Hey, everyone. I'm David Chalian, CNN's Political Director, and welcome to the CNN Political Briefing.

My colleagues and I remain squarely focused on achieving our dual mandate goals of maximum employment and stable prices for the benefit of the American people.

That's Jerome Powell, the chair of the Federal Reserve, announcing the first interest rate cut since the pandemic. The Fed made an unusually large cut this week of half a percentage point. The move marked a significant shift for the economy after the central bank spent the last few years trying to tamp down inflation as Americans contended with high prices. We know the economy is a top issue for voters. In poll after poll, voters rank issues related to the economy at or near the top of the list of factors driving their decision. So how is the economy doing right now? And how could the policies proposed by Vice President Harris and former President Trump impact things like inflation? This week, we're talking with Catherine Rampell. She's an opinion columnist for The Washington Post, and she frequently writes about the economy, public policy, immigration and politics. She's also an economic and political commentator for CNN. She joined me to talk about the election, the economy and how Americans are feeling about their finances right now.

Catherine, thanks so much for joining me.

Great to be here.

So, let's start with the big economic news of the week, which is that for the first time since the pandemic, the first time during the course of the Biden administration, the Federal Reserve cut interest rates. And I guess I have two questions about that. Obviously, it wasn't a surprise. Everyone was expecting it. But what does it mean when the central bank cuts interest rates? What does that mean for people?

So, the Fed is cutting its overnight interest rate, and pretty much every other interest rate for every other credit product that exists in the United States is benchmarked off of that. So when the Fed cuts what's called the Fed Funds Rate, that should eventually trickle through to mortgage rates, credit card rates, auto loan rates, etc. It's not like an exact science, like you can't just say, okay, the Fed's rate is X and so my mortgage rate will be like X plus three or whatever. But they are related. So the reason why this really matters for consumers right now is that mortgage rates are very high. Obviously, lots of financial products are very expensive, and that has been painful for people. There's a reason why the Fed thought that pain was necessary, which is that we had inflation, that they kind of wanted to dampen consumer demand. And the action today suggests that they think that they did, that the war on inflation is not quite over, but it's headed in the right direction. And now is the time to start potentially stimulating the economy or, at the very least, to stop restricting it so much.

So that's interesting because if you think that the economy needs to be stimulated, you, I assume, and again, I'm not an economist here, so help me out, help tell our listeners out here — but that would seem to suggest, especially, I guess, if you're going to do this 50 basis point cut instead of 25, that perhaps you think the economy is on the books of it, looking at it, weaker than perhaps has been suggested, let's say, by the administration.

If you listen to what the Fed chair, Jay Powell, said and like what's in the statement that came out today, they don't say the economy is bad. They say the economy is good, that they're kind of happy with where things are and they want to keep stuff — they want to keep the good thing going.

Our economy is strong overall and has made significant progress toward our goals over the past two years. We're committed to maintaining our economy's strength by supporting maximum employment and returning inflation to our 2% goal.

I wouldn't read their messaging to mean they expect like an imminent recession or anything like that. Everything that they have said suggests that they believe that the economy is still going to get that coveted soft landing, which basically means we got out of this really inflationary period without —hopefully, knock on wood — having a recession, you know, that that we managed to, like, cool inflation without killing the economy altogether. So that's still their baseline scenario even if there's, you know, some hints of worry about soft patches in the economy. Like I said, the unemployment rate has gone up. There are some other indicators that like investment is slowing and things like that. So, not everything is great, but I don't think I would read anything that they've said today to mean they're freaking out about the economy. This was a really big rate cut. So, that in and of itself might signal some worry. You mentioned 50 basis points versus 25 basis points. For those who are listening, 25 basis points, a quarter of a point, that's sort of the more standard increment in which they move. The fact that they did twice that is more aggressive. But everything that they messaged was like, look, things are — we got a good thing going. Let's keep it that way.

Can I ask, when do we know that the flight is over and we've landed? Because I feel like I've been hearing about sticking this soft landing for ten months now in some way. And, like, I don't understand how long the landing process is.

That's a good question. I think maybe we can finally get rid of this metaphor when the inflation rate is actually at 2% and we don't have a recession. So right now, it's not there. Like, it's come down a lot. It's in the, you know, depending on which metric you look at, you know, it's 2.5%, something like that. The mid twos, let's say. The Fed wants it to be at 2% — and at a sustainable 2%. So, if we get to that point and we don't have a recession, I think that means the landing has been achieved. We can move on to different metaphors, hopefully less annoying ones.

But it means that if you hear President Biden say — or somebody else in the administration — you know, we stuck the soft landing. We're saying that that's premature.

'It's a little premature. You know, everything that the Fed does is very understated. Their job is to, like, not make news to the extent possible. Somebody asked Powell during his press conference, are you saying mission accomplished? And he said, no, I'm not saying mission accomplished. We still have more to go. But, as I said, kind of everything else they were communicating made it sound like, okay, we've sort of — if we haven't entirely moved on from the inflation fight, we've mostly moved on. And now they're looking at other things. They're less concerned about inflation; they're more concerned about the softening job market. I think that's about as close to a mission accomplished-type evolution as as you can expect, even if they're not willing to, like, spike the football.

Sure. Lots of political lessons learned there, to not say mission accomplished or have a banner behind you saying that. You mentioned the softness in the labor market as a potential warning sign. You mentioned something about softening in investments. How else do you when you, Catherine, are just sort of looking at the state of the American economy, like, how do you assess it overall right now? How would you describe the current state of the economy?

I think the economy is still very good. There are some vulnerabilities in it. So, like I said, unemployment has ticked up a little bit. We're still adding jobs. We're adding fewer jobs each month than we had been. But, you know, on net, we are not losing jobs. So that's very good. There are some other things that are kind of troubling, like default rates on credit cards have gone up. That's a sign that consumers are under stress. So is the fact that the savings rate has gone down, so, like, basically of your paycheck each month, how much of it do you spend? How much of it do you squirrel away? The share that's being squirreled away has been shrinking in the past few months, which suggests that consumers have a little bit less of a cushion.

Is that because consumers need a little more cash flow for the increase in prices?

'Yeah. So, they have continued to spend even as prices are going up. And for a while, they had a really healthy cushion in terms of like how much savings they had stockpiled, for a few different reasons. One was that they were trapped at home early on during the pandemic and not able to spend, right? So people weren't going out. They weren't traveling. They, you know, they were buying a bunch of, you know, waffle irons and sports equipment and, you know, other things for their homes. But a lot of other big ticket purchases were being put off. So, they had savings from that. They also had savings from the fact that the government transferred them a bunch of cash, right? We had near-universal stimulus checks, three rounds of them — two under Trump, one under Biden. We had a bunch of other programs where the government sent cash to people. So, people were sitting on a lot of money. And that's partly what contributed to price growth, right? That people were, you know, as the economy reopened and they started going out again, they started going out to eat; they started traveling and buying even more stuff, more experience-based goods, as well. They had all this pent-up demand. And the number of restaurants, you know, couldn't accommodate them. The number of hotels couldn't accommodate this huge amount of demand. So, that ended up with higher prices. And then people kept spending and spending and spending despite those higher prices. Now, they've continue to spend. They've sort of spent down that savings that they had. And, you know, as each paycheck comes in, it seems like they've kind of gotten used to a certain lifestyle, continuing to spend. But, you know, there's less of a mark. They can't use what's already in the bank account. They're using more of that paycheck. So, I think that's sort of how I would characterize what's going on, and —

I love, by the way, the way you describe — because I asked you to, like, give me your sense of the state of the economy, and you did it all from the consumer's perspective. And I love that because that is how we should look at the economy.

I mean, there's a lot of other stuff going on in the economy, too, obviously. But these are some red flags, yellow flags that if things go awry, if there is, heaven forbid, you know, a wave of layoffs and again, we are — there's no evidence that that's on the horizon right now. But if there is, it means that people don't have a lot to fall back on. And that would be concerning that there's like some there's some sort of underlying financial stress. Obviously, Americans have been complaining about financial stress for a very long time, for several years, even if they weren't always acting like it, right? Like you saw in the survey numbers, people said that they were really frustrated with high prices, and yet they managed to swallow them anyway and keep spending. But at some point, you know, that may not become sustainable. Now, if they're continuing to get jobs, and they're continuing to get raises, it can go on for a while. So, the hope is that, like, we get to more of a settled, sustainable path where people are getting jobs, they're able to spend sustainably without using up their nest egg. And we don't have a recession. So, that would be great.

That would be great. And it's a good place to take a quick break. We're going have a lot more with Catherine Rampell in just a moment.

Welcome back. We're here with Catherine Rampell, columnist for The Washington Post and an economic and political commentator here at CNN. We're talking about the economy and the election and how voters feelings about the economy could influence the outcome in November. Catherine, that is where I want to take everything we were talking about earlier. How in your time covering the economy and its impact on people, how do you square when the economy looks pretty good, as you described that it is, and people just —.

Hate it?

Yeah, like, they're just not feeling that. How do you square that?

It has been difficult to figure out how to think about this, because there does seem to be a huge disconnect between how the economy looks on paper and how people feel about it. Again, on paper, very strong GDP growth. Unemployment has ticked up a bit, but it's still at historically very low levels. We're still adding jobs. People are still spending money. All of those traditional indicators would suggest that the economy's really strong and yet consumers are super grumpy and mad about it. I think there is something to the idea that their view on the economy, like everything else, is shaped by what they hear from their political leaders and from the media, etc. So, I don't want to completely discount that perception can be malleable. But I do think that it's reasonable for people to be bummed out, to some extent, about the economy, because, after all, we did have a huge run up in prices that has moderated more recently. But in 2022, 2023, we had very fast price growth, and prices are not going to go back down. I think —

And that's the norm, right? Prices don't ever go back down to some earlier era, right?

The overall price level generally does not fall. Like individual — you know, gas prices can go up, can go down. You can have a bird flu and egg prices go up — they go down. Individual things, you know, there can be some some movement. But the overall price level, the overall direction of prices in the economy, is always going up. And in fact, if the overall price level is going down, that's usually a sign that you have a very sick economy. That's what happened during the Great Depression. You know, when prices are falling, then people stop buying things because they're, like, waiting for stuff to get cheaper. Anyway, that's a situation you don't want to get in, but that's not super intuitive to a normal person, understandably. So, I think there has been this expectation among many consumers that things are going to go back to how they were, and that's just never going to happen. So people are always going to be disappointed. So I think that's part of it. So some of it is just, like, people need to get acclimated to the new price level, just like, you know, people got acclimated to the idea that a cup of coffee is no longer, you know, whatever, $0.25 or what it was in some ancestor's day. And, you know, today it's several dollars. It takes time. So, I think it's partly about that. I think that there is actually sort of a mental tax that inflation can represent for a lot of people in the sense that going to the grocery store, you had a routine, you knew, like, you get this, that, you know, get the peanut butter, you get the milk, you get the the bread, whatever, and it kind of comes out to a certain amount. And now you're you're facing sticker shock again, partly because you're not acclimated to that higher price level. But you have to do a little bit more like mental math when you're in the grocery store. You have to think, well, should I get this peanut butter or should I trade down to the private label brand? And I think all of that stuff is really taxing, having to think about is it worth it for me to, you know, drive to my kid's soccer game because of the gas that it's going to cost? I think all of that can wear on people. And beyond that, now, wages are growing faster than prices. That was not the case for a while. But today it is. People are actually getting raises that are outpacing price growth, which is good, but they don't feel it in the sense that because price growth still has been strong, they feel like part of that raise has been robbed from them. There's this line about how, you know, a raise is something I deserve. Inflation is something that happened to me, even though they're both actually kind of the same thing. Part of the reason why wages have been going up is that employers are responding to demand from their workers to, you know, to keep up with the cost of living or beyond. So, I think it's like this sort of constant feeling of just being exhausted by inflation and having your meritorious raise kind of robbed from you. I think there's a lot of that. And I think that there's also just a lot of discontent and partisanship, frankly, from voters, right?

No doubt about that. And on that partisanship, obviously, you know, the Trump campaign and the Harris campaign, I would not say they have put out tons of detailed policy proposals of what they would do on the economy. Trump's had more time. He's been running for office for nearly two years, so he has a few more, I think, policies out there than Harris, who's been at this for —

I mean, arguably like nine years now, but yeah.

Fair. He also, yes, has a record to run on, no doubt. But as you look at what they have put forward, what is your assessment of the impact on the economy if Trump were to be reelected versus if Harris were to be elected?

So, if you look at the proposals that Trump has put out, to the extent that he has put anything out, they are almost all things that would actually worsen inflation and hurt economic growth. So, I'm referring to things like having a global tariff of 10 to 20% on all goods, plus maybe 60% to 100% on Chinese goods. That is a tax on products.

Harris calls it the Trump sales tax. That's how she brands that.

It's similar in some ways to a sales tax. It's an excise tax of some kind, probably. You know, it's a tariff — tariff is a tax. And some of that tax will be passed along to consumers, maybe not 100%. I think she may overstate it by saying like all of it's going to go to consumers. But if you look at his previous rounds of tariffs, almost all of it was passed along to consumers. So, I think that's a reasonable model. So that's going to raise prices. Deporting he now says like 20 million people. I don't know how he gets that number, but deporting a large share of the workforce also likely to raise prices because a lot of those people he's likely to deport are working in agriculture. They're working in food services. They're working in lots of industries where there are worker shortages, often where, you know, there's a high share of immigrants who take those jobs, in part because Americans don't want them.

And correct me if I'm wrong, but business leaders get real value out of that immigrant population doing the work that they're doing.

'Yes. And consumers — you know, if you don't have somebody milking the cows, if you don't have somebody picking the cabbage, you're going to have less milk and less cabbage or, you know, insert your preferred grocery item there. So that's likely to raise prices. His advisers have also talked about devaluing the dollar. That's a, you know, technical, wonky-sounding term. But it basically means a dollar buys less stuff, and that is literally inflation. But he wants to do it, you know, to devalue the dollar to make us more competitive against other countries. You know, it has some upsides, but it has a lot of downsides. That's likely to to make inflation worse. And then the thing that I'm most freaked out about, is that he wants to politicize the Federal Reserve. He has been pretty explicit about this. And there's a reason why the Fed is independent, because you don't want politicians controlling the money supply. When they do, there is always a temptation to print more and more money to stimulate the economy, to pay off debts, things like that. And it's how you get hyperinflationary basket cases like Venezuela or Argentina or pre-Euro Italy or lots of other — Zimbabwe, lots of other places.

And we have some not too distant history.

Yes —

At this in this country, do we not?

'Yes. Not as bad. But yes, Richard Nixon leaned on a then Fed chair, Arthur Burns, to try to get him to to print a little more money, essentially to help Richard Nixon in an election. And that contributed to the very bad inflation that we experienced in the 70s. It wasn't the only thing, but it was bad. And then since then, Paul Volcker came in. He jacked up interest rates. It was super painful. We had back-to-back recessions. But he convinced everyone that it was credible, that the Fed was independent, that they were willing to do painful things, that they weren't under the thumb of politicians. And ever since then, every Fed chair, every Fed official has worked to safeguard that that reputation. Trump wants to take it away. And again, it's wonky. Like, most people don't even know what the Fed does. And that's totally fine. But if that happened, then you could imagine much worse outcomes.

Right. So his big ticket items, you say, and a lot of economists have assessed they'd be inflationary. How about some of the big ticket items she has put forward? What is the consensus about her plans?

'So, some of her stuff I think is silly. The price gouging stuff that she led with, it's not even clear what that would mean. And she has since walked it back. I've been very critical of that. Some of the other things that she has released since then, I think have a little bit more meat on the bones. And some of them are good. Some of them are are, you know, mediocre and some of them may be bad. But she's been a lot clearer on what she would do on the tax side of things. So one policy of hers that I am a fan of is expanding the child tax credit and, in fact, increasing it, especially for the parents of newborns, that they would get $6,000 per newborn baby for the first year of the baby's life because babies are expensive. Will that have a huge effect on the economy? Probably not. I think it's like there are not that many babies born each year for it to affect the macroeconomy. But it will make a big difference to individual families. She has also talked about other tax proposals, things like increasing the amount that a startup can deduct on its taxes. Again, I don't know that that's really going to do very much. It's really hard to say. They're sort of trying to signal things about her economy, about her brand. She wants to fight back against the idea that she's anti-business. She wants to emphasize the idea that she's pro-family. Will any of these things have a huge effect on the economy? Probably not. But, you know, do no harm is better than increase inflation. So if that's the choice and, you know, this is not only coming from me, these are obviously my views on these things, but you can see lots of lots of economists, you have from Goldman Sachs, among others, Nobel laureates, who have looked at their respective economic agendas and have basically said some version of Trump's would be bad; Harris' would be, eh, you know, we don't really know.

Well, that is a good place to end our conversation. Catherine, thank you so much for your time. I really appreciate it.

Thanks for having me.

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