March 26, 2025 • 28 mins
With President Donald Trump firing independent regulators and killing off advisory committees, David Wilcox, director of US economic research for Bloomberg Economics, and editor Molly Smith discuss why data on the world's largest economy may be next.
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:08):
Some of the presidents Alex advisors have suggested that you
should resign.
Speaker 1 (00:12):
If he asked you to leave, would you go? No?
Speaker 3 (00:17):
Can you follow up on it?
Speaker 1 (00:19):
Do you think that legally you're not required to leave?
Speaker 2 (00:23):
No.
Speaker 3 (00:33):
I'm Stephanie Flanders, head of Government and Economics at Bloomberg.
Welcome to Trumpanomics, the podcast that looks at the economic
world of Donald Trump, how he's already shaped the global
economy and what on earth is going to happen next?
And it's that what's going to happen next part that
we're focusing on this week. There's so many presidents being
broken in Washington these days, it's easy to miss a few.
(00:57):
Last week, well, most were focused on deportation, court orders,
flights to El Salvador. Something happened that we at Trumpanomics
think should have got more attention. Two commissioners on the
Federal Trade Commission got fired for being Democrats. Now you
might say, so, what, who isn't being fired in the
nation's capital these days? Except it's not really supposed to
(01:20):
happen at an independent agency like the FTC. And if
it can happen to officials there. It raises questions about
whether folks at other independent agencies, even senior ones, could
be fired too. Fed share J Powell, for example, who
you heard voicing a rather different opinion at the start
of the show. It also made us think about some
(01:41):
other seemingly minor developments in other corners of DC that
could raise red flags about the independence and oversight of
not only the agencies that implement America's economic and regulatory policies,
but even potentially the economic data on which every judgment
about the US economy is based. Now, of course we
(02:02):
might be overdoing it. I hope we're overdoing it. Some
of these risks may well not materialize, but when it
comes to the independence of monetary policy and economic statistics, well,
we at Bloomberg get nervous fairly easily. David Wilcox has
spent his entire career overseeing and analyzing US economic data
and policy, first as Assistant Secretary for Economic Policy at
(02:24):
the US Treasury under President Clinton. He was then many
years until twenty eighteen, leading the Research and Statistics Division
for the US Federal Reserve. Acted as a senior advisor
to three Federal Reserve chairs, including Jay Powell happily for us,
he's now reached the pinnacle of his career as the
director of US economic research for Bloomberg Economics. David, thank
(02:47):
you very much for joining us and for being the
one really to sound the alarm about a lot of
these things.
Speaker 1 (02:51):
It's good to be here.
Speaker 3 (02:53):
Well, I know you do have a lot of thoughts
and concerns about this, based on your experience on the
inside of these agencies and decisions. But I also wanted
to get a bit of the reporter perspective from Molly Smith,
who's a US economics editor for Bloomberg in New York
and has been writing up quite a lot of what's
been happening at the statistical agencies and other parts of
(03:14):
DC that collate US economic data in recent months. Molly,
welcome to Trumponomics.
Speaker 2 (03:20):
Thanks for having me.
Speaker 3 (03:28):
So, David, let's start with that first thing. I mentioned,
the firing of two commissioners, which definitely did get a
little bit lost in the enormous amount of other news
that's happening on a daily basis in Washington. Why did
you immediately pick up the phone to tell us this
was something to worry about.
Speaker 1 (03:43):
Well, the historical parallel is just echoes very loudly. Nearly
one hundred years ago, President Franklin Dello and Or Roosevelt
also tried to fire an FTC commissioner named William Humphrey.
Humphrey initially had been appointed to the FTC by President
Calvin Coolidge in nineteen twenty five, and was reappointed to
(04:05):
a second term by President Herbert Hoover. When FDR came
into office, he correctly identified Humphrey as somebody who held
different policy views than FDR did, and so he asked
Humphrey twice in letters to resign, but Humphrey refused, so
(04:25):
FDR fired him. And that came despite the fact that
there was language in the FTC Act saying that the
President could fire members of the Commission only for inefficiency,
neglected duty, or malfeasance in office, and Roosevelt didn't allege
that any of those applied in the case of William Humphrey.
(04:48):
Humphrey refused to go. He sued for back wages, the
wages that he hadn't been paid after he'd been terminated.
Then he suffered the misfortune of before the case found
completion through the court system, which then as now the
wheels of justice turned rather slowly, but Humphrey's executor, the
(05:11):
executor of his estate, took up the legal cause and
maintained the lawsuit, and ultimately, in nineteen thirty five, the
Supreme Court ruled in Humphrey's favor and awarded those back
wages to his estate. That the case is incredibly important
today because it's that legal foundation, that nineteen thirty five
(05:34):
Supreme Court decision on which rests the employment security such
as it is that Federal Reserve governors also enjoy. The
language in the Federal Reserve Act is a little different,
but the legal principle is exactly the same.
Speaker 3 (05:50):
And to be clear, the firings in this case were
in a sense similar to the FDR ones because it
was not based on bad behavior, and there was no
claim it was based on bad behavior. It is the
fact that they potentially disagreed with the administration the continued
service on the FTC. The statement said, the explanation from
the White House was is inconsistent with my administration's.
Speaker 1 (06:10):
Priorities, exactly right. And I think what we're likely to
see here can't say with certainty, but likely, I think
is that this case involving the two FTC commissioners will
work reasonably rapidly through the court system and will get
a decision ultimately, probably from the Supreme Court. An extra
(06:33):
reason for concern is that the Supreme Court has been
chipping away at that nineteen thirty five decision Humphrey's Executor
versus the United States. Twenty twenty, for example, they limited
the reach of Humphrey's Executor so that it no longer
applies to single headed agencies like the Consumer Financial Protection Bureau.
(06:55):
They said it did still apply as of twenty twenty
to multi head agencies like the Federal Reserve Board. But
I think there's a lot of opinion in legal community
among legal scholars that Humphrey's Executor hangs by a thread,
and with it the independence of the Federal Reserve, its
(07:16):
ability to set monetary policy without fear of being second
guest by political authorities.
Speaker 3 (07:22):
And it should be said it would put the administration
in direct opposition to the way that j. Powell himself
said he saw the situation. In the first press conference
after the election, he was asked, can you be fired?
Are you worried about being fired by the president, and
said no, in a very kind of this is not
a questioned way. Was that your understanding, David, when you
(07:43):
were inside the FED that it was just there was
just not an issue about whether or not the President
could fire at FED chair.
Speaker 1 (07:48):
Well, as in many things in the legal world, it's
a little complicated. There are two positions that Jay Powell holds.
One is that he's a member of the Board of
Governors and they're The Federal Reserve Act language is quite
clear the President may terminate members of the Federal Reserve
Board for cause. The other position to which he also
(08:11):
needs to be confirmed, is as Chair of the Federal
Reserve Board, and there the drafting of the language, unfortunately
was rather awkward and leaves ambiguous the question about whether
the President can demote the chair from his elevated status
to that of a mere member of the Board of Governors.
(08:31):
That question has never been litigated. No president has ever
tried to demote a Federal Reserve chair before. I think
it's possible that we may see that question resolved here
in the future.
Speaker 3 (08:44):
But the broader concern which I mentioned at the start,
was around something which one thinks of as even more
of a kind of bedrock for US economic policy, and
that's just economic data, Molly, what's happened in the last
few weeks, as Doge and other parts of the administration
have been sort of cutting a sway through Washington, what's
(09:07):
happened that has raised concerns around statistics.
Speaker 2 (09:10):
So the biggest thing that I could point to so
far has been the administration terminating these statistical advisory committees.
And this was part of a broader executive order aimed
at reducing the scope of the federal government and eliminating
these committees wherever they were deemed unnecessary. And the thing
(09:30):
is about these committees, though at least for the statistical agencies,
is that they're made up of all volunteers. David can
speak to this also, he is chair of one of
these committees, so he knows this all too well. They're
all on a volunteer basis. They are not paid, they
are not employees of the federal government. And they generally
a lot of these committees met maybe two to four
(09:53):
times a year. And since COVID, it's all been virtual
for the most part, so they really had just about
zero cost to the government. I think the biggest budget
of any of them was maybe one hundred thousand dollars,
so this is certainly not or does is going to
be zeroing in on for the big for the big
bucks in terms of savings here. And it's really, if anything,
(10:15):
you know, these committees were there to advise the statistical
agencies about a whole range of things, whether it was
really how to keep up to date with our economy
which is ever evolving, and to make sure that the
data was commensurate with that and reflecting these new trends.
And it was really just a huge benefit to them
to have people on these committees that maybe were formerly
(10:38):
on these agencies themselves that maybe now work in academia
or our business economists work on Wall Street, in all
different real corners of economics and providing this free advice.
So if anything, now maybe you'd think, oh, well, not
that the government is going to be spending money on this,
but if they were to want a value of that back,
(11:00):
it would be through hiring consultants. But these people did
it for free. So committees. The committees that were terminated
include one to the Bureau of Economic Analysis, that's the
agency that pulls together the GDP report as well as
the Fed's preferred inflation gauge, the personal consumptions expenditures price index.
So the BA advisory committee was one. Another was the
(11:23):
one that David shared, which advised across the BA as
well as Bureau of Labor Statistics and Census. And I
also just learned that in the past week two of
the advisory committees to the BLS were also terminated, effective
actually a month ago, but those people only just found
out last week.
Speaker 3 (11:40):
So just to tease this out, and it's just to
demonstrate how all over this story, David Wilcox is you
were personally, as Molly mentioned, you were personally running one
of these committees. Briefly, in terms of the value of
these organizations. I mean, it sounds like you were giving
them advice on improvements in the data, but I guess
there was also a little bit of an informal oversight
(12:03):
by the academic and sort of stakeholder community of changes
that were being considered by these bureaus.
Speaker 1 (12:09):
Is that right, Yeah, that's right. It's important to note
that for all of these committees, the word advisory was
right in their title. We had no decision making power,
but we were populated by people who were at the
top of their fields with incredible expertise on the committee
that I was privileged to serve as chair for. One
(12:31):
of our members was Droona Jimoglu. You may have heard
his name because he's a recent recipient of the Nobel
Prize in economics. He was the only Nobel Prize winner.
But the committee was chock full of members.
Speaker 3 (12:47):
Who were free. As Molly has underlie, they were getting
a value for money.
Speaker 1 (12:51):
They were getting nothing in the way of an honorarium.
They were serving for the purpose of advancing the public good.
They came from a range of different areas of subspecialty.
What they had in common were two things. One was
a conviction that economic measurement is difficult, ever changing, and
(13:12):
super important for decision makers across society. And secondly, they
had the conviction that what they were doing had a
risk of making a difference if they said something smart.
The agency heads were in the room, the subject area
experts were in the room, and there was a risk,
just a risk, that the agency might change direction as
(13:36):
a result of their advice.
Speaker 3 (13:39):
So I guess you have to wonder a little bit
why you wouldn't want a free and very well founded,
deeply researched views by members of that broader community that
uses economic statistics. But if you were making a change,
for example, I don't know. We've heard the COMMA Secretary
Howard Lutnik suggest take the government's share of the economy
(14:00):
out of GDP. Would that be something that the Advisory
Committee would have had views on?
Speaker 1 (14:04):
Do you think, David, absolutely, we would have had views.
Whether they would have come and asked us, I think
that's open to question. It's such a basic question. It's
been long settled. It was debated fifty sixty years ago
when the whole concept of national income and product accounts
was being invented. But that's been resolved literally for decades.
(14:27):
It is now a matter of both national norms and
international standards that government demand is included in the field
of activity that's taken into account for purposes of tallying
gross domestic product or what we all know as GDP.
Speaker 3 (14:46):
And of course it's true. It makes reporters immediately think,
oh my god, and economists think, how could you possibly
start comparing countries if you suddenly had a totally new series.
Speaker 2 (14:54):
You know, David and I have spoken about this extensively
as well, and something that when I about this a
couple of weeks ago, that really stood out to me
that he said was there's this one idea of like
maybe Lutnik was just floating the idea of how the
data is presented, as in, maybe the government spending figure
(15:15):
is still there in the GDP report, but they publish
let's call it, like a maybe so called core GDP
that excludes it, so that you can still see it.
You can add it back in if that's how you
choose to calculate it, which is the still standard way.
That's one thing, not great, but you would still have
the data there. It's not like it's been eliminated that
you could calculate it yourself. The real concern, which I
(15:37):
don't know that this is what Lutnik was implying, but
certainly you could make this inference, was that what if
the GDP report just did not publish government spending it
all anymore? What if that data just simply was not
collected anymore, and that calculation then could not be made
the same way. That's more the concern when I talk
to people who are at the statistical agencies in the
(16:00):
let's call it the alumni community of the agencies, that
they're really worried looking from the outside in and I know.
Speaker 3 (16:07):
For various reasons, Molly, You've been sort of calling around,
particularly in the last few weeks, people who work at
these agencies insofar as you know them, and also people
who've formerly worked there. I mean, how nervous are they
specifically around this question of the statistical agencies? What are
you picking up.
Speaker 2 (16:26):
The thing that the biggest thing is to what extent
can the government interfere with statistics? And I don't want
to be here fear mongering, because I think that's you know,
a lot of what has happened in the last two
months is really, of course, as Trump is really pushing
the boundaries of what the executive branch can do, and
it's created a lot of questions of, oh, if he
did X, can he do why? Or does X then
(16:48):
apply to something else? And I certainly don't want to
be out here raising concerns that are unfounded. But these
are just questions that people have and are very much
spoken about in this community of people who I talk to.
So one of them is definitely seeing political interference in
the numbers. And one of the reasons why US economic
data is considered among the gold standard for the rest
(17:11):
of the world is because it's largely impartial that the
people who produce these numbers are mostly civil servants. They
are not political appointees. Certainly the heads of the agencies are,
but everyone is there with just a real commitment to
producing a public good. And as David was saying, you
know that the value of these numbers for making decisions
(17:33):
across all levels of decision making and policy making, that's
really what the core of the mission is all about.
And you know, people have raised ideas of seeing how
in other countries that have more authoritarian regimes, where the
numbers can be politically influenced, like in Russia, like Argentina
has had a past with this during the Greek debt crisis.
(17:55):
There have been other examples where politicians have found the
way to somehow insert themselves in the data to varying extents,
and that seems to be the real concern here or
something else that people raise too is especially now as
we're starting to get a better idea of how tariffs
would impact the economy, namely through slower growth and faster
(18:19):
or at least more elevated inflation. The idea of what
if Trump's he's a report that he doesn't like and
could would the agencies just simply not report it that one.
I don't know if that really has a material risk
of happening.
Speaker 3 (18:33):
Probably more than most places. We're very sort of hardwired
for the time and date of the release of these
numbers exactly all hell would break. Well, well, maybe we'll
find out, but I mean we should say none of
these things have happened yet. And I guess you know,
one further thing to mention to you, Molly, is you
know it's true you can talk about the Argentina examples
and the Russia examples, but we know that governments are
(18:54):
perfectly capable of sort of distorting and messing up economic statistics,
not through any kind of ideological agenda, but just by
not giving these agencies enough money and enough people. I
noticed that. I mean, the UK has been getting itself
into trouble recently on this, both on its labor statistics,
which have been endlessly questioned, and they've had massive issues
with the surveys. Just this week, I think they've announced
(19:15):
that the main producer price index in the UK is
going to be suspended for a few months because of
nothing to do with the politics, but just because of
concerns about the surveys. So you did a piece that
rather sounded the alarm about this before any of this happened,
before the inauguration, just looking at the long standing underfunding
of these agencies, which I guess is what would make
(19:36):
you a little bit more worried now is because they're
not coming into this in fine fettle. They're actually already
kind of being quite scrimped and tailed.
Speaker 2 (19:46):
Yeah, but these agencies have been underfunded for quite some time, and.
Speaker 3 (19:50):
That by administrations of both parties.
Speaker 2 (19:52):
Yes, the topic that really got me looking into this
issue more broadly was last year when the BLS said
it was going to have to cut the sample size
of one of the surveys in the Jobs Report, and
this is the survey that produces the unemployment rate and
the participation rate, among others, and that's still a concern.
They were able to stave off that sample size cut
(20:14):
temporarily through some short term funding last year, but still
TBD going forward. And this is exactly something that was
coming up in these Advisory Committee meetings that how can
we get that survey to be conducted online versus in person,
And that's something the BLS has been trying to do.
But guess what it costs money, So you need at
(20:35):
least an initial investment before these things will cost less
in the long run.
Speaker 1 (20:40):
Stephanie, I think our listener's list of concerns is probably
not long enough, so can I add one more big one?
Speaker 3 (20:46):
Always?
Speaker 1 (20:48):
Last week, the IRS was reported to be close to
reaching an agreement with Immigrations and Customs Enforcement, and under
that agreement, that Customs Enforcement they agency known as ICE,
would send names and addresses to the IRS, which is
our tax collecting authority in the United States, and the
(21:09):
IRS would verify the names and addresses. What on earth
does that have to do with economic data. It strikes
at the heart of the trust relationship between the government
and respondents because when respondents agree to participate in a survey,
they are assured in no uncertain terms that their responses
(21:30):
will be used quote for statistical purposes only. That's exactly
because respondents fear turning over valuable data to the United
States government and having it potentially used for an enforcement purpose.
They don't want to become criminally liable because they took
the public spirited action of participating in an economic survey.
(21:54):
So this IRS action risks setting a very damaging that
could strike at the heart of the trust foundation of
US economic data.
Speaker 2 (22:06):
And actually to that note, there was a note from
Goldman Sachs, I think in the past week saying that
the response rate to the Job's Household Survey by foreign
born workers has already declined. So I mean, I don't
think it would have been because of this already, since
the IRS development that David was just talking about only
just happened in the past week, but certainly reason to
(22:28):
think that foreign born people in this country would have
certainly less incentive to reply to government surveys.
Speaker 3 (22:35):
I mean, I guess we should say, Molly that the
heads of these agencies have not been appointed or replaced
by Donald Trump yet.
Speaker 2 (22:42):
That's correct. So the heads of these agencies, those are
roles that are politically appointed. The vast majority of people
who work in these agencies are civil servants, but the
leads are political appointees. And right now there is actually
one vacancy the Census direct Rob Santos. He's resigned from
his role shortly after Trump was inaugurated, so Trump will
(23:06):
have the chance to fill that role. I haven't heard
anything yet about where the progress on that stands. But
Census is really interesting because that was seems like in
his first term, that was the agency that Trump seemed
to square in on the most. Trump certainly has done
that a lot, has said the jobs numbers are phony
and fake. But when he's gone after census, it really
(23:28):
has had to deal more with a question about citizenship
and whether that should be included in the decential count.
And this was an issue that went all the way
up to the Supreme Court in his first term, and
this is probably something that Trump will want to revisit
this time around. The reason why it's so important is
because people who respond to the census, this is used
(23:51):
to then divvy up federal funding and congressional seats. So
he has an interest then to say, if you know,
if you're not a citizen, then you should not be
included in the census, and then your district then should
be not receiving appropriations and congressional seats as a result.
So this is probably something that he would have a
vested interest in taking on in this term.
Speaker 3 (24:12):
I'm just trying to step back a little bit as
we kind of near the end of this there's a
lot of things that people are worried about. Some would say,
you know, hysterical about with regard to some of the
things that this administration is doing, the kind of concerns
that we've been talking about, And I mean, you're correct me, David,
but it feels like there's kind of two different things.
(24:33):
There's the extent of executive power, which definitely arises in
this question around the firing of the commissioners and potentially
officials other independent agencies, which as you pointed out, will
be litigated, has already been chipped away by the Supreme Court,
and they may yet decide that actually the president has
(24:54):
a right to pire and fire people at these agencies
that are to some extent already implement the administration's policies.
That seems to be one set of things which is
about the nature of executive power, and you can disagree
about that. But there's a whole other set of things
that I think relate more to these this question of
the statistics and the independence of the statistics, which is
(25:16):
around whether there's oversight over the quality of these statistics
and whether there could be lasting problems arising from things
that administration has done which may not even be intentional.
Just on those second set of things, how much do
you David see the scope for distorting data or just
(25:39):
having it be kind of fundamentally undermined by things that
are happening.
Speaker 1 (25:43):
Well, the tradition in the United States is very strong.
The agencies have coded in their DNA that they resist
political interference. The most notorious example of this in history
occurred in the administration when President Nixon was caught on
(26:04):
tape from the Oval Office expressing really venomous views about
how he felt that the Bureau of Labor Statistics, the
agency that, as Molly mentioned, generates the unemployment rate and
other key data, how they were out quote unquote to
get him, and he was determined to undermine them.
Speaker 3 (26:24):
You know what's brilliant is that is not the thing
that most people remember about President Nixon, that he was
out to undermine the of Labor Stistics, and I did
not know it until now. So I think that thank
you for that.
Speaker 1 (26:34):
Absolutely. A through line for both of the issues that
you described, Stephanie, is the question of trust, And as
in many areas of life, trust in these areas that
you were describing is very difficult to accumulate. Building it
up is the work of years, decades, if not generations.
(26:58):
Destroying trust can happen, and in a jiffy it can
trust can be devastated through a single action, and that
damage is extremely difficult to repair. So that in this
there are a lot of things that keep me up
at night in this area, that's the one that keeps
(27:19):
me up at night most.
Speaker 3 (27:21):
I think we decided that if it keeps David Wilcox
up at night, given his many years of experience at
things that matter very deeply to Trump and Nomics, that
was worth an episode. Thank you very much, David, Thank you, Molly.
Speaker 1 (27:34):
Thank you, Thank you for having us on to discuss
these important issues.
Speaker 3 (27:45):
Thanks for listening to Trump Andomics from Bloomberg. It was
hosted by Me Stephanie Flanders. I was joined by David
Wilcox and Molly Smith. Trump and Nomics is produced by
Samasadi and Moses and with help from Chris Martlu and
Amy Keene and sound designed by Blake Maple's Brendan Francis
Newnham is our executive producer and to help others find
(28:05):
the show, please rate it and review it highly wherever
you listen to podcasts
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:08):
Some of the presidents Alex advisors have suggested that you
should resign.
Speaker 1 (00:12):
If he asked you to leave, would you go? No?
Speaker 3 (00:17):
Can you follow up on it?
Speaker 1 (00:19):
Do you think that legally you're not required to leave?
Speaker 2 (00:23):
No.
Speaker 3 (00:33):
I'm Stephanie Flanders, head of Government and Economics at Bloomberg.
Welcome to Trumpanomics, the podcast that looks at the economic
world of Donald Trump, how he's already shaped the global
economy and what on earth is going to happen next?
And it's that what's going to happen next part that
we're focusing on this week. There's so many presidents being
broken in Washington these days, it's easy to miss a few.
(00:57):
Last week, well, most were focused on deportation, court orders,
flights to El Salvador. Something happened that we at Trumpanomics
think should have got more attention. Two commissioners on the
Federal Trade Commission got fired for being Democrats. Now you
might say, so, what, who isn't being fired in the
nation's capital these days? Except it's not really supposed to
(01:20):
happen at an independent agency like the FTC. And if
it can happen to officials there. It raises questions about
whether folks at other independent agencies, even senior ones, could
be fired too. Fed share J Powell, for example, who
you heard voicing a rather different opinion at the start
of the show. It also made us think about some
(01:41):
other seemingly minor developments in other corners of DC that
could raise red flags about the independence and oversight of
not only the agencies that implement America's economic and regulatory policies,
but even potentially the economic data on which every judgment
about the US economy is based. Now, of course we
(02:02):
might be overdoing it. I hope we're overdoing it. Some
of these risks may well not materialize, but when it
comes to the independence of monetary policy and economic statistics, well,
we at Bloomberg get nervous fairly easily. David Wilcox has
spent his entire career overseeing and analyzing US economic data
and policy, first as Assistant Secretary for Economic Policy at
(02:24):
the US Treasury under President Clinton. He was then many
years until twenty eighteen, leading the Research and Statistics Division
for the US Federal Reserve. Acted as a senior advisor
to three Federal Reserve chairs, including Jay Powell happily for us,
he's now reached the pinnacle of his career as the
director of US economic research for Bloomberg Economics. David, thank
(02:47):
you very much for joining us and for being the
one really to sound the alarm about a lot of
these things.
Speaker 1 (02:51):
It's good to be here.
Speaker 3 (02:53):
Well, I know you do have a lot of thoughts
and concerns about this, based on your experience on the
inside of these agencies and decisions. But I also wanted
to get a bit of the reporter perspective from Molly Smith,
who's a US economics editor for Bloomberg in New York
and has been writing up quite a lot of what's
been happening at the statistical agencies and other parts of
(03:14):
DC that collate US economic data in recent months. Molly,
welcome to Trumponomics.
Speaker 2 (03:20):
Thanks for having me.
Speaker 3 (03:28):
So, David, let's start with that first thing. I mentioned,
the firing of two commissioners, which definitely did get a
little bit lost in the enormous amount of other news
that's happening on a daily basis in Washington. Why did
you immediately pick up the phone to tell us this
was something to worry about.
Speaker 1 (03:43):
Well, the historical parallel is just echoes very loudly. Nearly
one hundred years ago, President Franklin Dello and Or Roosevelt
also tried to fire an FTC commissioner named William Humphrey.
Humphrey initially had been appointed to the FTC by President
Calvin Coolidge in nineteen twenty five, and was reappointed to
(04:05):
a second term by President Herbert Hoover. When FDR came
into office, he correctly identified Humphrey as somebody who held
different policy views than FDR did, and so he asked
Humphrey twice in letters to resign, but Humphrey refused, so
(04:25):
FDR fired him. And that came despite the fact that
there was language in the FTC Act saying that the
President could fire members of the Commission only for inefficiency,
neglected duty, or malfeasance in office, and Roosevelt didn't allege
that any of those applied in the case of William Humphrey.
(04:48):
Humphrey refused to go. He sued for back wages, the
wages that he hadn't been paid after he'd been terminated.
Then he suffered the misfortune of before the case found
completion through the court system, which then as now the
wheels of justice turned rather slowly, but Humphrey's executor, the
(05:11):
executor of his estate, took up the legal cause and
maintained the lawsuit, and ultimately, in nineteen thirty five, the
Supreme Court ruled in Humphrey's favor and awarded those back
wages to his estate. That the case is incredibly important
today because it's that legal foundation, that nineteen thirty five
(05:34):
Supreme Court decision on which rests the employment security such
as it is that Federal Reserve governors also enjoy. The
language in the Federal Reserve Act is a little different,
but the legal principle is exactly the same.
Speaker 3 (05:50):
And to be clear, the firings in this case were
in a sense similar to the FDR ones because it
was not based on bad behavior, and there was no
claim it was based on bad behavior. It is the
fact that they potentially disagreed with the administration the continued
service on the FTC. The statement said, the explanation from
the White House was is inconsistent with my administration's.
Speaker 1 (06:10):
Priorities, exactly right. And I think what we're likely to
see here can't say with certainty, but likely, I think
is that this case involving the two FTC commissioners will
work reasonably rapidly through the court system and will get
a decision ultimately, probably from the Supreme Court. An extra
(06:33):
reason for concern is that the Supreme Court has been
chipping away at that nineteen thirty five decision Humphrey's Executor
versus the United States. Twenty twenty, for example, they limited
the reach of Humphrey's Executor so that it no longer
applies to single headed agencies like the Consumer Financial Protection Bureau.
(06:55):
They said it did still apply as of twenty twenty
to multi head agencies like the Federal Reserve Board. But
I think there's a lot of opinion in legal community
among legal scholars that Humphrey's Executor hangs by a thread,
and with it the independence of the Federal Reserve, its
(07:16):
ability to set monetary policy without fear of being second
guest by political authorities.
Speaker 3 (07:22):
And it should be said it would put the administration
in direct opposition to the way that j. Powell himself
said he saw the situation. In the first press conference
after the election, he was asked, can you be fired?
Are you worried about being fired by the president, and
said no, in a very kind of this is not
a questioned way. Was that your understanding, David, when you
(07:43):
were inside the FED that it was just there was
just not an issue about whether or not the President
could fire at FED chair.
Speaker 1 (07:48):
Well, as in many things in the legal world, it's
a little complicated. There are two positions that Jay Powell holds.
One is that he's a member of the Board of
Governors and they're The Federal Reserve Act language is quite
clear the President may terminate members of the Federal Reserve
Board for cause. The other position to which he also
(08:11):
needs to be confirmed, is as Chair of the Federal
Reserve Board, and there the drafting of the language, unfortunately
was rather awkward and leaves ambiguous the question about whether
the President can demote the chair from his elevated status
to that of a mere member of the Board of Governors.
(08:31):
That question has never been litigated. No president has ever
tried to demote a Federal Reserve chair before. I think
it's possible that we may see that question resolved here
in the future.
Speaker 3 (08:44):
But the broader concern which I mentioned at the start,
was around something which one thinks of as even more
of a kind of bedrock for US economic policy, and
that's just economic data, Molly, what's happened in the last
few weeks, as Doge and other parts of the administration
have been sort of cutting a sway through Washington, what's
(09:07):
happened that has raised concerns around statistics.
Speaker 2 (09:10):
So the biggest thing that I could point to so
far has been the administration terminating these statistical advisory committees.
And this was part of a broader executive order aimed
at reducing the scope of the federal government and eliminating
these committees wherever they were deemed unnecessary. And the thing
(09:30):
is about these committees, though at least for the statistical agencies,
is that they're made up of all volunteers. David can
speak to this also, he is chair of one of
these committees, so he knows this all too well. They're
all on a volunteer basis. They are not paid, they
are not employees of the federal government. And they generally
a lot of these committees met maybe two to four
(09:53):
times a year. And since COVID, it's all been virtual
for the most part, so they really had just about
zero cost to the government. I think the biggest budget
of any of them was maybe one hundred thousand dollars,
so this is certainly not or does is going to
be zeroing in on for the big for the big
bucks in terms of savings here. And it's really, if anything,
(10:15):
you know, these committees were there to advise the statistical
agencies about a whole range of things, whether it was
really how to keep up to date with our economy
which is ever evolving, and to make sure that the
data was commensurate with that and reflecting these new trends.
And it was really just a huge benefit to them
to have people on these committees that maybe were formerly
(10:38):
on these agencies themselves that maybe now work in academia
or our business economists work on Wall Street, in all
different real corners of economics and providing this free advice.
So if anything, now maybe you'd think, oh, well, not
that the government is going to be spending money on this,
but if they were to want a value of that back,
(11:00):
it would be through hiring consultants. But these people did
it for free. So committees. The committees that were terminated
include one to the Bureau of Economic Analysis, that's the
agency that pulls together the GDP report as well as
the Fed's preferred inflation gauge, the personal consumptions expenditures price index.
So the BA advisory committee was one. Another was the
(11:23):
one that David shared, which advised across the BA as
well as Bureau of Labor Statistics and Census. And I
also just learned that in the past week two of
the advisory committees to the BLS were also terminated, effective
actually a month ago, but those people only just found
out last week.
Speaker 3 (11:40):
So just to tease this out, and it's just to
demonstrate how all over this story, David Wilcox is you
were personally, as Molly mentioned, you were personally running one
of these committees. Briefly, in terms of the value of
these organizations. I mean, it sounds like you were giving
them advice on improvements in the data, but I guess
there was also a little bit of an informal oversight
(12:03):
by the academic and sort of stakeholder community of changes
that were being considered by these bureaus.
Speaker 1 (12:09):
Is that right, Yeah, that's right. It's important to note
that for all of these committees, the word advisory was
right in their title. We had no decision making power,
but we were populated by people who were at the
top of their fields with incredible expertise on the committee
that I was privileged to serve as chair for. One
(12:31):
of our members was Droona Jimoglu. You may have heard
his name because he's a recent recipient of the Nobel
Prize in economics. He was the only Nobel Prize winner.
But the committee was chock full of members.
Speaker 3 (12:47):
Who were free. As Molly has underlie, they were getting
a value for money.
Speaker 1 (12:51):
They were getting nothing in the way of an honorarium.
They were serving for the purpose of advancing the public good.
They came from a range of different areas of subspecialty.
What they had in common were two things. One was
a conviction that economic measurement is difficult, ever changing, and
(13:12):
super important for decision makers across society. And secondly, they
had the conviction that what they were doing had a
risk of making a difference if they said something smart.
The agency heads were in the room, the subject area
experts were in the room, and there was a risk,
just a risk, that the agency might change direction as
(13:36):
a result of their advice.
Speaker 3 (13:39):
So I guess you have to wonder a little bit
why you wouldn't want a free and very well founded,
deeply researched views by members of that broader community that
uses economic statistics. But if you were making a change,
for example, I don't know. We've heard the COMMA Secretary
Howard Lutnik suggest take the government's share of the economy
(14:00):
out of GDP. Would that be something that the Advisory
Committee would have had views on?
Speaker 1 (14:04):
Do you think, David, absolutely, we would have had views.
Whether they would have come and asked us, I think
that's open to question. It's such a basic question. It's
been long settled. It was debated fifty sixty years ago
when the whole concept of national income and product accounts
was being invented. But that's been resolved literally for decades.
(14:27):
It is now a matter of both national norms and
international standards that government demand is included in the field
of activity that's taken into account for purposes of tallying
gross domestic product or what we all know as GDP.
Speaker 3 (14:46):
And of course it's true. It makes reporters immediately think,
oh my god, and economists think, how could you possibly
start comparing countries if you suddenly had a totally new series.
Speaker 2 (14:54):
You know, David and I have spoken about this extensively
as well, and something that when I about this a
couple of weeks ago, that really stood out to me
that he said was there's this one idea of like
maybe Lutnik was just floating the idea of how the
data is presented, as in, maybe the government spending figure
(15:15):
is still there in the GDP report, but they publish
let's call it, like a maybe so called core GDP
that excludes it, so that you can still see it.
You can add it back in if that's how you
choose to calculate it, which is the still standard way.
That's one thing, not great, but you would still have
the data there. It's not like it's been eliminated that
you could calculate it yourself. The real concern, which I
(15:37):
don't know that this is what Lutnik was implying, but
certainly you could make this inference, was that what if
the GDP report just did not publish government spending it
all anymore? What if that data just simply was not
collected anymore, and that calculation then could not be made
the same way. That's more the concern when I talk
to people who are at the statistical agencies in the
(16:00):
let's call it the alumni community of the agencies, that
they're really worried looking from the outside in and I know.
Speaker 3 (16:07):
For various reasons, Molly, You've been sort of calling around,
particularly in the last few weeks, people who work at
these agencies insofar as you know them, and also people
who've formerly worked there. I mean, how nervous are they
specifically around this question of the statistical agencies? What are
you picking up.
Speaker 2 (16:26):
The thing that the biggest thing is to what extent
can the government interfere with statistics? And I don't want
to be here fear mongering, because I think that's you know,
a lot of what has happened in the last two
months is really, of course, as Trump is really pushing
the boundaries of what the executive branch can do, and
it's created a lot of questions of, oh, if he
did X, can he do why? Or does X then
(16:48):
apply to something else? And I certainly don't want to
be out here raising concerns that are unfounded. But these
are just questions that people have and are very much
spoken about in this community of people who I talk to.
So one of them is definitely seeing political interference in
the numbers. And one of the reasons why US economic
data is considered among the gold standard for the rest
(17:11):
of the world is because it's largely impartial that the
people who produce these numbers are mostly civil servants. They
are not political appointees. Certainly the heads of the agencies are,
but everyone is there with just a real commitment to
producing a public good. And as David was saying, you
know that the value of these numbers for making decisions
(17:33):
across all levels of decision making and policy making, that's
really what the core of the mission is all about.
And you know, people have raised ideas of seeing how
in other countries that have more authoritarian regimes, where the
numbers can be politically influenced, like in Russia, like Argentina
has had a past with this during the Greek debt crisis.
(17:55):
There have been other examples where politicians have found the
way to somehow insert themselves in the data to varying extents,
and that seems to be the real concern here or
something else that people raise too is especially now as
we're starting to get a better idea of how tariffs
would impact the economy, namely through slower growth and faster
(18:19):
or at least more elevated inflation. The idea of what
if Trump's he's a report that he doesn't like and
could would the agencies just simply not report it that one.
I don't know if that really has a material risk
of happening.
Speaker 3 (18:33):
Probably more than most places. We're very sort of hardwired
for the time and date of the release of these
numbers exactly all hell would break. Well, well, maybe we'll
find out, but I mean we should say none of
these things have happened yet. And I guess you know,
one further thing to mention to you, Molly, is you
know it's true you can talk about the Argentina examples
and the Russia examples, but we know that governments are
(18:54):
perfectly capable of sort of distorting and messing up economic statistics,
not through any kind of ideological agenda, but just by
not giving these agencies enough money and enough people. I
noticed that. I mean, the UK has been getting itself
into trouble recently on this, both on its labor statistics,
which have been endlessly questioned, and they've had massive issues
with the surveys. Just this week, I think they've announced
(19:15):
that the main producer price index in the UK is
going to be suspended for a few months because of
nothing to do with the politics, but just because of
concerns about the surveys. So you did a piece that
rather sounded the alarm about this before any of this happened,
before the inauguration, just looking at the long standing underfunding
of these agencies, which I guess is what would make
(19:36):
you a little bit more worried now is because they're
not coming into this in fine fettle. They're actually already
kind of being quite scrimped and tailed.
Speaker 2 (19:46):
Yeah, but these agencies have been underfunded for quite some time, and.
Speaker 3 (19:50):
That by administrations of both parties.
Speaker 2 (19:52):
Yes, the topic that really got me looking into this
issue more broadly was last year when the BLS said
it was going to have to cut the sample size
of one of the surveys in the Jobs Report, and
this is the survey that produces the unemployment rate and
the participation rate, among others, and that's still a concern.
They were able to stave off that sample size cut
(20:14):
temporarily through some short term funding last year, but still
TBD going forward. And this is exactly something that was
coming up in these Advisory Committee meetings that how can
we get that survey to be conducted online versus in person,
And that's something the BLS has been trying to do.
But guess what it costs money, So you need at
(20:35):
least an initial investment before these things will cost less
in the long run.
Speaker 1 (20:40):
Stephanie, I think our listener's list of concerns is probably
not long enough, so can I add one more big one?
Speaker 3 (20:46):
Always?
Speaker 1 (20:48):
Last week, the IRS was reported to be close to
reaching an agreement with Immigrations and Customs Enforcement, and under
that agreement, that Customs Enforcement they agency known as ICE,
would send names and addresses to the IRS, which is
our tax collecting authority in the United States, and the
(21:09):
IRS would verify the names and addresses. What on earth
does that have to do with economic data. It strikes
at the heart of the trust relationship between the government
and respondents because when respondents agree to participate in a survey,
they are assured in no uncertain terms that their responses
(21:30):
will be used quote for statistical purposes only. That's exactly
because respondents fear turning over valuable data to the United
States government and having it potentially used for an enforcement purpose.
They don't want to become criminally liable because they took
the public spirited action of participating in an economic survey.
(21:54):
So this IRS action risks setting a very damaging that
could strike at the heart of the trust foundation of
US economic data.
Speaker 2 (22:06):
And actually to that note, there was a note from
Goldman Sachs, I think in the past week saying that
the response rate to the Job's Household Survey by foreign
born workers has already declined. So I mean, I don't
think it would have been because of this already, since
the IRS development that David was just talking about only
just happened in the past week, but certainly reason to
(22:28):
think that foreign born people in this country would have
certainly less incentive to reply to government surveys.
Speaker 3 (22:35):
I mean, I guess we should say, Molly that the
heads of these agencies have not been appointed or replaced
by Donald Trump yet.
Speaker 2 (22:42):
That's correct. So the heads of these agencies, those are
roles that are politically appointed. The vast majority of people
who work in these agencies are civil servants, but the
leads are political appointees. And right now there is actually
one vacancy the Census direct Rob Santos. He's resigned from
his role shortly after Trump was inaugurated, so Trump will
(23:06):
have the chance to fill that role. I haven't heard
anything yet about where the progress on that stands. But
Census is really interesting because that was seems like in
his first term, that was the agency that Trump seemed
to square in on the most. Trump certainly has done
that a lot, has said the jobs numbers are phony
and fake. But when he's gone after census, it really
(23:28):
has had to deal more with a question about citizenship
and whether that should be included in the decential count.
And this was an issue that went all the way
up to the Supreme Court in his first term, and
this is probably something that Trump will want to revisit
this time around. The reason why it's so important is
because people who respond to the census, this is used
(23:51):
to then divvy up federal funding and congressional seats. So
he has an interest then to say, if you know,
if you're not a citizen, then you should not be
included in the census, and then your district then should
be not receiving appropriations and congressional seats as a result.
So this is probably something that he would have a
vested interest in taking on in this term.
Speaker 3 (24:12):
I'm just trying to step back a little bit as
we kind of near the end of this there's a
lot of things that people are worried about. Some would say,
you know, hysterical about with regard to some of the
things that this administration is doing, the kind of concerns
that we've been talking about, And I mean, you're correct me, David,
but it feels like there's kind of two different things.
(24:33):
There's the extent of executive power, which definitely arises in
this question around the firing of the commissioners and potentially
officials other independent agencies, which as you pointed out, will
be litigated, has already been chipped away by the Supreme Court,
and they may yet decide that actually the president has
(24:54):
a right to pire and fire people at these agencies
that are to some extent already implement the administration's policies.
That seems to be one set of things which is
about the nature of executive power, and you can disagree
about that. But there's a whole other set of things
that I think relate more to these this question of
the statistics and the independence of the statistics, which is
(25:16):
around whether there's oversight over the quality of these statistics
and whether there could be lasting problems arising from things
that administration has done which may not even be intentional.
Just on those second set of things, how much do
you David see the scope for distorting data or just
(25:39):
having it be kind of fundamentally undermined by things that
are happening.
Speaker 1 (25:43):
Well, the tradition in the United States is very strong.
The agencies have coded in their DNA that they resist
political interference. The most notorious example of this in history
occurred in the administration when President Nixon was caught on
(26:04):
tape from the Oval Office expressing really venomous views about
how he felt that the Bureau of Labor Statistics, the
agency that, as Molly mentioned, generates the unemployment rate and
other key data, how they were out quote unquote to
get him, and he was determined to undermine them.
Speaker 3 (26:24):
You know what's brilliant is that is not the thing
that most people remember about President Nixon, that he was
out to undermine the of Labor Stistics, and I did
not know it until now. So I think that thank
you for that.
Speaker 1 (26:34):
Absolutely. A through line for both of the issues that
you described, Stephanie, is the question of trust, And as
in many areas of life, trust in these areas that
you were describing is very difficult to accumulate. Building it
up is the work of years, decades, if not generations.
(26:58):
Destroying trust can happen, and in a jiffy it can
trust can be devastated through a single action, and that
damage is extremely difficult to repair. So that in this
there are a lot of things that keep me up
at night in this area, that's the one that keeps
(27:19):
me up at night most.
Speaker 3 (27:21):
I think we decided that if it keeps David Wilcox
up at night, given his many years of experience at
things that matter very deeply to Trump and Nomics, that
was worth an episode. Thank you very much, David, Thank you, Molly.
Speaker 1 (27:34):
Thank you, Thank you for having us on to discuss
these important issues.
Speaker 3 (27:45):
Thanks for listening to Trump Andomics from Bloomberg. It was
hosted by Me Stephanie Flanders. I was joined by David
Wilcox and Molly Smith. Trump and Nomics is produced by
Samasadi and Moses and with help from Chris Martlu and
Amy Keene and sound designed by Blake Maple's Brendan Francis
Newnham is our executive producer and to help others find
(28:05):
the show, please rate it and review it highly wherever
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