Economists expressed alarm at President Donald Trump's moves to undermine the independence of the Federal Reserve and the Bureau of Labor Statistics.
The U.S. economy has long enjoyed a reputation as the safest place in the world to invest or build a business, which has given the country a nearly incalculable advantage, but economists compared Trump's efforts to stack the central bank with loyalists to cancer – but arguably worse, reported the New York Times.
“It’s like throwing sands in the gears,” said Glenn Hubbard, who led the Council of Economic Advisers under George W. Bush. “It just makes the economy less efficient.”
If the president successfully politicizes the Federal Reserve or statistical agencies, Hubbard said the damage would show up right away.
“This is not a danger like cancer that’s years and years away,” Hubbard said. “It’s a present danger.”
Trump has recently fired the head of the Bureau of Labor Statistics after her agency reported weak job growth, and he has targeted individual officials at the Federal Reserve for refusing to cut interest rates and pressured individual companies over their business decisions.
“These are all real components of why people would trust the United States, and if you start taking them apart, you start eroding that trust,” said Norbert Michel, an economist at the libertarian Cato Institute. “At some point you’re no longer the thing that gives people confidence. You’re just another third-world country.”
The president has repeatedly threatened to fire Fed chair Jerome Powell, which he does not have the authority to do, and called on a Joe Biden-appointed governor, Lisa Cook, to resign over allegations of mortgage fraud cooked up by Trump appointee Bill Pulte, the director of the Federal Housing Finance Agency.
“The Fed is seen as the mitigating force that keeps the economy rolling along,” said Patrick Harker, who until recently served as president of the Federal Reserve Bank of Philadelphia. “We know the history. When you breach the independence of a central bank, there’s no case where it turns out well in the long run. One has to be very careful messing with this.”
Financial markets have thus far ignored Trump's repeated threats against Powell, and economic activity has mostly held up despite uncertainty from the president's trade wars and other moves, but financial crises aren't always apparently until they're well underway – and impossible to stop, according to experts.
“The most likely scenario is that you just start seeing things get chipped away, chipped away, and then eventually it just kind of blows up,” Michel said. “Eventually it’s too much, and the right domino falls and it’s not something you can control.”