White House NEC Director Kevin Hassett Talks Inflation, Fed

Hassett Says Supply-Side Growth Delivers Jobs Without Inflation

The White House's economic case rests on the claim that supply-side growth creates jobs without inflation, so the administration does not need to change course after an election decided on prices. Hassett treats the week's data as confirmation and attributes the remaining price pressure to energy, while conceding that voters feel the level of prices rather than the rate of change.

Takeaways

• Job market is hitting on all cylinders. Initial claims for unemployment insurance fell to about their lowest level since World War II, and the quit rate rose. The jobs report beat all estimates at 165,000, more than double expectations, with enormous upward revisions to the previous two months.
• Supply-side growth can avoid inflation. Hassett calls the 120,000 people building new factories in the report a big positive supply shock, and credits expensing for capital goods with expanding supply. Supply-side growth, in this view, does not carry the inflation that demand-side growth does.
• Inflation is falling but prices stay high. Cumulative inflation under Biden reached about 22 percent, and slowing the rate of increase to 3 percent still leaves prices rising. Hassett concedes the frustration is real, pointing to egg prices that are way down and beef prices that fell four of the last five months.
• Energy prices drive the headline number. Hassett attributes top-line inflation to energy costs tied to the situation in Iran, which lift airfares, and says the president has no regrets about it. Core inflation had been back near the Fed's target for the previous three months before the last CPI reading.
• No change of economic policy is coming. The administration sees its policies working, with growth present and inflation coming down from a high level. Hassett predicts Democrats will struggle to repeal those policies, since the president will veto and the White House holds deregulatory executive authority.
• Warsh would weigh inflation over growth. Asked whether the Fed should raise rates in December, Hassett does not answer directly and points instead to Kevin Warsh's public statement that he will watch inflation data like a hawk and respond more to inflation than to growth.

The process for removing Lisa Cook

1. The White House counsel's team has set up an orderly, fair process and is negotiating collegially with Governor Lisa Cook and her team.
2. A meeting will put all the evidence on the table.
3. Hassett is one of three people who will go over the facts with Cook and her people and produce an evidence-based report for the president.