Commentary: What Trump should be doing instead of attacking the Fed

Yahoo

4 days ago

Republicans have a problem. Their signature economic package for 2025, the tax bill President Trump signed into law in early July, is deeply unpopular. Voters think it will harm the poor and reward the wealthy, and sober analysis suggests they're right. The last time Republicans passed a law like this, in 2017, voters pummeled them in the subsequent election.
As the leader of his party, President Trump bears responsibility for selling the tax bill to voters. He's not doing that. Instead, his main economic messaging effort this summer has been a sustained attack on the Federal Reserve and its chair, Jerome Powell.
Trump has routinely suggested he'll try to fire Powell, perhaps hoping the Fed chair will crack under pressure and quit before his term expires next May. He has hurled a dictionary of insults at Powell, calling him 'dumb,' 'stupid,' 'major loser,' 'knucklehead,' 'numbskull,' 'Mr. Too Late,' and 'the worst Federal Reserve chairman in history.' Since Powell has shown no signs of quitting, Trump has suggested he'll announce a "shadow" Fed chair who will offer different monetary policy guidance until Powell's term finally ends.
Trump's war on Powell serves at least three purposes. His stated reason for browbeating the Fed is to compel sharp interest rate cuts to stimulate the economy. But Trump also has a penchant for creating villains he can blame when something goes wrong, and as head of a cautious central bank, Powell fits the profile.
Trump also manages his many controversies by creating new kerfuffles to distract people from existing ones. Threatening mayhem at the Fed has been a way for Trump to deflect attention from tariff-related inflation, slowing economic growth, and now, the mushrooming Jeffrey Epstein scandal.
The Fed is not really causing Trump any problems. It has kept interest rates steady since last December, one source of calm in financial markets otherwise roiled by Trump's tariffs and their many unintended consequences. The Fed most likely will end up cutting rates by later this year or early next, just not as dramatically as Trump wants.
Read more: How much control does the president have over the Fed and interest rates?
Tax bill blowback should be a more pressing concern for Trump. As analysts figure out what's actually in the megabill, the political peril for Republicans becomes increasingly apparent. Most voters don't know all the details, but they already dislike the tax law and could oppose it even more strongly once it begins to affect real people.
A recent CNN poll found that 61% of people oppose the bill while only 39% approve. Fifty-eight percent say Trump has gone too far in cutting federal programs, which most likely reflects the blunt-force DOGE cuts overseen by Elon Musk earlier this year. And in the CNN poll, approval for Trump's handling of the federal budget was a lowly 37%.In an Associated Press poll, 62% of respondents said the tax bill would help the wealthy, while just 20% felt it would help low-income people. The portion saying it would harm 'people like me' was twice the portion saying it would help. Trump's approval rating on handling the economy in that poll was a scant 38%, with 60% disapproving. Trump is now deeply underwater on what used to be one of his most winning issues.
Voters are correctly assessing the complicated bill. The Yale Budget Lab found that the bottom 40% of earners would actually suffer a net loss of income from the bill, mainly because of cutbacks in food aid, Medicaid, and other health subsidies. The top 20% of earners would gain about $6,500 in annual after-tax income, while the savings for the top 1% would be $30,000. That's highly regressive, in that it benefits the rich at the expense of the poor.
Healthcare cuts are likely to be a particularly controversial aspect of the legislation, which could increase the number of uninsured Americans by 11 million, according to the Congressional Budget Office. Other GOP policies could boost that number to 16 million within 10 years, and real people will start to feel the cutbacks in 2026.
Republicans have essentially given voters every plausible reason to blame them for increasing healthcare costs, lost coverage, and medical disasters. Democrats will be eager to help heap it on. They're already erecting billboards near closing rural hospitals blaming Trump for the shutdowns. Whether such claims are accurate or not, Republicans put the target on their own backs.
When Republicans passed a big tax-cut law in 2017, during Trump's first term, they thought voters would reward them for a bill that financially benefited a majority of Americans. It didn't work out that way. The law was unpopular from the start, with many Americans feeling it heavily favored businesses and the wealthy. While that law harmed few people, many felt it did nothing to help them. In the 2018 midterm elections, Democrats outperformed, gaining 40 seats in the House of Representatives and retaking control of the chamber.
The 2025 tax cut law is more punishing than the 2017 vintage, because of the cuts to food aid and healthcare. And Republicans have a far narrower edge in the House this time around. If the pattern holds, Republicans will take a beating in next year's midterms, losing the House and maybe the Senate.
If Trump has a plan to prevent that, he might want to reveal what it is. The Fed will probably be cutting interest rates by the time of next year's election, blunting Trump's vilification of the central bank. He'll need somebody else to blame for everything voters dislike, unless he finds a way to persuade them that things are better than they think.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on Bluesky and X: @rickjnewman.
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