Federal Reserve officials often face as much criticism as New York City’s incoming mayor, Zohran Mamdani, if not more. The scrutiny directed at central bankers can be intense.
Let’s consider why this is the case. Across the political and economic spectrum, there has been a rush to showcase an understanding of fundamental economics, often highlighting Mamdani’s mixed messages. Critics of the socialist mayor’s proposals argue that initiatives like “rent freezes” attempt to make the expensive affordable, ultimately leading to a shortage of the very apartments he seeks to make accessible.
Critics are not mistaken in pointing out that freezing rents could stifle new apartment developments in New York City. Such a move would deter the renovation of existing properties. After all, why invest in or upgrade properties that cannot command market rates? This goes beyond rent freezes.
Mamdani also advocates for wage floors, which could impede hiring in the city as much as rent controls could hamper development. When politicians and government authorities impose their limited understanding on the complex marketplace, it often results in scarcity of resources deemed affordable and can lead to unemployment. Such interventions can spark crises, which are typically the outcome of government interference rather than financial phenomena.
This discussion brings to mind Kevin Hassett, a leading candidate to be chosen by President Trump as the next Federal Reserve Chairman. Hassett recently expressed his desire to “get to a much lower rate” in the future. Curiously, this statement did not dominate the headlines of major newspapers, nor did it provoke a storm of editorial debate, particularly from conservative voices. The reason for this silence remains unclear.
While Mamdani faces sharp criticism for his stance on wage and rent controls in New York City, Hassett’s calls for more affordable dollar access—affecting global markets as well as local ones—seem to have escaped similar scrutiny. Why is there a lack of outcry over such significant economic proposals?
While Mamdani was correctly pilloried by deep thinking types for his adamancy about price floors on wages and ceilings on NYC dwellings, Hassett is much more than one-upping the Mayor-elect with his calls for cheaper access to the dollars not just exchangeable for apartments in New York, but every single market good available not just stateside, but around the world given the dollar’s global acceptance. Where’s the outrage?
In particular, where’s the outrage when the majesty of compound returns is considered? While it’s bothersome to think of Mamdani imposing his economic illiteracy on NYC property owners, renters, and would-be renters alike, it can’t be said enough that nearly every American earns in dollars, and of substantial importance, saves in dollars. Despite this, Hassett isn’t merely calling for a rate freeze a la Mamdani, he implies that his Fed will make Gracie Mansion appear Adam Smith by comparison. Which is the point, or should be about the Fed.
Dumb as the economics are of politicians from both sides of the political aisle, the economics of the biggest employer of economists in the world are a monument to just how ridiculous the profession is, and realistically always was. It’s often said that economists are monolithic in their beliefs about things as though unanimity among PhDs is somehow indicative of wise. It’s not.
It’s accepted wisdom inside the walls of the Fed that economic growth causes inflation, that war brings with it an economic upside, not to mention that the central bank can turn economic growth on and off by decreeing rates of interest high or low depending on the economy’s “temperature.” With his most recent comments, it’s evident that Hassett shares these beliefs about the Fed’s power.
Or maybe he doesn’t. Which arguably calls into question his thinking even more, that he would say anything to please the man charged with appointing him. Either way, why do Mamdani’s droolings rate scorn where Hassett’s rate admiring reverence?
