The newly-named Federal Reserve chairman faces an historic challenge that no predecessor has encountered since the years immediately following World War II. In that period, the gigantic spending required to aid our allies and secure military victory saddled the U.S. with towering debt. President Truman—fearing that huge interest costs would swamp the budget—heavily pressured the Fed to hold down rates. Today, the U.S. is wrestling with its biggest budget crisis in 70 years, and we’re confronting a similar conundrum. Gigantic interest payments now devour one in every five dollars we collect in taxes, and the CBO predicts that by 2035, those carrying costs will become the biggest line item of all, exceeding expenditures on Medicare. The already scary math gets far worse if interest rates rise from here, an outcome that would hike what the U.S. pays on every new trillion in borrowings, hence putting deficits on even faster track, and accelerating the spiral in interest expense.
President Trump recognizes the problem big time, and in fact, his crusade for pushing the Fed to lower rates is only secondarily about boosting growth. His prime rationale: Taming the interest dragon that threatens to undermine America’s position as he world’s safest place to invest. In a Truth Social post following the Fed’s decision to leave its benchmark rate unchanged on January 29, the POTUS declared, “The U.S. should be paying LOWER INTEREST RATES THAN ANY COUNTRY IN THE WORLD!…[Jerome Powell] is costing America Hundreds of Billions of Dollars a year in totally unnecessary and uncalled for INTEREST EXPENSE!”
