White House Economic Advisor Apologizes After Demanding Fed Researchers Face Discipline

Unprecedented Attack on Fed Independence

White House National Economic Council Director Kevin Hassett sparked a firestorm this week when he called for Federal Reserve researchers to be "disciplined" over a study that contradicted the Trump administration's claims about tariffs. The paper is an embarrassment," Hassett said during an interview with CNBC's "Squawk Box." "It's, I think, the worst paper I've ever seen in the history of the Federal Reserve system. The people associated with this paper should presumably be disciplined," he continued, accusing the researchers of reaching "a conclusion which has created a lot of news that's highly partisan based on analysis that wouldn't be accepted in a first-semester econ class."

The controversial study from the New York Federal Reserve found that U.S. businesses and consumers bore 86% of the tariff burden, while foreign exports bore 14% of the burden as of November 2025. This directly contradicted Trump's repeated assertions that foreign countries pay for tariffs. They also found that the average tariff rate jumped last year as the Trump administration raised the import levies, rising from 2.6% at the beginning of 2025 to 13% at the end of the year. The report found that the average tariff rate peaked at around 16% in April and May, following the president's announcement of his "Liberation Day" tariffs.

The attack on Fed researchers drew swift condemnation from economists and former officials across the political spectrum. "Claudia Sahm, a former Fed research director who has been critical of Trump's efforts to weaken the bank's independence, called Hassett's comments "deeply disturbing." Douglas Holtz-Eakin, the president of the center-right American Action Forum, also condemned Hassett's remarks in a memo on Thursday. "The only one who should be embarrassed is Kevin Hassett, the smell of whom's burning reputation flavors the air of DC, and who is a bipartisan embarrassment to all who have attempted to inject economic reality to the policy process," wrote Holtz-Eakin, a Republican who previously served as director of the Congressional Budget Office.

Swift Backtrack and Apology

Facing mounting criticism, Hassett quickly walked back his inflammatory comments. I called Kevin who immediately indicated that he spoke out of emotion and deeply regretted his language. He then txted me the following statement to post. "I regret suggesting the authors should be disciplined for their research." The apology came through economist Larry Kotlikoff, a longtime friend who described Hassett as someone who is "almost always very careful with his language."

Whatever the value of their paper, Kevin's strenuous objection included the following: "The people associated with this paper should presumably be disciplined, because what they've done is they've put out a conclusion which has created a lot of news that's highly partisan based on analysis that wouldn't be accepted in a first-semester econ class." The Fed is an independent agency. One of the authors is an academic. So, Kevin's words crossed two red lines — the Fed's independence and academic freedom. Hassett's statement acknowledging that "The Fed's Independence Extends to its Research" represented a significant retreat from his original position.

Broader Pattern of Fed Pressure

Hassett's comments represent just the latest in a series of Trump administration attacks on Federal Reserve independence. The newest escalation between the White House and the Fed comes as Trump has been pushing Fed Chairman Jerome Powell to slash interest rates more aggressively since he entered his second term. In January, Powell announced that the Justice Department was investigating him and that the Fed received grand jury subpoenas related to testimony he provided to the Senate last year about renovation cost overruns at the Fed headquarters building in Washington. Powell said the inquiry was a pretext to pressure him to lower interest rates.

Federal Reserve Bank of Minneapolis President Neel Kashkari panned Hassett's comments at a Thursday event in North Dakota. Kashkari defended the research of the regional banks and drew a direct line between attacks against the Fed and the White House's desire for lower interest rates. "This is just another step to try to compromise the Fed's independence," Kashkari said. The broader context includes various attacks on the Fed and its longstanding independence. That includes a criminal inquiry into Powell and the Fed over a multibillion-dollar renovation of its headquarters and an attempt to fire Fed Governor Lisa Cook over unproven allegations of mortgage fraud.

Economic Reality Versus Political Messaging

The controversy highlights the tension between economic research and political messaging on trade policy. "Our results show that the bulk of the tariff incidence continues to fall on U.S. firms and consumers," the New York Fed wrote, noting that its findings were consistent with a pair of recent studies on U.S. tariff pass-through showing American importers absorbing nearly all the cost. This finding aligns with mainstream economic theory, as most economists typically agree that tariffs on imports amount to a tax that is offloaded onto consumers.

While Hassett eventually apologized for his disciplinary demands, the episode raises serious questions about the administration's willingness to accept independent economic analysis that challenges its policy narratives. The Federal Reserve's research function serves as a crucial source of unbiased economic data for policymakers and the public