While the Federal Reserve’s July 31 decision to lower interest rates 0.25 percent likely made nary a ripple in your day, the move represents perhaps the most reckless political interference in the Fed’s 106-year history. The decision is no ripple, but an earthquake that has dire consequences for every American and even our neighbors across the world.

The Federal Reserve System operates as the central bank of our nation. Among its many responsibilities, the Fed shepherds America’s monetary policies to maintain price stability and maximum domestic employment. It monitors the health and fitness of our banks, big and small, and it seeks to minimize systemic risks to the U.S. financial system.

In short, with a guiding hand in every corner of our economy, the Fed is the bedrock underlying our entire economy.


The Federal Reserve system was enshrined in 1913 following a series of bank panics. Its creation was born to preserve our economy’s complete independence of undue political influence. The driver of not just our nation’s economic well-being but all progressive civilization, the modern world economy is both incredibly intricate and extremely sensitive to political tremors that, if left unchecked, can do untold damage to markets. The Federal Reserve was erected to be a citadel to stand above the never-ending tumult of politics.

For example, members of the Fed’s Board of Governors are appointed to serve staggered 14-year terms and can only be removed “for cause.” Furthermore, the Fed’s budget is set not at the whim of congressional appropriators but is perpetually self-funding, keeping legislators’ often-partisan motives far away from impacting long-term policy. These guardrails have helped the Federal Reserve operate largely out of the hands of political interests.

So, too, have presidential norms. Reserve governors are appointed by the chief executive, but the political involvement ends there, and for decades U.S. presidents have refrained from issuing public comments and complaints about the Fed’s monetary policy decisions. This line of separation has been invaluable to a stable economy.

Unfortunately, as it is with so many other aspects of our once-calm public life, Donald TrumpDonald John TrumpSteele Dossier sub-source was subject of FBI counterintelligence probe Pelosi slams Trump executive order on pre-existing conditions: It 'isn't worth the paper it's signed on' Trump 'no longer angry' at Romney because of Supreme Court stance MORE has blown up these norms.

While in office, Trump has repeatedly bashed the Fed for raising interest rates and demanded that it lower them. Additionally, despite appointing current Chairman Jerome Powell, Trump has publicly and privately criticized Powell and questioned his judgment. He has even mused out loud on the potential for firing Powell.


There is little question that Trump’s constant meddling and intimidation played a decisive role in the Fed’s decision to lower interest rates.

You may ask: it’s a fraction of a percentage point – who cares? Well, lowering this important benchmark interest rate has all sorts of implications for households and businesses, some good, some bad.

One of the biggest impacts will be on retirement security. In general, lower interest rates are bad for net savers who earn less on their savings, and bad for pension plans, which are trying to provide the benefits for which their workers contracted. That is urgent for states like my home New Jersey where government pension funds are habitually underfunded.

And it is especially urgent for Social Security recipients, who will face catastrophic cuts if the Social Security Trust Fund goes broke from collapsing interest rates. For over 80 years, Americans have paid into Social Security to enjoy the peace of mind that their retirement benefits will be protected – but that trust is under threat. Congress is considering H.R. 860, the Social Security 2100 Act, landmark legislation I co-sponsored, that would keep Social Security solvent for 80 more years. But with Trump’s meddling, even Social Security could be upended.

Of course, on the other hand, low interest rates can be good for net borrowers, who pay less in debt service. Ultimately, whether low rates are good or bad overall depends on the economic context, and right now, interest rates, inflation and unemployment are all low and our economy continues to grow. That two Federal Reserve members dissented from the decision to lower interest rates stands out and raises the question: why now? Trump’s interference is the inescapable reason.


The number itself is irrelevant versus what it represents. The Fed has thrived on its independence, and in turn our nation has flourished economically on a scale that is unmatched in the world. But if Trump is permitted to the break the seal on the Fed’s independence, what will stop him from doing that again and then again at his whim? Or his successors?

Remarkably, even after the interest rate decrease was announced, Trump attacked it as insufficient and slurred Chairman Powell. Seeing his behavior had an impact, he will not stop using his office to bully the Fed. And if such interference becomes accepted practice, the foundation of our entire economy becomes that much more unstable.

No one can or will claim that our financial system is even a fraction of perfection. The growing economic inequality that continues to tear apart our nation originates in part with a financial system that is skewed to the top 1 percent of society, rather than the 99 percent to which all too often the Federal Reserve and its leaders have been indifferent. Nevertheless, over the last several generations, the Fed has largely succeeded at keeping our financial system afloat. It is no accident, either, that inflation rates have been low for a generation: that is because of the Fed’s skillful navigation.

As it is with seemingly every cherished institution, Donald Trump is trying to take a sledgehammer to our financial citadel. If his mindless destruction can succeed here, our entire economy could become the collateral damage.

Pascrell represents the 9th District of New Jersey and is a member of the Ways and Means Committee.