Don’t swear allegiance just yet! And the new Fed chair

Don’t swear allegiance just yet! And the new Fed chair

Close those borders!

The president seems determined to shut down legal immigration too. There is the $100,000 fee on the H1-B visa, the banning of nationals from 19 countries from visiting the United States and 20 more countries with partial restrictions. One shameful act is that people who had gone through all the hoops to become American citizens have had their induction ceremonies canceled and some have even been pulled out of line at the ceremony itself. One account is “As people were arriving, they were being asked what their country of origin was. And the woman from Haiti was, along with people from Haiti, Venezuela, and other so-called travel ban countries, pulled out of line, and told that their own ceremony for that day was canceled.” Mind you these people know more about the country than most native born citizens having taken tests of citizenship along the way. One woman, an immigrant from the Congo (who might be one of my distant cousins) said “I followed the rules, paid the full fee, waited years, passed every step; I was at the finish line pretty much. Having my ceremony canceled at the last minute makes me feel anxious, powerless.”  This is shameful.

These actions were taken when the shooting of the National guardsmen in DC gave the president the excuse he needed to shut down immigration from certain countries that he didn’t like. So I was wondering if he would shut down travelers from Portugal when it was revealed that the killer at Brown University and of the MIT professor was from Portugal. For some reason the president did not do this. Rather he shut down the green card lottery program under which the killer came to the United States probably because it had “diversity” in its title. “Diversity” refers to applicants from countries with low immigration rates to the US and not to racial diversity. Homeland Security secretary Kristi Noem said “At President Trump’s direction, I am immediately directing USCIS to pause the DV1 program to ensure no more Americans are harmed by this disastrous program.”

Of course the immigration advocates (yes there is such a thing) complain “It’s unjust to block the legal immigration processes of tens of thousands of people who have absolutely nothing to do with this offense, except that they happened to have applied for the same type of visa.” My suggestion is simply to remove “diversity” from the title of the program so as not to incur the president’s wrath.

The Fed chair watch

The press seems to think that the race for the Fed chair is between the two Kevins, Warsh and Hassett. This is totally curious. It should be between current Fed governor Waller and Hassett. The inclusion of Warsh is a true head scratcher. Warsh was once a governor and was critical of the Bernanke Fed for its accommodation to the Administration in its quantitative easing – which by the way – aggressively lowered interest rates. Warsh has warned that the Fed’s monetary policy is no substitute for sound fiscal policy. “Given what ails us, additional monetary policy measures are, at best, poor substitutes for more powerful pro-growth policies,” Don’t you think that Trump would consider that a criticism of his (Trump’s) policies? Warsh has no chance of being the next Fed chair.

The president has said repeatedly that the person he nominates must lower interest rates. Kevin Hassett has been out front advocating for lower interest rates from the Fed since he joined Trump’s team as chairman of the president’s National Economic Council. Hassett has said “The president has expressed frustration with the policy decisions of the Fed. And I think that that frustration that he has with the policy decisions is based on pretty sound analysis. The fact is that inflation is way down. Interest rates in the U.S. are amongst the highest anywhere on earth. And reducing interest rates would be sensible and would save the taxpayers lots of money right now.” That’s what the president wants to hear so score one for Hassett.

I don’t know why Waller is being excluded except perhaps he is already on the Fed board and only recently has voted to lower the Fed funds rate. Last year while the president was agitating for a 1 percent rate, Waller said “As a result, in the absence of an unexpected and material deterioration in the economy, I am going to need to see at least a couple months of better inflation data before I have enough confidence that beginning to cut rates will keep the economy on a path to 2% inflation.” But then when the president decided to interview both sitting governors Waller and Bowman, Waller suddenly changed his tune saying “It makes sense to cut the [Federal Open Market Committee]’s policy rate by 25 basis points two weeks from now.”

I would pick Waller. He knows the landscape. He was an economist at the Fed’s reserve bank of St Louis, perhaps the reserve bank with the strongest economics department. He is the only governor with a PhD in monetary economics. He also knows the workings of the Open Market Committee and would probably be more effective than Hassett in moving the Committee in the direction that he favors. Consider that several reserve bank presidents have indicated that they do not favor rate cuts in the coming year. The latest is the Cleveland Fed’s Beth Hammack who has opposed recent rate cuts because she is more worried about elevated inflation than the potential labor market fragility that prompted officials to lower rates by a cumulative 0.75-point over the past several months. Hammack has said that she does not see the need for further cuts. She will join the Committee as a voting member next year. As Treasury secretary Bessent acknowledged, the Fed chairman has only one vote on the Open Market Committee. So it will be imperative that the new chair have the ability, knowledge and persuasion to get the other members of the committee to support his view. Of the choices facing the president, Waller is the most likely while Hassett is the least.