see enormous differences in economic well being.

Right, the United States is rich, Argentina is you know, people are barely getting by.

And I was born in Papua New Guinea, where people are dirt poor.

And so what you learn from that is it's possible for an economy to be intensely successful the US quite unsuccessful Argentina or a failed state Papua New Guinea.

And so anything that makes the US more like Argentina or more like Papua New Guinea could be incredibly costly.

But none of that plays out overnight.

So we have for the most recent Nobel Price was awarded two economists who looked at what determines which countries are rich and which are poor, And basically it's about the quality of their political and economic institutions.

Do we set fair and reasonable rules of the game that provide incentives for people to invest and to be entrepreneurial, and where they can rely on those rules to continue what it means to be fair and reasonable and so on.

We can look debate all of that, but that's the basic idea.

If I look at what Trump is doing, he's moving back from that.

He's moving America in the wrong direction.

Trump is telling Intel who should run its company.

He then takes buys no one really knows, nationalizes ten percent of a private company.

He's imposing tarrorifts just about everywhere.

We have police on the streets, we have CBS paying fifteen million dollars to the president, and real questions about freedom of the press and therefore the marketplace ideas.

These are very, very, very dangerous steps.

They make us a lot more like.

We have the Bureau of Labor Statistics commissioner being fired effectively suggesting don't ever publish numbers that I don't like.

That's literally from Argentina's playbook.

We have the FED under threat.

These are unbelievably more costly than whatever happened this week or this month to move away from democracy and capitalism, and they play out over long periods.

One recent study found that the typical looked at every populist leader who'd been elected over a century around the world and found typically a populist would lead average income in a country to fall by fifteen percent.

That's one leader, But that occurs over fifteen years, and so it doesn't make headlines, and we're not looking at the stuff that really matters.

Partly because we economists are not being very clear about it.

Anything make you optimistic economically right now?

I love that.

Yeah, hey man.

The really good news is I could be wrong, and I'm often wrong and I mean it though, which is what I'm describing as risks.

And actually one of the remarkable things about the US economy has been incredible resilience that we've seen.

We got hit by a global pandemic, and life's kind of okay right now.

We had a financial crisis not too long ago, and life's okay right now.

We had a populist authoritarian leader take over as president quite recently, and as of right now, things are okay right now.

So we should always be worrying about what could be wrong.

But you're absolutely right.

Let's enjoy the beautiful moment that we're living in the sky's blue, the sun shines, the birds are chirping, most people have jobs.

Inequality may not be where we want it to be, and there's lots of things to worry about, but we are still at this point pretty close to being the richest people in the world in the richest year in human history.

No one's ever had a bet at us.

That's justin Wolfer's Professor of Economics and Public Policy at the Gerald R.

Ford School of Public Policy at the University of Michigan.

Justin so great to talk to you.

Thank you so much, a great pleasure man, and thanks you for listening to One Thing Trump did.

It was produced by Harrison Patino.

Our next middle episode is coming to your podcast feed later this week.

We're going to be asking if you feel represented by the political process and what fair representation looks like to you.

It's going to be allowing us to get into the redistricting stuff that is going on in Texas and California and elsewhere.

If you like this podcast, please rate it and write a review.

Our theme music was composed by Noah Haidu.

I'm Jeremy Hobson and I will talk to you soon.