The Fed Cut Was a ‘Boon’ to the Harris Campaign
We have discovered something that the supporters of Kamala Harris and Donald Trump agree on: the Federal Reserve’s half-point interest rate cut this week was a political gift to Harris.
“It really is a political move,” Trump said Thursday in interview with Newsmax. “Most people thought it was going to be half of that number, which probably would have been the right thing to do.”
“So, it’s a political move to try and keep somebody in office, but it’s not going to work because the inflation has been so bad,” Trump added.
Predictably, Trump’s remarks were received with horror by pearl-clutching establishment media reporters who were aghast that the former president would, for the second time in two days, suggest that politics could have played a role in the Fed’s interest rate cut.
At the same time, the political reporters could not help but admit that Trump had a point.
President Donald Trump with Federal Reserve Chair Jerome Powell on November 2, 2017. (Official White House Photo by Andrea Hanks)
“The Federal Reserve’s long-awaited cut to interest rates may prove a boon to Vice President Kamala Harris’s campaign as the presidential election enters the home stretch,” the Washington Post‘s Jeff Stein wrote.
Stein goes on to quote Mark Zandi, the Democrat-aligned chief economist of Moody’s Analytics, praising the cut as helpful to Harris.
“The rate cut, which will be the start of a series of rate cuts, is an economic tailwind behind the Harris campaign for sure,” Zandi told Stein. “It’s not just about the symbolism — it’s also about the real effects. It’s really going to support the economy.”
Biden Both Was and Was Not Confused
President Biden was not confused about the message sent by the rate cut, announcing that it is a sign of America’s economic health and evidence that inflation is a thing of the past. The work of defeating inflation may not be over but, according to Biden, it almost is.
“The Fed lowering interest rates isn’t a declaration of victory. It’s a declaration of progress. It’s a signal we’ve entered a new phase of our economy and our recovery, ” Biden said in a speech Thursday at the Economic Club of Washington, D.C. “I’m not here to take a victory lap. I’m not here to say, job well done. I’m not here to say, we don’t have a hell of a lot more work to do.”
He was, however, confused about his relationship with Jerome Powell. In that same speech, Biden very weirdly claimed that he has not met with Powell since becoming president. That’s obviously untrue. We have pictures of Powell sitting in the Oval Office with Biden and standing in the White House press room alongside him. Biden appointed Powell to a second term as Fed chair, something that almost certainly included meeting with him.
President Joe Biden and Chairman of the Federal Reserve Jerome Powell hold a meeting in the Oval Office of the White House on May 31, 2022. (SAUL LOEB/AFP via Getty Images)
So, was Biden lying about meeting with Powell? Or was this a memory lapse? If you watch the video, it certainly doesn’t seem to be a slip of the tongue.
Jared Bernstein, who chairs the White House Council of Economic Advisers, tried to do some damage control. What Biden meant to say, according to Bernstein, was that he had never discussed interest rates with Powell. This is supposed to create a contrast with Trump, who Biden apparently thinks held secret meetings with Powell to pressure him on rates. In reality, Trump’s critiques of Fed policy were very public, coming through tweets and media interviews.
In other words, Biden was trying to play to the trope that Trump is a threat to Fed independence—despite the fact that Trump has always explicitly said that while he thinks a president should be able to talk publicly about monetary policy, he doesn’t plan to interfere with the Fed.
“I’m not thrilled,” Trump said in an interview CNBC’s Joe Kernen back in 2018. “Because we go up and every time you go up they want to raise rates again. I don’t really — I am not happy about it. But at the same time I’m letting them do what they feel is best.”
Harris Still Gives Weird Answers on the Economy
While Biden and Zandi are celebrating the Fed’s move, Harris has been more circumspect. She rarely answers questions from the press and tends to speak in vague grandiosities when pressed on economic issues. So, Harris called the Fed cut “welcome news” but stuck to the message that prices are too high.
“I know prices are still too high for many middle class and working families, and my top priority as president will be to lower the costs of everyday needs like health care, housing, and groceries,” said Harris in a statement.
The political problem for Harris is that the Biden administration’s repeated declarations that inflation was a passing problem—transitory, they said—or was already over has soured public opinion on Biden. Harris wants to avoid ringing the victory bell again on inflation for fear that it will signal that she is out of touch with economic reality.
Avoiding that impression is a top priority and a difficult challenge for Harris because she is out of touch with economic reality. She has insisted that “price gouging” is the reason grocery prices soared during her vice presidency—a position considered plausible by just two percent of economists surveyed in a recent poll by the University of Chicago Booth School of Business. Eighty-eight percent of the Booth panel of economists said they either strongly agree or agree that her prescription for inflation—price controls—will create “substantial economic distortions.”
Not that the economists in these surveys are necessarily right. They almost all think tariffs get passed through to consumers in the form of higher prices—something that failed to happen during Trump’s tariff era. But at least Trump knows he is up against the economic establishment when it comes to trade. Harris floats along in an isolated campaign bubble that shields her from dissenting opinion, even from establishment economists who likely support her candidacy.
Similarly, Harris has still not figured out a coherent answer to the question she was asked at the debate about why people do not think they are better off now than they were four years ago. As we’ve pointed out, the best explanation for this is that people are not better off than they were in the prepandemic Trump era.
One reason this is such a hard question for Harris is that members of her own party feel pretty lousy about how the economy has treated them. If you ask Democrats in general terms how the economy is doing, a 41 percent plurality say the economy is getting better. But just 19 percent of Democrats say their own household finances are better off now than a year ago, and just 36 percent say they expect to be better off a year from now.
