The Federal Reserve’s bad policy under Democrat presidents should not continue under a Republican one. That’s one takeaway from President Donald Trump’s most recent complaints toward Fed Chair Jerome Powell.

While Trump has advocated lower interest rates for years, he has done so recently because Congress will not do its job and reduce spending — at least, not enough to manage federal debt and deficits. Using monetary policy to aid fiscal policy — in layman’s terms, monetizing the federal debt — would only yield another round of the same type of pernicious inflation that helped Trump boot Joe Biden out of office eight months ago.

Lower Debt Costs?

In a recent lengthy Truth Social post, Trump claimed that Powell “could do the biggest and best job for our Country by helping to lower Interest Rates and, if he reduced them to the number they should be, 1% to 2%, that ‘numbskull’ would be saving the United States of America up to $1 Trillion Dollars [sic] per year.”

Both halves of that equation are important. Lowering interest rates to 1-2 percent, while most measures of inflation remain somewhere between 2-3 percent, means that the average American account would see the purchasing power of their money eroded each month, as they have while the Fed pursued its policy of quantitative easing (i.e., money printing) for much of the past two decades.

Below-inflation interest rates may well suit the self-proclaimed “King of Debt.” But they serve as a tax on savers — particularly seniors on fixed incomes, who have to manage a defined set of pension assets to last throughout their retirement.

Backfired for Democrats

Trump is calling for low interest rates because he wants to lower the cost of financing the federal debt. That amounts to the same position Democrats wrongly took during the Biden years, when they manufactured artificially low interest rates through the Federal Reserve’s printing presses to fund their Covid spending spree.

But as I noted at the time, that was bad policy by both Congress and the Federal Reserve. Powell’s biggest mistake of his tenure as Fed Chair occurred in the fall of 2020, when he claimed that “the recovery will be stronger and move faster if monetary policy and fiscal policy continue to work side by side to provide support to the economy.”

Such comments resulted in trillions of dollars, more “emergency” spending from Congress — at a time when the economy was recovering from Covid lockdowns, and the Federal Reserve was printing money via quantitative easing into the spring of 2022. We all know what happened then: the largest bout of inflation in a generation.

Trump wants the Fed to lower rates — and risk another inflation spike — for much the same reason Democrats did four years ago: so lawmakers can continue to spend money that Washington doesn’t have, in this case, via lower debt service costs. On the one hand, it’s possible to have some sympathy for those trying to clean up the hangover caused by Democrat overspending. On the other hand, if lawmakers didn’t and don’t want to make tough choices, they shouldn’t have run for office in the first place.

Stop Over-Spending

Trump may think that jawboning Powell into cutting interest rates will solve his problem. It seems much more likely to create another by sparking the return of inflation that the public loudly demonstrated they loathe last November. Besides, cutting federal spending isn’t Jerome Powell’s job — that lies with Congress.

If Trump wants to jawbone anyone, he should demand much deeper spending reductions from lawmakers, including for the programs that are consuming a growing share of the budget. As one expert noted in congressional testimony this week, even if we eliminated all federal discretionary spending, which includes functions like K-12 education, federal grants, and virtually the entire defense budget, Washington would still run a deficit this year. So perhaps Trump should not have his heads of agencies telling lawmakers to scale back the (still comparatively small) reductions to mandatory spending, included in the pending budget reconciliation bill.

Lawmakers of all parties keep thinking that some magic bullet will solve all of the country’s fiscal problems. It won’t. Most of those quick-fix “solutions” will only bring the country more grief. The sooner Trump and Congress tackle the tough work of reducing federal spending, the better off we will all be.