Hassett says authors of New York Fed tariff study should be disciplined: ‘Worst paper I’ve ever seen’

White House economic advisor Kevin Hassett said Wednesday that the authors of a recent New York Federal Reserve paper that found U.S. companies and consumers are shouldering most of the tariff burden should be “disciplined.”

In a CNBC interview, the National Economic Council director ripped the report, saying that central bank researchers ignored key aspects of how the duties worked and instead simply focused on prices. Hassett said the research also should have included the upward impact on wages and benefits that U.S. companies see by bringing more production onshore.

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The headline frames the story as one of disciplining a wayward Fed official. But the real issue is the status of the Fed itself, whether it should be subject to discipline or, whether it ought to be subject to any external control at all?

The problem is the Fed exists because we don't trust our elected officials to do the job the Fed is entrusted with. We believe that elected officials will politicize the Fed and damage the nation. We fear that they will manipulate interest rates and inflate the money supply not for the health of the economy but only to get themselves reelected.

So we set up this quasi-constitutional rump agency, deliberately removed from our democratic process because we don't trust the representatives of that democracy. Our base case creating legitimacy of government is consciously set aside for the Fed.

Now it is clear that the comments in this forum will be decidedly in favor of granting President Trump the power to influence the Fed. But in three years the presidency of Donald Trump will move into history when we might well be faced with a Democrat President who will be very much aligned with the Fed official who wrote this report.

The Fed is a bad solution to a multi-faceted conundrum. It is not clear that more democracy will get us a better result.

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