Image by Thanakorn Lappattaranan

The Fed Should Tap the Brakes, Not Hit the Gas

By Peter Morici

Dec. 8, 2025 – Originally published in Newsmax

After cutting interest rates in September and October, the Federal Reserve should pause at its December meeting — the jobs market isn’t in crisis but inflation remains menacingly high.

By the summer of 2023, the economy was at full employment but continued to grow robustly.

From September 2023 to December 2024, it added 174,000 jobs a month, even though indigenous population growth and legal immigration could support only about 90,000 additional workers a month. Illegal immigrants made up the difference.

In 2025, President Donald Trump’s deportations and tightened legal pathways for immigration slowed legal additions to the workforce to about 55,000 a month.

Since he announced his big tariffs in April, jobs creation has been choppy but through September, it averaged 44,000 jobs a month.

Considering the mismatch between the skills of job seekers and requirements of available positions, as exacerbated by Artificial Intelligence (AI), that’s close enough to what the economy can accomplish.

I don’t know if that has sunk in at the Fed or the White House.

Additional stimulus from lower interest rates would juice inflation more than it would add more jobs.

Since March 2021, inflation has been significantly above the Fed’s 2% target.

In September, the Consumer Price Index was up 3% with President Trump’s tariffs contributing about 0.5%.

That’s not encouraging, because we have seen only about half of the tariffs effects if the Supreme Court does not strike down most of them.

Inflation for services runs hotter than for goods. After subtracting energy-related items, services inflation was 3.5% in September.

Those activities are 61% of consumer spending.

That should tell you why rising homeowners insurance premiums give this economist agita.

Fed policymakers place a lot of stock in consumer expectations about future inflation, and those have hardened.

Conference Board and University of Michigan surveys put those closer to 5% than 2%.

Even if exaggerated, those indicate well-founded fears, because until at least recently, producers abroad and American businesses like automakers have been absorbing many of the cost pressures from Mr. Trump tariffs.

That can’t last forever.

Altogether, expect inflation close to 3% next year and any shock could boost it further.Oil is trading near the bottom of its sustainable rang — $60 a barrel.

Below that, some U.S. shale and Canadian production become unprofitable and will phase down production.

Russian, Iranian and Venezuelan oil are subject to U.S. sanctions and Russian and Iranian oil to tightening EU sanctions. Those are more than 15% of global supply and could be disrupted by military actions.

President Biden significantly depleted the Strategic Petroleum Reserve to bring down inflation as he prepared to run for reelection. Now that safety value is less available to Mr. Trump.

We have considerable data independently collected by the Federal Reserve, industry associations and commercial statistical services.

Those indicate the economy remains on a reasonably good footing for long term growth, the immediate effects of the recent government shutdown notwithstanding.

Jobs creation has been slowed mostly by Mr. Trump’s deportations, his tighter stance on immigration overall, uncertainty about tariffs and the downsizing instigated by AI.

In October, the payroll processer ADP and Revelio Labs estimated the private sector added 42,000 and 13,100 respectively. State and local hiring would add to that.

The federal government shutdown and the Trump administration’s reductions in force will subtract from those figures, but the government reopening makes those effects transitory.

In 2025, AI investments accounted for virtually all the growth in capital spending. Those added 1% to GDP growth.

In 2026, AI’s boost to aggregate demand and GDP will likely be 1.5%, and President Trump’s tax cuts should add a comparable boost.

On the supply side, AI will likely increase productivity growth 0.8% to 1.5% a year. That’s on a scale similar to the transcontinental railroads, moving assembly line and interstate highway system.

Hence, we can accommodate a slower pace of hiring and still support GDP growth in the range of 2.5% — right on the trend set during the first Trump and Biden presidencies.

If the Supreme Court strikes down most of Mr. Trump’s tariffs, the impact would be another large tax cut.

Mortgage and business borrowing interest rates tend to track the 10-year Treasury rate, which is currently about 4%.

Even if economic growth slowed to 2% and with inflation about 3%, the neutral rate, consistent with neither accelerating inflation nor excessive unemployment, should be 5% for 10-year Treasuries.

By that reckoning, monetary policy is too loose.

The Fed should stand pat for now and see what happens at the Supreme Court regarding Mr. Trump’s tariffs.

 

Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.

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Elite Universities Foolishly Snub President Trump

Picture by Mohammad Mijanul Hoque

By Peter Morici

Nov. 17, 2025 – Originally published in Newsmax

Elite universities are foolish to refuse President Trump’s offer for a dialogue about improving performance, campus environments and public confidence about their value.

In October, President Trump asked nine universities to comment about a compact to improve performance and in return, receive preference in competition for federal funds. Those are strategically important for their scientific research.

These institutions were Vanderbilt University, Dartmouth College, Brown University, MIT and the Universities of Pennsylvania, Texas, Arizona, Southern California and Virgina.

The compact includes some requirements that are unnecessarily severe. For example, freezing tuition for five years and free tuition for students in STEM disciplines.

Others are badly aimed. Faculties are too woke and unbalanced in favor of progressive ideologies, but shutting units that attack conservative ideas won’t solve the deeply rooted prejudices among humanities and other faculties.

Still, rejecting the president’s request for feedback or failure to respond in any positive way by all but Texas and Vanderbilt were tragic mistakes.

The president is offering an opportunity to discuss the compact—it’s not a take-it-or-leave-it proposition. If they had engaged in dialogue and suggested revisions, the document could have been improved.

But instead, university presidents snubbed the American people by rejecting any form of accountability.

The American people pay the tuition and taxes that underwrite student loans and research grants.

They should expect universities to prepare students for life—equip them with empathy, tolerance, critical thinking skills and the ability to earn a living. And to undertake leading-edge research.

According to a Pew Trust poll, 70% of the American public view higher education as headed in the wrong direction.

Fifty-five percent believe universities do a good job advancing science, while the majority assign poor marks for exposing students to a wide range of opinions and providing opportunities to express opinions, develop critical thinking skills and an affordable education.

That’s a grade of F, or at best D, in all classes except science.

Hiding behind platitudes about academic freedom, constitutional rights and excellence, academic leaders fail to recognize they have very dissatisfied customers.

The declining relative value of a college education—as measured by the ability of graduates to think critically and get jobs that really require a college degree—indicates the customer is right and universities are wrong.

The president’s compact offers the opportunity for improvement in several areas.

• Abide by the laws concerning discrimination on race, for example by requiring incoming freshmen to take the ACT, SAT or an equivalent exam, and correct the bias in favor of progressives and against conservatives in enrollment and staffing.
• Embrace more open cultures and speech codes and enforce civility.
• Transparent grading and recruitment to ensure high standards
• Refrain from taking institutional positions on political issues—universities should be neutral on matters that don’t concern their operation, but faculty could still say what they pleased if they don’t cultivate lawlessness.
• Address costs and affordability by tackling administrative bloat.
• A reasonable cap on international student undergraduate enrollment and caution when taking money from foreign governments.
• A system of accountability.

His details on many of these reflect the naivete often exhibited by business leaders about what’s wrong with universities and how to fix them. But hiring independent auditors and requiring that faculty and students be polled about campus climates are hardly threatening unless you are insincere about wanting genuinely inclusive environments.

Most alarming is the compact would empower the Justice Department with enforcement authority.

The failing grades American universities receive from their customers would seem to indicate the seven university presidents who rejected a dialogue should be fired.

Not really. The Trump administration ignores that these presidents only serve as long as their boards allow and progress is only possible if their faculties will follow them.

A mutiny is easy to incite among tenured professors, and the threat of less funding for the physics lab is hardly a weapon feared by Trump-deranged, radical humanists.

President Trump endangers what American universities do best—advance science—by now offering the compact and preferential access to grant money to less capable institutions.

His ongoing war with wokeism at Harvard endangers important medical and other scientific research.

The leading role of universities goes back to a report published by Vannevar Bush who ran the Office of Scientific Research and Development during World War II. It stressed that scientific research was essential to national security and public welfare, and the U.S. government should support basic research at colleges, universities and institutes.

From Gatorade to mRNA we have delivered, and the president should send Harvard researchers grant money.

University presidents should view his request for feedback as an opportunity for dialogue with both their customers, the American people through their president, and faculties who clearly need to clean up their act.

 

Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.

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