Jason Furman, a key figure in former President Barack Obama’s administration, has penned an opinion piece in The Dispatch warning about potential threats to the Federal Reserve’s independence under a possible second term of Republican presidential candidate Donald Trump.
What Happened: In his article, Furman recalls Trump’s history of criticizing the Fed. He cites a 2019 incident where Trump tweeted, “My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?” shortly after the Fed had cut rates to about 2.1%.
Furman argues that Trump’s campaign promises could create inflationary pressures, forcing the Fed to raise interest rates. He writes, “If he follows through on his campaign promises of across-the-board tariffs and large tax cuts, the result would be upward pressure on inflation that would force the Federal Reserve to set interest rates higher than they otherwise would have been.”
While acknowledging the Fed’s structural protections against political interference, Furman notes that the U.S. central bank now ranks in the bottom half of central bank independence globally, according to academic rankings.
He expresses concern about the potential for erosion of norms, especially if Trump’s actions were to be continued by future presidents.
Furman concludes by emphasizing the importance of central bank independence: “Independent central banks are the closest thing to a free lunch macroeconomists have to offer. Decades of research has documented how independent central banks can achieve lower and more stable inflation and less severe business cycles without any worsening in unemployment or growth on average.”
See Also: Mark Cuban Says Trump’s Lack Of Understanding Business Is ‘Insane’ — Slams 200% Tariff Threat On John Deere
Why It Matters: Furman’s concerns are not isolated. Recently, he questioned the logic behind Trump’s proposed tariffs, highlighting the potential economic repercussions of such measures. In a post on X, Furman asked, “Who do you think is going to pay for all the foreign tariffs that are levied in retaliation?”
Additionally, several trade economists have criticized Trump’s latest trade policy proposal, which includes a hefty tariff on John Deere for moving production to Mexico. Jonathan W. Coppess, director of the agriculture policy program at the University of Illinois Urbana-Champaign, stated that relocating jobs has serious consequences, but Trump’s solution may not be effective.
Moreover, Trump’s plans for tax cuts, tariffs, and deportations have drawn significant attention for their potential to worsen inflation.
During a recent appearance at the New York Economic Club, Trump confidently declared that tariffs would bring in “trillions of dollars” for the U.S. government, downplaying the cost of child care as “not very expensive” compared to the expected revenue from tariffs.
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