Musk is at DOL. Here’s why that may matter for inflation

Feb 12, 2025

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QUICK FIX

The Department of Government Efficiency arrived at the Labor Department last week. Given the uproar that unfolded at Treasury and other agencies after Elon Musk’s team walked through the door, some former government statisticians are alarmed.

DOGE’s attention has sparked concern that the quality of the Labor Department’s reports on everything from inflation to the job market could suffer at the hands of inexperienced outsiders. Former officials say the sensitive survey data needs to be protected at all costs.

“I see some very big threats. I see threats associated with funding. I see threats associated with personnel. I see threats in the reduction of independence and objectivity,” Erica Groshen, the former head of the Bureau of Labor Statistics, told MM.

While the survey data that underpins the BLS’s critical economic reports are protected by law, many of the agency’s best practices for data collection and analysis aren’t “written into law,” she said. And “if an administration is less careful about laws, they’re going to be even less careful about norms.”

For BLS, norms matter. Its reports are important to understanding the U.S. economy. Later this morning, the agency will publish its monthly update on the Consumer Price Index — a widely watched gauge for measuring inflation — that will affect everything from future Federal Reserve interest rate policy to the mortgage market and long-term hiring plans for businesses. (The median forecast among top economists is that CPI climbed at an annual rate of 3.1 percent in January, excluding volatile food and energy prices.)

A big reason why investors and policymakers place so much emphasis on CPI — along with the Labor Department’s monthly jobs data and other BLS reports — is that, while any measure of inflation is imperfect, there’s a general belief that they reflect a good-faith estimate of economic health. Any perception otherwise hurts the bureau’s ability to collect and present accurate data.

As Sam and Victoria Guida report today: “The calls to protect BLS are preemptive. There is no evidence that DOGE has attempted to interfere with the compilation or presentation of data by the agency. But the government-cutting group has been opaque, with concerns heightened after news trickled out over the past couple of weeks about the level of access DOGE-linked officials have to the Treasury Department’s payments system – which has also been the subject of litigation…

“DOGE’s secretive work at DOL has inflamed tensions around how longstanding BLS practices could be threatened by the Trump administration’s broader efforts to take a hacksaw to the federal bureaucracy.” BLS allies say “anything that would shake the public’s faith in the agency could weaken its effectiveness.”

A diminishment of the bureau’s effectiveness would have real – and lasting — consequences on the ability of Fed officials to adjust rates to tame inflation or preserve the labor market. The longer it takes for central bankers to draw a bead on either, the greater the risk to Main Street businesses, Wall Street investors and everyday consumers.

A spokesperson for Musk's government efficiency did not respond to a request for comment.

It’s WEDNESDAY — For econ policy thoughts, Wall Street tips, personnel moves or general thoughts, email Sam at ssutton@politico.com. And for Wall Street regulatory tips and news, you can find Declan at dharty@politico.com.

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Driving the day

The Labor Department will release the Consumer Price Index for January at 8:30 a.m. … The Peterson Institute for International Economics hosts a virtual event on transatlantic trade at 9 a.m. … Former Council of Economic Advisers Chair Jason Furman and former Assistant Treasury Secretary for Financial Markets Matthew Rutherford speak at a Brookings Institution event on the federal debt at 10 a.m. … The House Small Business Committee holds a hearing on SBA lending programs and community banks at 10 a.m. … Federal Reserve Chair Jerome Powell testifies at House Financial Services at 10 a.m. … House Small Business Chair Roger Williams (R-Texas) and Rep. Monica De La Cruz (R-Texas) will participate in a virtual discussion on proposed reporting requirements affecting small businesses at 2 p.m. … Fed Gov. Christopher Waller will give a speech about stablecoin infrastructure at 5:05 p.m.

Late-night noms — Wall Street finally got some answers late Tuesday about who it will be regulated by, when news began to trickle out about a series of top financial regulatory selections from the White House. Former FDIC Director Jonathan McKernan was tapped to take over the CFPB, Jones Day partner Jonathan Gould was put up for the Office of the Comptroller of the Currency and Andreessen Horowitz’s Brian Quintenz, a former CFTC commissioner, is getting the nod to chair the derivatives regulator, our Michael Stratford, Declan Harty and Katy O’Donnell report.

— The picks are far from unconventional, as many around Washington had pegged all three as likely candidates to lead their respective agencies. But the moves “come as Trump and his allies push for a drastic makeover of the financial regulatory system, reversing Biden-era policies that drew criticism from Republicans and industry groups for being too heavy-handed,” Michael, Declan and Katy report.

— At Treasury, Trump is also tapping John Hurley as undersecretary for terrorism and financial crimes and Sidley Austin partner Brian Morrissey as general counsel.

The hits keeps coming at the CFPB — A pair of top officials at the Consumer Financial Protection Bureau stepped down Tuesday after being placed on administrative leave, in the latest fallout from Acting Director Russ Vought’s orders to shut down work at the agency, Katy reports. The officials — Assistant Director for the Office of Enforcement Eric Halperin and Assistant Director for Supervision Policy Lorelei Salas — both cited concerns about continuing on at the agency as the Trump administration put its work to a stop, Katy reports.

— Zixta Martinez, the CFPB’s deputy director was also placed on administrative leave, an agency spokesperson told Katy.

— Fed Chair Powell, meanwhile, told lawmakers at a Senate Banking Committee hearing that the CFPB’s shuttering could leave a gap in the federal government’s oversight of large banks and their compliance with consumer protection laws, Victoria Guida reports. Powell’s comments were made in response to questioning by Sen. Elizabeth Warren, who warned that knocking down the agency is “like putting a sign on every checking account, every credit card, every mortgage application and every car loan: ‘Cops have been fired: Let the scams begin.’”

Er, actually — From our Michael Stratford and Kyle Cheney: “Treasury Department officials said Tuesday that the agency last week “mistakenly” and “briefly” gave a member of Elon Musk’s team the power to alter a sensitive federal payments database, prompting an internal forensic investigation that remains ongoing.”

Scott readies meeting with big banks — Jasper Goodman scoops that Senate Banking Chair Tim Scott (R-S.C.) is set to host big bank executives at a closed-door roundtable with other GOP committee members this week. The meet-up will focus on preventing debanking, which was also a major focus of Tuesday’s hearing with Powell.

— “I am struck — and my colleagues and I are struck — by the growing number of cases of what appears to be debanking,” Powell told Sen. Cynthia Lummis (R-Wyo.), who has raised concerns about cryptocurrency companies being cut off from banking services. “We're determined to take a fresh look at that.”

— Powell also told Lummis that the Fed would remove language from Reserve Bank manuals on how to evaluate requests for master account access that had been identified by Lummis in a hearing on debanking earlier this month. Reserve Bank staff had been instructed to “consider the conduct of the institution and its leadership,” including if the institution’s leaders had been “associated with controversial commentary or activities.”

New estimate — Trump’s plan to eliminate taxes on Social Security benefits would reduce revenue by $1.5 trillion over 10 years and increase federal debt by 7 percent by 2054, according to a new Penn Wharton Budget Lab estimate.

At the regulators

Uyeda hits back on climate — And so the climate pullback hits the SEC. Acting Chair Mark Uyeda announced Tuesday that he asked staff to request that the court that’s hearing a flurry of lawsuits challenging the SEC’s climate-risk reporting rule hold off on scheduling oral arguments in the case, Declan reports. Uyeda called the rule “deeply flawed” and said the agency’s briefs in the case “do not reflect my views.”

— Uyeda’s move, while not a surprise, was met with immediate pushback by financial reform advocates, progressives and SEC Commissioner Caroline Crenshaw — the panel’s lone Democrat. In a statement, Crenshaw said, “the only things that have changed since the Rule was passed have been matters of politics and not substance.”

ICYMI: SEC wants to put Binance case on ice — In the latest sign of the agency’s pivot on crypto, the SEC late Monday asked the court hearing its lawsuit against Binance for a 60-day stay citing its work to set up a new regulatory framework with its crypto task force, Declan reports.

— And it wasn’t just Binance. The agency similarly asked for more time to respond to a motion to dismiss its lawsuit against Cumberland DRW, pointing to the task force’s work and how it “may affect and could facilitate the potential resolution of this case.” The SEC said that more time “will allow the parties to explore a potential resolution of this matter while conserving judicial resources.”

Heads up: FTA seeks to preserve CFPB open banking rule – The Financial Technology Association is filing a motion to intervene in the lawsuit that banking groups brought against the Consumer Financial Protection Bureau over the agency’s open banking rule. The lawsuit was brought by the Bank Policy Institute and the Kentucky Bankers Association.

“Consumers must have the right to control their financial data,” said FTA President and CEO Penny Lee. “Strong consumer data rights are critical to America’s digital economy and are core to how Americans manage their money today."

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On The Hill

First in MM: Scott introduces beneficial ownership reporting extension bill — The Senate Banking chair is introducing legislation that would extend the deadline for tens of millions of small businesses to report their ownership information to Treasury under an anti-money laundering law. The bill would modify the Corporate Transparency Act to extend the filing deadline for businesses to report their “beneficial ownership” information to 2026. It is the companion to a House bill that passed the lower chamber unanimously on Monday evening.

“This commonsense bill will ensure small businesses are protected and not overly burdened by unclear and unnecessarily complicated regulations — allowing them to focus on serving their customers while following the law,” Scott said in a statement.

Scott talks Trump’s international trade plans — Scott, meanwhile, said Tuesday at the Washington International Trade Conference that he hopes to see the Trump administration have evolving conversations around reciprocal trade, especially with reciprocal access to markets, our Katherine Hapgood reports.

“Wherever those markets are more difficult for us to get into than for them to get into our market, you'll find this administration seeing that as a bad thing, and so trying to right-size to a conversation [about] reciprocity is an important part of their engagement,” Scott said. The lawmaker noted that his home state is a major exporter and the production location for major companies like Boeing, BMW and Volvo.

Wall Street

Griffin goes off on tariffs — Hedge fund CEO and GOP megadonor Ken Griffin on Tuesday warned that the White House’s tariff policy threatens economic growth, per Reuters. The Citadel founder said, “it makes it difficult for multinationals in particular to think about how to plan for the next five, 10, 15, 20 years.”

Schwab goes all night — Charles Schwab, the brokerage giant, “is expanding overnight trading to all of its retail clients as it seeks to capture demand from investors piling into US stocks amid elevated prices,” Bloomberg reports.

Jobs report

Esther Kahng, a longtime aide to ranking member Maxine Waters (D-Calif.) on the House Financial Services Committee who most recently served as the California Democrat’s chief counsel, is leaving the Hill to serve as head of public policy and chief of staff at Zest AI. — Jasper Goodman

James Galkowski is now a professional staff member on House Appropriations on the Financial Services and General Government Subcommittee. He most recently was a technical consultant at Bondi Partners and is an alum of the Defense Department and the Trump White House. — Daniel Lippman

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