National Economic Council Director Kevin Hassett, President Donald Trump’s top economic adviser, said he wants Democrats to vote to open the government but understands why Senate Minority Leader Chuck Schumer and House Minority Leader Hakeem Jeffries have chosen the funding deadline to pick a fight.
“The issue is that if you’re a minority party, then you don’t necessarily have a lot of leverage over anything,” Hassett said. “And there are a few things like debt limit increases and government shutdowns that give the minority party some leverage. I don’t agree with the Democrats’ position right now, but I do think that it serves democracy for the minority party to have some leverage now and then.”
Hassett came to the Punchbowl News Townhouse on Wednesday to talk about the shutdown, tariffs and even weighed in on the process to select the next chairman of the Federal Reserve.
The shutdown. Hassett, a University of Pennsylvania PhD who was in the first Trump administration, has a unique perch in the White House. He’s the most important economic adviser to the president of the United States. And the Trump administration is taking a different strategy in this shutdown than previous White Houses did.
The Trump administration has said that OMB Director Russ Vought could use the shutdown to drastically reshape the federal bureaucracy. Vought has already stopped funding for the Hudson Tunnel Project and the Second Avenue Subway in New York City and canceled green energy projects in a number of blue states.
Hassett said that Cabinet secretaries can use a shutdown “as an opportunity to change the structure of the human resources team or whatever.”
“And I think the hope is that that doesn’t happen, that the Democrats come back tomorrow, the next day, open the government,” Hassett said. “But I think that it should put a lot more pressure on the Democrats to know that they’re playing with fire a little bit. Because it is possible for Cabinet secretaries, if they so choose, to have reductions in force.”
Hassett added that if it is a long shutdown, “then there would be an economic impact, for sure.”
Hassett sounded a bit bearish on a straight extension of enhanced premium tax credits for Obamacare. Congressional Republicans want to overhaul the tax credits, which are at the heart of the shutdown, while Democrats are seeking a permanent extension. The credits expire at the end of the year, although insurance companies are already raising premiums dramatically.
“They could have made it permanent if they wanted,” Hassett said of Democrats, who extended the credits for three years.
Hassett’s view is that the credits go to middle-income earners, which he views as a political decision.
“You have to choose, where are you going to spend your money?” Hassett said. “You could spend your money on the people that most need it, or are you going to expand the base to people who maybe are more likely to vote for you? And I think that there’s a pretty clear case to be made the expansion of the Affordable Care Act subsidies deep into many times the poverty level is a budgetary problem that potentially could undermine the care for people who really need it.”
The Fed. Trump has said that Hassett is one of the candidates to succeed Jay Powell as the next chair of the Federal Reserve.
Hassett told us he hasn’t had a formal interview to be the next central banker. Hassett did say that Powell should leave the Federal Reserve board when his term is up as chair.
And Hassett also said he thinks the Fed should continue to cut rates aggressively.
“All of a sudden, if inflation takes off next week, you would have to reconsider,” Hassett said. “I think the politically neutral Federal Reserve should be data dependent, and they should watch their targets and make sure that we hit them.”
