All eyes on Kevin Warsh New Fed Chair keeps rate unchanged, hosts first news briefing

[00:00:00]Today, Federal Reserve Chair Kevin [music] Warsh will lead his first interest rate meeting and press conference. Right now, of course, most economists do expect the Fed to leave rates unchanged, but investors and small businesses will be listening closely for what Kevin Warsh says about the months ahead. And joining us now to discuss what we can expect is former Trump White House economic advisor Steve Moore. Good morning to you, sir.

[00:00:23]>> Hey, Jen.

[00:00:24]>> So, with energy prices falling, inflation now easing a bit, real wages rising, you know, the economy is continuing to show some strength. What message do you expect Warsh to send about the possibility of rate cuts later this year?

[00:00:38]>> Hm, that's a good one. Well, listen, I mean, the script the meeting couldn't come at a better time because we have this apparent uh you know, peace deal that looks like it's going to stick, and that means we're going to see the flow of oil uh you know, increasing, and we're going to see hopefully that price of oil continue to fall. And so, gas prices will fall, and and food prices will follow, etc. So, that makes uh Kevin Warsh's job a little bit easier, doesn't it, uh Jen, because uh the natural forces will bring those prices down. I've known Kevin Warsh for a long time. He was my choice for Fed Chair. I think he'll be excellent. And I I'll say this about him. He is a he is dedicated to bringing that inflation rate down. He's what we call an inflation hawk. So, he wants to bring that inflation rate, which is now running at 4.2% down to below 2%, and maybe we're not going to done at 0%. I think consumers would love to see that. Uh but, I do not expect the Fed to raise or lower interest rates at this meeting.

[00:01:30]>> All right. And we're expecting him to speak, I think, around 2:00 p.m.

[00:01:33]Eastern, uh and look forward to that. And I want to ask you about this this article you recently wrote about the 40th anniversary of the 1986 Tax Reform Act.

[00:01:42]You called it one of the most important economic achievements of the Reagan years.

[00:01:47]Why was that reform so successful, and is there a path for Congress to replicate something like it today, politically?

[00:01:55]>> Yeah, this was a miracle. I was in Washington in 1986. I just arrived uh in in DC and it was a it was a miracle.

[00:02:02]What we did was we lowered all the tax rates from 50% down to 28% and we got rid of all almost all the loopholes in the tax system. It it was kind of a miracle and what you know what's a real miracle about this Jan is that it passed the United States Senate 97 to 3 including votes from people like Al Gore and people like Ted Kennedy and and even some of the most liberal senators. So, it was one of the great bipartisan achievements. By some estimates, by lowering those rates and getting rid of all the special loopholes in the tax code, it raised the American economy by about a trillion dollars. Your question is a good one. Could we do it again?

[00:02:41]Could we get you know, the Democrats and Republicans together and get because we've we've you know, we haven't cleaned out the barn of the tax code now for 40 years. It's time to do it again, but I don't know. I mean, the Democrats today in the Congress are a lot different than they were back then when you had people like Bill Bradley and others who really wanted to to do something great for the country and boy did we. And it was truly bipartisan. The Democrats ran the house under Dan Rostenkowski and the Republicans ran the Senate and they came together and passed a great piece of legislation.

[00:03:15]>> was it was almost overwhelmingly in favor of of this of this tax cuts. Rhode Island, speaking of which, has become the latest blue state to raise taxes on high income earners, speaking of of Democrats. Now, Democratic supporters call it {quote} a matter of fairness. Critics say it's bad economics. What are the long-term consequences of these so-called millionaire taxes and what message does it send to job creators and also investors?

[00:03:41]>> Yeah, you're seeing now a real exodus of of the millionaire class out of these blue states. So, you know, you look at states that have these millionaire taxes are California, New York, Maine, you just mentioned Rhode Island and a couple of now Washington State, Seattle has this and Seattle's a good example. You know, Seattle was the home of Starbucks, Microsoft, Amazon, some of the great companies and guess what? Since they introduced this new millionaire tax, a lot of those people and the CEOs are moving out of Seattle.

[00:04:15]So, it's a bad policy. It doesn't work very well and all you're doing is really inviting your entrepreneurs and your businesses to leave the state and where they going? They're going to Texas, they're going to they're going to Florida, they're going to the Carolinas. So, it's a real battle between the red states and the blue states.

[00:04:32]>> Totally. Finally, SpaceX's IPO created thousands of new millionaires including employees far, far removed from the executive suite. So, we're talking janitors, cafeteria workers. Many of those employees have life-changing wealth right now. Doesn't this underscore a point often missed in the debate over capitalism that when companies succeed, the benefits extend well beyond the company's founder?

[00:04:58]>> Yeah, you I can't improve on what you just said. Exactly right, Shana. And you know, not only is they're saying that he might be the first world's first first trillionaire, trillionaire, but he's created 100 billionaires and he's created thousands of millionaires and you're quite right, Shana. These some of these were people who were just blue-collar workers who worked at SpaceX who now have million dollars. And this is a great, great story. By the way, my wife and I had a had invested about 7 or 8 years ago in a tech fund, you know, about $25,000 and we just kind of let let it sit and then we we let realized, hey, you know, what's in this in this package was we own some some SpaceX. So, next time you and I get together, I'm buying lunch. I'm feeling better about that.

[00:05:41]>> [laughter] >> Always on you now. All right. Former White House economic advisor Steve Moore, what a great story. Thanks for joining us this morning.

[00:05:48]>> Take care. Thank you.

[00:05:50]And genuine interest in moving the Fed forward.

[00:05:54]This week's FOMC meeting exemplified the very best of the Fed's traditions. Rigorous debate, open-mindedness, commitment to mission, responsibility, and accountability for performance.

[00:06:11]In this business, they all add up to one thing.

[00:06:15]Getting monetary policy right.

[00:06:18]Or as near to it as we can do.

[00:06:21]That is our North Star.

[00:06:24]My colleagues and I are here to serve our legislative remit, which you've heard us say before, price stability and maximum employment.

[00:06:34]And these objectives guided our business in the meeting just concluded.

[00:06:40]As you saw a few moments ago, the committee decided to maintain the target range for the Fed funds rate at 3 and 1/2 to 3 and 3/4 percent in support of the Fed's dual mandate.

[00:06:54]The committee also reaffirmed its policy of maintaining ample reserves in the banking system.

[00:07:01]Economic activity is expanding at a solid pace despite elevated uncertainty that owes in part to the conflict in the Middle East.

[00:07:11]Productivity growth growth and capital investment both strong.

[00:07:16]Job gains have kept pace with the workforce and the unemployment rate has changed little.

[00:07:22]We recognize that inflation has been running well ahead of the Fed's long-stated inflation goal of 2%.

[00:07:30]That's been going on for more than 5 years.

[00:07:34]>> [clears throat] >> Persistently high prices are burden for the American people.

[00:07:40]But the recent past need not be prologue.

[00:07:44]I am pleased to report that members of the FOMC are unambiguous and unanimous. This committee will deliver price stability.