DrWebTrump’s Attack on the Fed Won’t Fix the Deficit – Jessica Riedl – The Dispatch
Illustration by Noah Hickey/The Dispatch. (Photos via Getty Images)Trump Can’t Fix the Deficit by Attacking the Federal Reserve
The president claims lower interest rates would save us $1 trillion annually. He’s wrong.
Jessica Riedl/September 23, 2025
President Trump has declared war on the prized independence of the Federal Reserve in an attempt to essentially run monetary policy out of the White House. He has attempted—illegally and on dubious grounds— to fire Fed Gov. Lisa Cook, threatened to fire Chairman Jerome Powell, and installed a top White House economist into a key Federal Reserve position. This White House pressure surely drove the Fed’s decision to reduce rates by 0.25 points on September 17.
Going to war against the Federal Reserve seems baseless when current interest rates—while above the anomalous 2010s levels—are not high by historical standards. Moreover, rates are not holding back the current economy, and they may even be too low to combat the recent inflation uptick. However, President Trump has offered an additional argument: Lower interest rates would reduce Washington’s interest on the national debt, “saving us $1 Trillion per year” in reduced budget deficits. This sacrificing of Federal Reserve independence to help the Treasury sell cheaper debt is known to economists as “fiscal dominance.”
Setting aside legitimate concerns over central bank independence and the illegal firing of Fed officials, would fiscal dominance really provide substantial budget deficit savings? The clear answer is no.
Trump is correct that mounting interest costs threaten to bury the federal budget. The toxic combination of soaring debt and elevating interest rates has expanded what the government spends on interest annually from $352 billion in 2021 to nearly $1 trillion today—heading toward $2 trillion within the next decade. Interest costs are the second-biggest budget item after Social Security, having recently surpassed Medicaid, defense, and Medicare spending. Within a decade, nearly 30 percent of all annual taxes paid may go toward interest on the national debt. To put that in perspective, it amounts to nearly four months of annual federal tax revenue.
Yet instead of working with Congress on a deficit reduction plan, President Trump has chosen to increase deficits further with more tax cuts, and then try to force downward the interest rate on the federal debt.
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