Author: haroldblackphd

Supreme Court rules against Trump on deploying the National Guard

The Supreme Court has ruled by a 6-3 vote that the president cannot deploy national guard troops in Chicago to protect immigration officers and their facilities from protestors. The ruling rests on the interpretation of the law 10 US Code §12406. That law says the president can call the national guard into federal service if 

(1) the United States, or any of the Commonwealths or possessions, is invaded or is in danger of invasion by a foreign nation;

(2) there is a rebellion or danger of a rebellion against the authority of the Government of the United States; or

(3) the President is unable with the regular forces to execute the laws of the United States.

The litigation in the case has revolved around the third point and the words “unable” and “regular forces.” What is mean by “regular forces.” Does this mean those who are enlisted in the armed forces rather than the weekend warriors in the national guard? Trump’s lawyers argued that regular forces did apply to the national guard while the opposing attorneys argued otherwise. The six supreme court justices said “We conclude that the term ‘regular forces’ in §12406(3) likely refers to the regular forces of the United States military. This

interpretation means that to call the Guard into active federal service under §12406(3), the President must be ‘unable’ with the regular military ‘to execute the laws of the United States.’” Of course the use of the armed forces domestically is restricted. The Posse Comitatus Act prohibits the use of the regular armed forces “to execute the laws” except in situations where it is “expressly authorized” by the Constitution or an act of Congress. Alito, Thomas ad Gorsuch dissented with Alito and Gorsuch penning their objections. Alito said that the president’s “inherent constitutional authority to protect federal officers and property” should be “sufficient to justify the use of National Guard members in the relevant area for precisely that purpose.”

In the lower courts there were arguments as to how much violence and disruption in the protests would be enough to warrant military intervention. That appeared to be the issue with Alito. However, one wonders if an Antifa like protest that occurred in Seattle was transpiring where facilities were torched and ICE officers injured would there be sufficient cause to invoke Section §12406(3). Also, since I don’t know the law, I wonder if the FBI or the Marshal’s Service or other federal law enforcement officers could be deployed to protect ICE and its facilities?

Finally, in those states where the governor concurred with deployment like Tennessee and Louisiana, the governors call out the guard rather than the president. I presume that if ICE facilities were endangered and the governor called out the guard, then that would be legal. But what of states like Washington, Illinois and California where the governors are hostile to ICE and hate Trump? How is ICE sufficiently protected in those states? Perhaps the attorneys who read this blog can provide an answer. Finally, I presume that if the president went to the Congress for the authority to use the national guard and it were granted (fat chance it would get 60 votes in the senate), then the guard could be legally deployed without the consent of the governors.

That blockbuster GDP report

The Commerce Department finally got around to releasing GDP figures for last quarter. It was a surprising 4.3% easily eclipsing the consensus prediction of 3.2%. Naturally, the White House was ecstatic – and who could blame them. The White House deputy press secretary Kush Desai said “Today’s blockbuster, expectation-smashing GDP report is the latest proof that President Trump’s America First trade and economic agenda continue to turn the page on the Biden economic disaster: American consumers are spending and American exports are surging. President Trump built the greatest economy in the world in his first term and he’s in the process of doing it all over again.” The president tweeted excitedly “The TARIFFS are responsible for the GREAT USA Economic Numbers JUST ANNOUNCED…AND THEY WILL ONLY GET BETTER! Also, NO INFLATION & GREAT NATIONAL SECURITY. Pray for the U.S. Supreme Court!!!”

Well that is really great news – if it is true. After firing all the number crunchers at Commerce and putting his own people in place, it is interesting that I have not read anything on whether we can trust these numbers. A GDP a bit over consensus might not be questioned but a jump of this magnitude deserves a bit of close scrutiny. Moreover, these are the preliminary numbers. I won’t go through all of what I have written before about the lack of reliability of the preliminary numbers which are always revised downward. So let’s just say a wee bit of skepticism is warranted.

The spending numbers indicate robust consumer spending despite almost record low consumer sentiment, growing inflation and increasing layoffs. Are consumers really spending? Yes and no. Most of the spending was due to higher income consumers who may be less price elastic than other consumers. The top ten percent of incomes accounted for virtually all of the increase in household spending during the quarter. This may be due to the continuing rise in the stock market. Also analysts say that the increase in consumer spending may have been driven by consumers spending more in the third quarter before many of the tariffs became effective. But lower income households actually cut back on their spending.

There was an increase in growth due to business investment spending in AI with all the data centers and infrastructure needed. Seventy percent of the growth in GDP was due to AI spending.  Some have called this a “jobless expansion” with unemployment at its highest levels in four years. Will AI spending continue to boost GDP in subsequent quarters? The healthcare sector was particularly strong last quarter and much of the growth could be attributed to a growth in productivity due to AI. Disposable income stayed flat and savings was at its lowest level since 2022. Consumer sentiment actually fell during the quarter. The president tweeted by the absence of inflation measured by the Consumer Price Index which went from 2.6% to 2.8%. However, the Producer Price Index jumped to 3.8 percent indicating higher prices to come. 

Yes I know that the president thinks it is due to his tariffs but their impact has been minimal. Exports did grow while imports fell causing an increase in the GDP numbers by 1.6%. When Trump’s tariffs were announced there was a surge in imports as consumers and businesses sought to buy now at lower prices. The accounting quirk is that this pulled the GDP numbers down since GDP measures domestic production. Nonetheless, the total collected from tariffs was only $195 billion compared to $77 billion before the increase mandated by the president. That’s a difference of only $118 billion which is a long way from being able to send everyone $2,000, eliminate the income tax and make us “rich as hell.”

Manufacturing output did not increase as the president claimed it would but  in fact it has contracted for nine consecutive months.. There has been no noticeable increase in on-shoring due to pressures from the tariffs. The manufacturing sector actually lost 58,000 jobs but it is difficult to untangle whether this is due to AI or to the increased cost of imported inputs. The management purchasing managers index for manufacturing shows the contraction and was 48.2 in November below the 50 mark that separates expansion from contraction. These are not good signs.

I have the feeling that much of the job loss is among small businesses who are less able to absorb the increased costs or to pass them on to their customers. But the continuing impact of deregulation is to increase business investment along with tax reduction. The ying and yang of Trump’s economic policies is to have those factors offset the negative impact of his tariffs.

The Trump Doctrine

I am not an expert on foreign affairs so this post may be far off base. If so then please correct me. Some say that President Trump seeks to re-assert the Monroe Doctrine. I don’t agree. The doctrine as articulated by President James Monroe warned the European powers that any effort to exert influence or control in the western hemisphere would not be tolerated and would be viewed as a threat to US security. The United States would not interfere in the affairs of the European countries and their colonies. What Trump is different. The Europeans are not interfering in this hemisphere. But Trump is asserting US supremacy by interfering with our southern neighbors, threatening them and disrupting our traditional allies to the north. This is not the Monroe Doctrine. It is uniquely the Trump Doctrine.

In his inaugural address the president said “We will measure our success not only by the battles we win, but also by the wars that we end, and perhaps most importantly, the wars we never get into.” So how did he do his first year. First, he has conducted a trade war against all the nations of the world (except Russia) – do trade wars count? He erected trade barriers with our erstwhile Canadian “allies” and said Canada could get rid of his tariffs by becoming the fifty-first state. He keeps talking about acquiring Greenland and even hinted at taking it by military force. He appointed the governor of Louisiana (?) as envoy to Greenland who promptly said that his position was to “to make Greenland a part of the US.” Naturally, this brought howls of protest from Greenlanders and the Danish government. The Danish foreign minister said “I am very upset about the appointment and the statement, which I find completely unacceptable.” Trump couches his desire by saying that Greenland is vital to US national security. Denmark, an ally, now calls the US a threat to its national security.

To the south during the past year he has threatened Mexico over drugs, illegal immigration and imposed tariffs. He threatened Panama over Chinese control of the Panama Canal. He is rapidly building up US forces in the eastern Caribbean and hints at air strikes and even a ground incursion into Venezuela. He has the navy seizing Venezuelan oil tankers and has shut down Venezuelan airspace. So far the navy has sunk several boats and killed 95 people accused of running drugs. But Trump recently said that he might expand the drug strikes to Columbia and Mexico, even saying that he might even send ground troops into Mexico.

The shutting down of Venezuela has had the consequence of pushing Cuba, which relies on Venezuelan oil, to the brink of collapse says the Wall Street Journal. So pressuring Maduro has the added result of perhaps forcing a regime change in Cuba as well. By why all of a sudden this outsized interest in Venezuela? First, the president said it was drugs and their threat to our national security. All this over cocaine when the drug crisis is fentanyl from China via Mexico? Perhaps the president gave us the real reason when he said that Venezuela “stole” US oil and assets and he wants them back. This refers to the nationalization of the oil industry by the Venezuelan government under Hugo Chavez in 2007. Not coincidentally Venezuela sits on the world’s largest proven oil reserves of over 300 billion barrels. So is all this Venezuelan brouhaha really about the oil and not so much about human trafficking, terrorism and illegal drugs? I am surprised the president doesn’t just say he wants Venezuela to be the 52^ndstate (Canada being the 51^st).

While the Monroe Doctrine told the Europeans that they could not interfere in the affairs of any country in this hemisphere it also said that the US would leave Europe to the Europeans. That hasn’t really happened given all our troops in Europe and being a member of NATO. However, what Trump has done is to threaten not to support NATO countries if they did not meet their own military commitment. He has acted as though he would end the supply of arms and intelligence to Ukraine and pivot toward Putin. This has had the effect of forcing Europe to strengthen its commitment to Ukraine, increase its aid to the beleaguered country and rebuild its own military forces to counter Russia.

I give the president high marks for the Gaza cease fire and the return of the hostages although I am uncertain as to what happens next. The president has all sorts of lofty ideas about turning Gaza into a paradise but those plans are just dreams. The reality on the ground still looks bleak. The president also authorized the B-2 strikes on Iran’s nuclear facilities and although reports of success is mixed, it still looks likes Iran has suffered a setback in its rush to make a nuclear bomb. The president has been rather aggressive in seeking to neutralize Iran’s proxies in the region with mixed success with the bombing of the Houthis. I am not sure what is going on with Turkey, Saudi Arabia, Egypt, Qatar, Syria, Lebanon and other players in the region but it seems that the US is trying to broker peace and form alliances. This administration seeks to be more committed to Israel than either Obama or Biden despite differences in the conduct of the Hamas war.

The administration is involved in more countries than previous administrations. There was even an Armenian-Azerbaijan peace agreement over the never ending conflict over Nagorno-Karabakh.  There are peace efforts underway in Africa with the conflicts in the Sudan, Nigeria, Congo and Uganda. The administration had the military conduct strikes against the Nigerian Muslim militants who are terrorizing Christian communities. The president tweeted “The United States launched a powerful and deadly strike against ISIS Terrorist Scum in Northwest Nigeria. I have previously warned these Terrorists that if they did not stop the slaughtering of Christians, there would be hell to pay, and tonight there was.” I wonder what all those Trump haters who yell “racist!” at every opportunity have to say about that? He has also bombed Yemen and Somalia.

However, it appears that the administration has lost interest in aiding Africa economically with its imposition of devastating tariffs on countries like Lesotho. In fact the tariffs in Africa and the ending of humanitarian aid amount to economic warfare and stand in contrast to its peace making efforts around the globe. Coupled with Trump’s attacks on legal immigration – except for Afrikaners – it appears that the president’s end game is the isolation of America – I called it Fortress America – within a world of fewer armed conflicts.

As to Asia, it looks like the administration is not as focused on China as it merits. Yes it has imposed high tariffs but it has also allowed the sale of some high powered chips and soft pedaled on Tik Tok. It seems to still support Taiwan and has just approved a significant sale of military materiel. It is also important that Japan is becoming more vocal against China and its new prime minister has refused to back down in the face of threats from Beijing. I think ultimately the president would like to minimize both threats from Russia on Europe and China on all of Asia through economic cooperation on nonsensitive matters. That might work with the Russians but probably not with the Chinese.

I do not know of any other administration so hyperactive in the foreign sphere. But this is certainly not a replay of the Monroe Doctrine because this administration sticks it nose into everything everywhere. He has attempted to broker peace between India and Pakistan, Thailand and Cambodia, Rwanda and Congo, Ethiopia and Egypt, and end the civil war in Sudan. One cannot say that each involvement is in the interest of national security. Surely our national security is not threatened by Nagorno-Karabakh.

This is Trump’s own doctrine and I am not certain what motivates it. Some have called this “America First” but that does not explain the intervention all over the globe in affairs that have little to do with the US. It is an administration characterized by threats, coercions, isolation yet interventions. Perhaps it is the quest for the Nobel Peace prize – but sword rattling in the Caribbean works against that. But regardless, this is the most hyperactive administration ever both domestically and in foreign affairs. This president is only through his first year. If he keeps this up he is on his way to being one of the most influential presidents in history.

So how to characterize the Trump doctrine? In a word – muscular.

The President’s Piques er Plaques

I guess it is now the tradition that the president needs not be dignified. I, among others, used to say that while I may not respect the person who occupies that office, I respect the office itself. Maybe that no longer applies. With me, the respect for the office ended with Bill Clinton. But John Kennedy was widely known to have cheated on Jackie with affairs with Marilyn Monroe and Judith Exner among others. Everyone knows about Bill Clinton’s peccadillos. Joe Biden is forever tarnished by his open borders policies, the inflation and the chaotic withdrawal from Afghanistan. But what about the current occupant, Donald J, Trump? 

I would bet a year’s salary that Trump will go down in history as the least dignified person to ever hold the office of president. His personal behavior has overshadowed his significant accomplishments. I know that his most avid supporters pooh-pooh his rudeness, bellicosity and ill temper but don’t you think he would be more effective if he toned it down a bit and shut off the tweeting for a while? Do you think that even his supporters would encourage such a behavior in their friends and in their children? Maybe it is a sign of the times where rudeness and lack of decorum are trendy. Then the president is just setting an example for our youth on how to be rude and crude.

The latest sign of this lack of dignity is the president’s wording on the presidential plaques at the White House. The president has installed a presidential wall in the West Wing’s colonnade. Under the portrait of each president is a plaque describing that individual. Instead of usual bland historical summaries, the president has seen fit to inscribe his feelings about some of his predecessors. Not unexpected is his referring to President Biden as “Sleepy Joe” saying that “Sleepy Joe Biden was, by far, the worst President in American history.” 

I actually disagree with that assessment. Historians usually credit James Buchanan as the worst president. But for me the worst presidents in history are Andrew Jackson (who Trump admires) and Woodrow Wilson. Trump uses President Obama’s middle name (Hussein) and calls him “one of the most divisive political figures in American History” (more divisive than Abraham Lincoln or Trump himself?) and says he passed “the highly ineffectual ‘Unaffordable’ Care Act.” In a show of bipartisanship, Trump also takes a swipe at George Bush the Second saying the Bush presidency was “largely defined by the events of Sept. 11, 2001” and that Bush “started wars in Afghanistan and Iraq, both of which should not have happened.” Bill Clinton’s reads that “scandals plagued his presidency” and “In 2016, President Clinton’s wife, Hillary Clinton, lost the Presidency to President Donald J. Trump!”

The president who has lusted openly about being awarded the Nobel Peace Prize omitted that recognition from the plaques of Presidents Wilson, Carter and Obama. Even the Babylon Bee had a turn saying “Trump hard at work coming up with insulting plaque for Rutherford B. Hayes” and that he was “having even more trouble coming up with a good plaque for Warren G. Harding.”

The president’s press secretary Karoline Leavitt sounded like a proud mother praising the artwork of her second grader when she said “The plaques are eloquently written descriptions of each President and the legacy they left behind. As a student of history, many were written directly by the President himself.” Translated that sounded like “Little Donny has again shown his wonderful ability to express himself and show why he is at the top of his second grade class.”

Stomach of the beholder?

Merry Christmas

My sainted mother once wondered where I and my late brother – who was a grill master – had learned to cook. She said “You surely didn’t learn it from me.” She was right. When I was growing up I thought that you had to eat food or else you died. Thanksgiving and Christmas were the only meals in the house that I actually looked forward to – the rest being just something keeping you from looking like Twiggy. How times have changed. Now I actually enjoy eating (most times).

When I visit my daughter and her family in northern Virginia I really like the restaurants where they take me. There is a northern Italian restaurant with great pastas, calamari and maybe the best house salad I have eaten. I never fail to order calamari if it is on the menu, much like my Dad always ordered oysters. We had breakfast at a diner where instead of the usual fare I opted for a wonderful half roasted chicken ever with seasoned fries covered with feta cheese. Sounds weird but it was delicious. A couple of days later we went back to the same diner and I had a spinach, mushroom and feta omelette served with spring greens (also weird) and hashbrowns. The omelette disappointed. Holly’s here in Knoxville is much better. Speaking of which, on one trip to Holly’s the waiter was explaining how they cooked their collards to a vegetarian friend of mine. It sounded wonderful so I ordered an omelette with collards, onions, red peppers and goat cheese. Outstanding! 

On Thanksgiving my daughter’s family took me to a family style Thanksgiving dinner at another Italian restaurant and my only complaint was that they ran out of their triple chocolate cake and substituted tiramisu which along with flan is my least favorite dessert. Who would have thought that turkey and stuffing would go with baked ziti and rigatoni? I said why can’t Knoxville have such restaurants (even Chattanooga has a better restaurant scene).

My daughter said that her favorite cuisine was Mexican and having lived in Texas, she was disappointed at the Mexican restaurants in the DC area. She then surprised me and said that she thought our Don Gallo’s at Choto was as good or better than her local restaurants. She and her husband both said that they wished they had a Chesapeake’s and a Paula Dean’s. When they visit I can also take them to Seasons, J C Holdway, and Gavino’s for baked ziti and pizza which are up to their standards. My 80^th birthday party was catered by Bistro by the Tracks and was outstanding. My daughter having gone to UT also likes Aubrey’s – she refers to it as “standard American fare”. I know that she would also like Cazzy’s .

What I learned from all this is that you take for granted the restaurants where you live and find those away from home a bit more satisfying. My daughter’s family takes an overseas trip every year and rave about the Italian food in Italy and say that it is better than any Italian restaurant where they have eaten in the states. When I travel I always ask the cab drivers and the locals “where do you eat?” and go there. It seldom disappoints. I have found BBQ joints off the beaten path, great catfish (I miss Uncle Bud’s) and wonderful meals away from the tourist areas. New York is full of great places to eat away from the maddening crowds. My favorite food city is New Orleans away from Bourbon Street. I know this sounds a bit like “Diners, Drive-Ins and Dives” but the best cooking is often found away from the fancy sauces and haughty servers.

Still my favorite restaurant is in my own kitchen. Yes there are a few dishes that I cannot prepare as well as some restaurants but on average I can do better than most. I like Chinese but do not prepare it at home. My favorite Chinese restaurants are in DC’s China town not locally. So I don’t eat Chinese in Knoxville. I can’t duplicate Hattie B’s hot chicken and wish we had one closer than Nashville. I like my pesto pizzas and my risottos. I like my chicken dishes, my venison, my turkey meatloaf and my turkey burgers are to die for. I only go to restaurants as a social gathering with friends. I cannot remember the last time I went out to eat by myself. Restaurant food simply tastes better in the company of friends. The other day, I took some leftover grilled chicken breasts and made an elevated mac and cheese. I chopped up the chicken, added a can of mushroom soup and onions to ziti cooked al dente put in a baking dish covered with parmesan and mozzarella cheeses topped with panko and baked for 30 minutes at 350 degrees. So was it baked ziti or mac and cheese? Yes and it was delicious and will become standard holiday fare.

So this Christmas season I wish you happiness, joy and a bountiful table laden with your favorite foods, egg nog and fruit cake.

Merry Christmas and Bon Appetit! 

Impeach them all!

A democrat member of congress has filed articles of impeachment against RFK, jr. What took them so long? Of course it has zero chance of succeeding and is just a political stunt to bring attention to the congresswoman, Michigan’s Haley (I wonder if she was named after Alex Haley) Stevens who is planning to run for the Senate. Here is what she said.

“Today, I formally introduced articles of impeachment against Robert F. Kennedy, Jr. Secretary Robert F. Kennedy Jr. has turned his back on science, on public health, and on the American people — spreading conspiracies and lies, driving up costs, and putting lives at risk. Under his watch, families are less safe and less healthy, people are paying more for care, lifesaving research has been gutted, and vaccines have been restricted. He has driven up health care costs while tearing down the scientific institutions that keep Michiganders and families across America safe. His actions are reckless, his leadership is harmful, and his tenure has become a direct threat to our nation’s health and security. Congress cannot and will not stand by while one man dismantles decades of medical progress. He has abused the powers of his office and failed to faithfully execute the laws of the United States, in violation of his constitutional oath and his duty under Article II, Section 3, of the Constitution. By doing so, Robert F. Kennedy Jr. has imperiled the health and safety of the American people, eroded public confidence in the Nation’s public health institutions, and stalled decades of scientific and medical progress.”

Wow! Sounds like her statement was written by the AMA, Big Pharma and all those that were on the NIH gravy train. Is some of it true? I leave it up to you to determine what.

Democratic Rep. Shri Thanedar, also of Michigan, has filed articles of impeachment against Secretary of Defense Pete Hegseth. You can view the full articles at

https://drive.google.com/file/d/1Aap3tMQSPdXiiZi-Wq2y_1wGlUAtVArM/view.

Briefly the articles say:

Article I: Murder and Conspiracy to Murder

Article II: Reckless and Unlawful Mishandling of Classified Information

“Pete Hegseth has been using the United States military to extrajudicially assassinate people without evidence of any crime. Former military attorneys have come out and asserted that his conduct constitutes war crimes. We cannot allow his reprehensible conduct to continue, which is why I have filed these articles to impeach him.” 

Thanedar pointed to Hegseth’s use of the encrypted messaging app Signal with other administration officials to discuss a strike on Houthi targets in Yemen. A report from the Pentagon’s inspector general found that Hegseth put the lives of U.S. troops at risk and violated department policy through the use of the app.

Not be outdone Delia Ramirez of Illinois filed articles of impeachment against Kristi Noem for extensive use of hair extensions and false eyelashes as potentially impeachable actions. “Secretary Noem has established a clear pattern of lawless behavior, mirrored in the behavior of rank and file members of her leadership team.” 

Of course, Texas’ Al (Full of Fire) Green always puts forth articles of impeachment against Trump every other week. The greenies whine about Lee Seldin and Chris Wright. The teachers’ unions don’t like Linda McMahon. OMB Secretary Russ Vought is called an extremist and the “shadow president.” Pam Bondi has proven (like Eric Holder) to be the president’s hit person at “Justice.” So I expect the democrats to impeach them all – along with the president – if they retake the House in 2026. You read it here first.

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.

The president’s mortgages – fraud or no fraud?

A second grand jury in Virginia has refused to indict New York attorney general Letitia James on mortgage fraud charges rebuffing the president’s efforts to bring retribution on some of his political enemies. To recap, James along with California senator Adam Schiff and Fed governor Lisa Cook had been accused of mortgage fraud. Bill Pulte, director of the Federal Housing Finance Agency uncovered documents indicated that James and the others had mortgage applications for second homes in which they said that the homes were to be primary residences which could be financed at lower interest rates than a secondary residence. James was the first to be brought before a grand jury in Norfolk, VA where the home was located. The grand jury did not indict because the judge ruled that the federal prosecutor, Lindsey Halligan once Trump’s personal lawyer, was illegally appointed to her position. Halligan was named by the president after he fired the US attorney for the eastern district of Virginia Erik Siebert who would not prosecute the case. Halligan then refiled the suit in Alexandria, VA. That the grand jury also refused to indict James.

Not being a lawyer, I presume that the “Justice” Department tried to indict James the second time because in Norfolk the case was dismissed on a technicality. Now that it has been thrown out again, does this mean that DOJ cannot file again? That would be a bad look. Usually a grand jury would indict a ham sandwich so the failure to indict in this case points to the weakness of the charges brought against James. I wonder if the statements by the president himself hurt the case. Recall he sent a note to his attorney general Pam Bondi that said “Pam: I have reviewed over 30 statements and posts saying that, essentially, ‘same old story as last time, all talk, no action. Nothing is being done. What about Comey, Adam ‘Shifty’ Schiff, Leticia??? They’re all guilty as hell, but nothing is going to be done.’” 

What will happen in the other cases? Will DOJ bring charges against Schiff and Cook? Well in an example of people in glass houses, one interesting tidbit has come to light. The president may himself have committed the same fraud on two residences bought near his Mar-a-Lago estate. Records show that in 1993, he signed a mortgage in Palm Beach, Fl, saying that the house would be his principal residence. Then seven weeks later, he did the same thing when he got another mortgage for a neighboring property saying that it too would be his principal residence. The real estate agent said that Trump never lived at either residence and from the beginning they were rental properties. Trump at the time was still a New York resident living in Trump Towers. As many have pointed out during the James and Cook accusations, that such a practice, while illegal, is common and seldom prosecuted. However the president himself said that regarding his enemies that the act was “deceitful and potentially criminal.” Oops.

On Cook, the president said “The American people must have the full confidence in the honesty of the members entrusted with setting policy and overseeing the Federal Reserve. In light of your deceitful and potentially criminal conduct in a financial matter, they cannot and I do not have such confidence in your integrity. I have determined that faithfully enacting the law requires your immediate removal from office.” If the allegations mean that he can fire Fed governor Cook “for cause” does this mean that he should fire himself? Don’t be silly. Of course not. Anyway the statute of limitations has expired in his case. 

The president has yet to respond while his White House translators stated “President Trump’s two mortgages you are referencing are from the same lender. There was no defraudation. It is illogical to believe that the same lender would agree to defraud itself. This is yet another desperate attempt by the Left wing media to disparage President Trump with false allegations. President Trump has never, or will ever, break the law.” Really? You decide.

Its the Fed’s fault – Part II: The search for neutral

Every now and then we start to see new terms appear followed by the musing of learned observers. One is the concept of a neutral interest rate defined as that rate of interest at which there is no inflation and full employment. At that rate, Federal reserve policy itself is in neutral being neither expansive nor contractionary. Think of it as the economy’s equilibrium interest rate. The problem with the concept is that the neutral interest rate cannot be observed. There are some fancy formulations out there to estimate it but those are just estimates. Anyway, that interest rate is a moving target given the dynamics of the economy. Today’s neutral most likely won’t be tomorrow’s. If the Fed seriously tried to continuously manipulate monetary policy to find neutral it would be more destabilizing than it is currently – and that is plenty destabilizing all ready.

But let us suppose that the neutral rate could be accurately measured and predicted. The Fed actually makes sounds like they know what it is. Fed chair Powell has droned on about a neutral rate of around 3 percent, meaning that a Fed rate above 3 percent would be restrictive while a rate below 3 percent would be expansionary. This would mean that current Fed policy is restrictive and would have room for ease. Hence, the logic of lowering the Fed funds rate. The fragile labor market and inflation above the Fed’s target of 2 percent would present challenges for the Fed seeking to move from restrictive levels toward the lower neutral rate but it seems to be on that path.

One of the problems of course is that no one knows what is the actual neutral rate. Chairman Powell has said “There are a range of views of what the neutral rate is at this moment for our economy … It’s not so mechanical. We understand that no one actually knows what the neutral rate is. We know it by its works.” Those “works” are the way the economy reacts to changes in the Fed rate. This is reminiscent of what Justice Potter Stewart said about pornography in that he knows it when he sees it. In the case of the Fed, that’s one hell of a way to run an economy.

Supposedly the model most commonly used by the Fed is from the Federal Reserve Bank of New York, the Holston-Laubach-Williams model. You can find it at https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr1063.pdf?sc_lang=en&hash=E048A35AE227C58E9E5D635FCC9259EC

I am no longer in academics but monetarists would question the very foundations of this model which are Keynesian in nature within an IS-LM framework incorporating the Phillips curve showing an inverse relationship between inflation and unemployment. There is a significant body of work outside the Federal Reserve’s economists questioning not only Keynesian economics but also the IS-LM and Phillips curve formulations. My doctoral seminar was littered with lectures on the deficiencies of such models and their inaccurate predictions. I know the economists at the Fed know this since the former economics head of the Open Market Committee was one of the readers on my dissertation. But if the Fed is actually using these formulations then we need a new set of economists working there.

Consider that the model applies the “Kalman filter to translate movements in real GDP, inflation, and short-term interest rates into estimates of trend growth, the natural rate of output, and the natural rate of interest.” The problem inherent in all this is that there must be assumptions made regarding the nature of the shock processes that affect the movement of inflation and output. This is the problem with all such models as I have written with regard to climate models. These models are overly complex yet must be restrictive at the same time. The Fed’s model estimates a real neutral rate and then adds the current rate of inflation to yield the nominal neutral rate. The estimated real neutral rate in the fourth quarter of 2025 was 0.84%. The Fed’s inflation target is 2% meaning that the nominal neutral rate would be 2.84 percent. This would imply that even with the past three rate cuts, the Fed’s monetary policy is still too restrictive. So given the Fed’s own estimates, President Trump was right in arguing that the Fed should lower interest rates because its own models show that interest rates are too high being above their own estimation of the neutral rate.

Its the Fed’s fault (too)!

Almost from day one, the president has expressed his displeasure with Fed chair Jerome Powell for not dramatically decreasing the Fed funds rate. The president wanted two things. First to head off a slowing of the economy and second to reduce the cost of financing the ever increasing federal government debt. To recap, the Fed doesn’t control interest rates. The market does. What the Fed does is to affect short term rates that are tied to the Fed funds rate which is the rate on overnight borrowings of banks’ excess reserves. If the Fed wants to lower the Fed funds rate it must increase the supply of bank reserves. It does this by purchasing Treasury bills from the banks which increases bank reserves. Since banks lend out excess reserves (those reserves above what is required) and now are holding too many excess reserves, they increase their lending thereby leading to increased consumer spending and business investment.

Or that is what is supposed to happen. But not always. Didn’t we have near zero short term rates during the reign of George Bush the Second, Obama, the latter part of Trump’s first term and during Biden? Those were times of low economic growth. So why does the president think things will be different this time? Why don’t zero short term rates necessarily spur consumer spending and business investment? It is the old adage of being able to lead a horse to water. I remember my sainted mother asking why did the Fed hate old people when her CDs were earning virtually nothing. You can’t force consumers to start spending if their sentiment about the economy is in the dumps. You can’t spur business investment and hiring if there is little consumer demand and businesses are failing.

Today’s economy is showing signs of weakness in employment. Job growth is either anemic or nonexistent. Inflation keeps hovering above the Fed’s target of two percent at around three percent. The Fed, obviously more concerned about employment than inflation just lowered the Fed funds rate for the third time. Doing so has increased bank excess reserves. What the banks will do if they cannot lend out those excess reserves is just to hold them since the Fed actually pays the banks some interest on their reserves. The Fed can then turn to monetizing the national debt, namely buying Treasury bills that are being used to finance the debt directly from the Treasury or its agents. This is purely inflationary. The increased inflation or the threat of increased inflation leads to increased bond rates as long term investors seek to minimize losses of holding longer term securities. This will have the effect of increasing government borrowing costs since most of the government debt is in longer term Treasurys rather than in shorter term Treasury bills. Therefore the president’s demands can work against himself if lowering short term interest rates lead to an increase in inflationary expectations, an increase in longer term Treasurys and an increase in the cost of servicing the government debt.

I have often said that the Fed’s twin mandates of low inflation and full employment are often incompatible and the Fed must choose one or the other. There are Fed members more concerned about inflation than full employment and vice versa. The current votes of the open market committee reflect that division. I personally feel that for the overall long term health of the economy that inflation should be job one. But the pressures of Washington politicians on the Fed are generally in the other direction. But Trump’s push to a one percent Fedd funds rate is reckless at best. Some say that he really doesn’t want the rate to be that low but is using that tactic to get some lowering of the Fed funds rate. Well you could have fooled me.

All things considered, its the government’s fault. The higher rates are mostly because of the government itself with its ever higher spending and growing accumulated debt. The Fed is just a convenient scape goat for the consequences of government excesses. If Trump really wanted lower interest rates he should lead the charge of federal austerity. Fat chance. Instead we got the One Big Beautiful Bill which increased spending, deficits and government borrowing through more Treasury bills to finance it all. So in reality, it is not all the Fed’s fault (or Joe Biden’s). It is the president’s. He knows it but like all politicians seeks to shift the blame. 

Raise your hands if you thought that a republican president along with republican control of both the House and the Senate would lead to more fiscal responsibility rather than the same old stuff. Someone once said that in Washington, republicans are only democrat-lite. Increased spending and demanding lower interest rates seem to be universal among Washington politicians regardless of party (with the possible exceptions of Thomas Massie and Rand Paul). What happened to all those who were elected as fiscal hawks? With the federal debt to GDP constantly rising, it will be interesting to see what happens to the economy when the dollar’s status as the world’s reserve currency is truly threatened. There are none to take its place. What happens when the dollar loses so much value that like in many countries our citizens start moving away from the dollar into cryptocurrencies? What will the Fed do then? What can it do? Interesting questions all but most likely I won’t be around to ponder the answers.