Hassett Signals Fed Rate Cut Likely, Defends Tariffs, and Outlines 2025 Economic Vision
NEC Director — now the clear front-runner to replace Jay Powell — talks AI, tariffs, wages, growth, affordability, and Trump’s upcoming economic push
White House National Economic Council Director Kevin Hassett, now widely viewed as the leading candidate to replace Jay Powell as Federal Reserve Chair, appeared on Mornings with Maria (Maria Bartiromo) for a sweeping discussion of the economy, monetary policy, tariffs, and the administration’s affordability agenda. Hassett did not confirm whether he will take the Fed job, but he strongly suggested the Federal Reserve should cut rates at next week’s meeting, citing weak labor indicators, missing data from the government shutdown, and a powerful AI-driven productivity boom.
Hassett defended the administration’s tariff authority amid an imminent Supreme Court ruling, touted Trump’s “$18 trillion” investment wave, and argued that affordability problems stem from Biden-era inflation and regulation. He also previewed the President’s new nationwide affordability tour, expanded housing efforts, and the launch of “Trump Accounts for Newborns,” which he called one of the administration’s most consequential long-term policies.
Below is the full interview reconstructed in a question-and-answer format.
Q1. What should the Federal Reserve do at its December meeting, and what is the White House expecting?
Hassett said the Fed should “cautiously reduce rates again” next week, and he expects that is what the FOMC will do. He emphasized that:
• The government shutdown caused data gaps, obscuring real-time economic signals.
• Anecdotal indicators (e.g., ADP) show labor softening, even as industrial production hits all-time highs and GDP has been running “in the fours.”
• The shutdown likely produced a temporary drag—but “a bigger rebound” is coming in Q1.
Against that backdrop, he says this is an appropriate moment to cut, and he believes the Fed sees it similarly.
Q2. Is artificial intelligence destroying jobs—or boosting productivity and wages? What is the White House message?
Hassett argued forcefully that AI is a net positive, not a job destroyer:
• AI functions like “the best coach you ever had” on the job.
• Workers don’t need to learn new coding languages—AI guides productivity directly.
• Productivity growth could hit 4% next year, far exceeding 1990s gains.
• AI is helping accelerate real wage growth, which Hassett contrasted with the $3,000 decline in real wages under Biden.
Hassett acknowledged stress among recent graduates but said this will “work out quickly,” noting that the AI economy is scaling much faster than the 1990s dot-com era.
Q3. What economic growth does Hassett expect for early 2026 under the ‘big, beautiful bill”?
Hassett believes the U.S. is entering “one of the golden years in American economic history,” driven by:
• A capital-spending wave Trump estimates at $18 trillion.
• A surge in factory groundbreakings—“about 20” in the last two months.
• Major tax changes kicking in next year, including no tax on tips, overtime, or Social Security, which will deliver large refunds in early 2026.
Asked directly about Q1 and Q2 growth, Hassett replied: “I would be disappointed at 3%. It could easily be a percent higher… and without inflation because it’s all supply-side.”
Hassett compared today’s AI productivity boom to the 1990s, arguing that Greenspan was right not to tighten during those high-growth years.
Q4. Does the stock-market “wealth effect” indicate consumer strength?
Hassett: “Yes.” He said the S&P 500’s melt-up is both a reflection of, and contributor to, strong demand:
• Firms posted the largest positive earnings surprise in memory.
• Consumers are “living their lives to the fullest,” boosting sales and profitability.
• Wage growth and consumption are reinforcing a virtuous cycle.
He said the recent government shutdown was the only real interruption.
Q5. Is the White House worried about the Supreme Court’s pending tariff decision? What’s the backup plan?
Hassett expressed confidence in the administration’s legal authority under IEEPA but said they are prepared either way.
• Trump has “full authority” to declare emergencies, including those tied to fentanyl.
• Tariffs or quotas are the natural tools for regulating trade, he argued.
• If the Court forces repayment of roughly $300 billion in duties, it would be a “massive economic disruption.”
Hassett said backup plans include Section 232 and Section 301 authorities:
“We’re going to win either way. The American people are going to win either way.”
Q6. Will new residency rules let Washington veto Federal Reserve regional bank presidents?
Hassett said Treasury Secretary Bessent’s proposal aligns with the original 1913 Federal Reserve Act, ensuring geographic representation. He did not say whether this will derail February approvals for the 12 regional presidents, noting he has not discussed it.
Q7. What is the administration’s message to Americans still struggling with affordability?
Hassett emphasized that the affordability crisis originated under Biden, citing:
• Mortgage payments rising more than $1,000 per month.
• Grocery baskets increasing from $400 to $525.
• Real household incomes falling $3,000 during the Biden years.
He said real purchasing power is up $1,200 so far this year under Trump and will continue improving as inflation moderates.
Q8. What about housing affordability and the new Housing Act?
Hassett said housing is a priority, and the administration considers the new Housing Act a “strong first move.” He previewed:
• A second round of policies being drafted now to reduce housing costs.
• Ongoing coordination with Congress, including Senator Scott’s proposals.
Q9. What will Trump highlight on his nationwide affordability tour?
Hassett said Trump will showcase:
• The $18 trillion in new factory construction now visible through groundbreakings.
• Economic momentum across manufacturing and wages.
• His broader record: de-escalating wars, restoring U.S. competitiveness, and fixing affordability.
Q10. How significant are “Trump Accounts for Newborns”?
Hassett called them one of Trump’s greatest achievements:
• Every newborn receives money invested in a broad-based index fund.
• All Americans 18 and under also receive accounts.
• Billionaire Michael Dell contributed $6.2 billion to deposit $250 for all children age 10 and under.
• Wealthy donors nationwide are now pledging additional funds.
Hassett said it gives every child “a piece of the pie” and a sense of ownership in American capitalism.
Q11. Are tariff revenues lower than estimated, and does this worsen the deficit outlook?
Hassett said the U.S. is receiving “a heck of a lot” of tariff revenue but acknowledged that reshoring shifts the numbers. When production moves to the U.S., Americans earn the profits and wages instead of foreign producers: “Either way America wins.”
Q12. How have Democrats claimed the ‘affordability’ message when Trump made it a first priority?
Hassett said the media echo chamber helps Democrats frame the issue, but Republicans have the stronger record:
• Biden’s 51-mpg fuel-efficiency mandate would have made all internal-combustion vehicles illegal, he argued.
• Car companies faced billion-dollar fines for failing to meet impossible standards, pushing car prices higher.
• Trump is rolling back those regulations to restore affordability.
Q13. What does Hassett expect on health-care policy and drug prices?
Hassett pointed to Trump’s most-favored-nation drug policy and rural-hospital funding efforts. He noted:
• During Trump’s first term, drug prices experienced the only two annual declines since World War II.
• The administration is prepared to do it again.
On expiring ObamaCare subsidies, he said the White House will “see where it ends up” but reaffirmed Trump’s commitment to affordability in health care.
Closing note: Hassett thanked the host as snow fell behind the White House — an image he acknowledged multiple times — while reiterating the administration’s optimism: strong productivity, strong growth, and a policy roadmap he believes will restore affordability and secure a “golden year” for the economy in 2026.
