Powell’s Fed Imposing Enormous Costs on America

Powell Costs By the Numbers

Powell’s Fed Imposing Enormous Costs on America

Federal Reserve Chair Jerome Powell's stubborn refusal to lower interest rates, despite ample evidence calling for such action, is inflicting serious economic damage on America. Even keeping rates just half a percentage point higher than economic conditions justify carries heavy costs in growth, employment, household finances, and the federal budget.

Let's examine precisely how Powell's misguided interest rate policy hurts the nation. A mere half-point overly tight Federal Funds rate drags down GDP growth by roughly a quarter to half a percentage point each year. Considering America's $28 trillion economy, that's $70 billion to $140 billion annually in lost economic output—wealth that is unnecessarily forfeited.

This loss translates directly into lower federal tax revenues, intensifying budget deficits and deepening our national debt. With federal revenues typically averaging around 18% of GDP, a GDP shortfall of $70 billion to $140 billion per year means federal revenues fall by roughly $15 billion to $30 billion annually. Over a ten-year span, this lost revenue snowballs into an additional $150 billion to $300 billion added to the national debt. Powell’s stubbornness, therefore, directly undermines America’s fiscal stability.

Moreover, about a quarter of the nation's debt is financed through short-term Treasuries. These instruments are acutely sensitive to interest rate hikes. Keeping rates unnecessarily elevated by 50 basis points means taxpayers face an additional $100 billion in debt-service costs over the next decade. Powell's rigid policies thus impose a double fiscal burden—lost revenues and higher interest payments—on current and future generations.

But it's not only the government's finances that Powell’s actions damage; American households feel acute financial pain too. A 0.5% interest rate increase raises annual payments on a typical $400,000, 30-year mortgage by over $1,000. For millions of American families already grappling with tight budgets, this is no minor inconvenience. Similarly, higher rates drive up costs on revolving debt—credit card balances totaling around $1 trillion—costing households an additional $4 to $6 billion each year in interest alone. This doesn't even count the higher costs on auto loans, student loans, or other forms of consumer credit.

Perhaps most troubling is Powell's impact on employment. Slower GDP growth translates into fewer jobs—an estimated 500,000 to 750,000 lost over the next 12 to 18 months due to this half-point excessive tightening. These aren’t just abstract numbers—they represent real people, families, and communities robbed of economic opportunity, solely due to Powell's needless rigidity.

This isn't Powell’s first costly error. Recall that during President Trump’s initial term, Powell erroneously raised rates in 2018, choking off robust economic growth. History is repeating itself in Trump's second term, as Powell again misjudges economic conditions and refuses to rectify his mistake. The consequences—lost growth, higher unemployment, soaring deficits, and strained household budgets—are stark and entirely avoidable.

It's past time the Federal Reserve Board of Governors intervened. Powell appears incapable of acknowledging, let alone correcting, his profound miscalculations. If he will not voluntarily adjust course, the Board must act decisively to prevent further economic harm.

In short, Powell’s stubborn refusal to lower interest rates is exacting an exorbitant cost from Americans: billions lost in growth, higher national debt, increased financial strain on households, diminished retirement savings, and reduced job opportunities. Jerome Powell is competing hard for the unenviable title of worst Fed chair in history. America deserves—and desperately needs—better.