A number of important developments took place during the last few days. First, Trump fired the Bureau of Labor Statistics commissioner Erika McEntarfer, after the publication of a dire employment report that showed the first effects of Trump’s tariffs on economic activity and DOGE’s cuts of public sector employees. Trump said he “didn’t believe these numbers” and so he shot the messenger who gave the bad news. Immediately, policymakers, market practitioners and academics criticised this move, saying it could compromise the integrity of US statistics (until now, the gold standard of accuracy at the global level) and thus the overall credibility of the US policymaking (if based on wrong, or false, information). The leaders of the American Economic Association expressed “their grave concern over the dismissal of the Commissioner of the Bureau of Labor Statistics”, since “the independence of the federal statistical agencies is essential to the proper functioning of a modern economy.”
In an article published by the New York Times, titled “What to Do When the President Acts Like a 5-Year-Old?” Nobel Laureate George Akerlof said that “the credibility of American statistics is foundational. It undergirds investor trust. It guides fiscal and monetary policy. It tells businesses when to hire, when to expand and when to hold. When those numbers are tainted or appear to be, the ripple effects are vast. Markets can lose faith in the data and in the country that produces it.”
As Akerlof says: “Agencies like the Bureau of Labor Statistics, the Census Bureau and the Bureau of Economic Analysis operate under the executive branch, but their mandates are to serve the truth, not the administration. Their job is to report what is, not what the White House wishes were true.” But the reality is that Trump believes that public employees should not be loyal to the US constitution, but rather to the president. This is what is behind the creation of the so-called “Schedule G”, i.e. a class of public-sector officials that pledge their allegiance to the president, not the US constitution.
Once numbers begin to be published from federal agencies led by Trump’s loyalists, it will be understandable if people question their veracity. Trump himself showed a series of very questionable charts to show what he claims the true employment situation in the US actually is. This approach is about to reach to the very heart of the economic system. After the resignation of Adriane Kluger from the Fed’s board, in response to Trump’s firing of Erika McEntarfer, a vacancy has opened up in the board, whose members are permanently part of the FOMC, which makes monetary policy decisions. Trump has recently severely criticised Jerome Powell’s leadership, for not cutting rates fast enough.
Many economists worried that Trump could use this opening to appoint somebody who could serve as a “shadow Chair,” especially after two FOMC members broke ranks and voted against Powell’s proposal of keeping rates on hold in July. Instead Trump has so far decided to give the position to Steve Miran, the author of the controversial Mar-a-Lago proposal, which underpins the entire tariff strategy of the US administration. Miran will remain in place until January, which is the natural end of Kluger’s mandate. What happens after that is yet to be seen. One thing is certain: Miran is a steadfast Trump loyalist who won’t miss the chance to bring into the FOMC discussion some of the arguments made to justify even the most controversial policies of the US President.
