WASHINGTON, DC – NOVEMBER 08: Fed Chairman Jerome Powell prepares to deliver remarks to the The Federal Reserve’s Division of Research and Statistics Centennial Conference on November 08, 2023 in Washington, DC. Market watchers and policy makers are listening carefully to Powell for indications of whether the Fed would need to hike rates further to bring down inflation. (Photo by Chip Somodevilla/Getty Images)
Getty Images
“I trust that you will never lose sight of the fact that millions of Americans are dependent on the Fed continuing to support the economy’s recovery.” Those are the words of Democratic Rep. James Clyburn to Fed Chairman Jerome Powell in a 2021 hearing. The quote comes care of the Wall Street Journal’s Allysia Finley.
Finley is making a point about how situational the Democrats are regarding the Fed’s so-called “independence.” Suddenly it becomes meaningful to them when it’s not them badgering the central bank for whatever economic sustenance they think the Fed can provide.
Which is a long way of saying that while there was logically no outcry from the Democrats when Clyburn leaned on Powell in 2021, the noise about the importance of Fed independence at times has deafening qualities in 2025 as President Trump and his partisans lean on the Fed to allegedly make things better.
Let’s just say that both sides are hopeless. Really, how soon we forget, Republicans in particular, that government has no resources. And that it only has resources insofar as actual producers have less.
Which calls for a rethink of Clyburn’s veiled demand directed at Powell in 2021 relative to what Republicans are saying now. Even before Friday’s limp employment report, Republicans inside and outside the administration, and all the way up to the U.S. Treasury and the White House, were demanding rate cuts from the Fed. After Friday, one guesses the demands will grow louder.
Which is the problem, for Republicans. Since when do they so readily believe that creations of government can centrally plan economic growth? If the question is flippant, that’s because it is. It was historically the Democrats who cheered government intervention, while Republicans were of the Reagan-style view that “I’m from the government and I’m here to help” were among the most terrifying words in the English language.
A simple truth formerly understood by GOP types was rooted in the tautology that all economic growth comes from the private sector. And as a corollary to the latter, anything that governments provide in the form of spending or easier credit comes via a substitution of wafer-thin government knowledge for the immense knowledge that is the marketplace itself.
Please consider these historical Republican/conservative truths vis-à-vis the present and future clamor from those same Republicans and conservatives that the Fed start cutting interest rates to bolster an allegedly softening U.S. economy. Translating these demands, Republicans and conservatives are calling for government intervention to boost the Trump economy. Which is the problem, but also the delusion.
Government intervention or central planning that never works during the good times hardly takes on growth-oriented virtue during the supposedly bad. That’s the problem.
As for the delusion, even if it’s true that the Fed’s interventions will release credit into the economy from the central bank, the Fed isn’t some “other.” It only has credit insofar as the private sector has less to allocate. How then could Fed meddling lift the economy?
Taking the question further, and assuming the Fed capable of the magic that Democrats, Republicans and even libertarians ascribe to it, won’t private capital retreat overcome the Fed substituting itself for the marketplace in the first place? Hopefully the question answers itself.
The Fed can’t alter reality. To suggest it can is a monstrous delusion.
Source: https://www.forbes.com/sites/johntamny/2025/09/07/the-fed-as-a-source-of-economic-growth-is-a-monstrous-delusion/
