The key detail about interest rates that Republicans should know, but don’t

In recent years, a surprising number of Republicans have forgotten who was president in 2020. Assorted GOP voices have insisted that Joe Biden was in the White House in 2020, but he wasn’t — a straightforward detail that the former Democratic president’s critics flub all the time.

But this week, Secretary of Housing and Urban Development Scott Turner went even further, suggesting that Biden was also president in 2018.

“In 2018, [Federal Reserve Chairman Jerome] Powell brought down interest rates during the Biden administration, and then now he won’t even bring it down when the economy is thriving,” the HUD secretary said. “And so, I don’t understand it.”

As the Cabinet secretary probably should’ve known, the Biden administration began in 2021, not 2018. Similarly, to suggest that Powell, who was appointed by Trump, has made rate cuts based on partisan considerations, instead of economic conditions, is wrong.

But Turner’s other point was of even greater interest: He suggested it was inexplicable for the Fed not to lower interest rates “when the economy is thriving.”

This has come up with surprising frequency of late. Last week, House Speaker Mike Johnson appeared on CNBC and declared: “My opinion is that we should reduce interest rates. The American economy is hot.”

This week, Donald Trump told reporters, “We want to see interest rates come down. Our country is booming.” A day later, Russell Vought, the head of the White House Office of Management and Budget, similarly endorsed lower interest rates during an appearance on CNBC, before adding: “America is hot right now.”

I can appreciate the broader political dynamic: Trump wants lower interest rates, and he wants the public to believe he’s delivering an economic miracle, so he’s pushing two contradictory points. Those who serve at his pleasure — or in the case of the House speaker, those who act like they serve at his pleasure — likely feel the need to stick to the presidential script for fear of being fired.

But Monetary Policy 101 isn’t that complicated: If the economy is “hot” and “booming,” the Fed shouldn’t lower interest rates because it would cause the economy to overheat and push inflation higher. If, on the other hand, the economy is struggling and needs a boost, then the Fed should lower interest rates.

Republicans, in other words, have a choice: They can either admit that the U.S. economy is falling short under Trump, creating a need for a rate cut, or they can claim that the economy is soaring, which would make a rate cut unnecessary.

To argue both points simultaneously, however, is incoherent.