Former Democratic donor and Soros partner is Trump’s pick for Treasury
Elon Musk criticized him as the “business-as-usual choice” for Treasury, but markets are cheering on routine. President-elect Donald Trump announced Scott Bessent is his pick for Treasury secretary, ending an internal battle over the top economic post that some described as a knife fight.
But there’s a bullet point in Bessent’s resume that has rubbed some on the Right the wrong way. He’s the former chief investment officer for liberal billionaire George Soros, once a partner at Soros Fund Management and a major Democratic donor.
He’s since switched his donations to the Right. In 2015, Bessent founded the hedge fund Key Square Capital Management. In 2016, he donated to the Trump campaign.
Trump has described him as “one of the most brilliant men on Wall Street.”
The flattery is mutual.
“I’ve been in the investment business 35 years and Donald Trump is the most sophisticated leader on economics that I’ve met,” Bessent said on Fox Business before being tapped as Treasury secretary.
Bessent hasn’t been a mainstay of Trump’s inner circle like a lot of his other cabinet picks. Instead, the hedge fund manager reportedly won over the president-elect with his 3-3-3 plan:
Cut the budget deficit to 3% of GDP by the final year of Trump’s term. It’s about 6% today.
Boost GDP growth to 3%. Real GDP growth was 3% in the second quarter of 2024 and a third-quarter advance estimate has it at 2.8%.
Get Big Oil to boost production by another 3 million barrels of crude per day.
Bessent gets the Treasury nod as a deficit hawk just as the national debt crossed the $36 trillion mark. But he isn’t just making his mark in budgets. Earlier this year, he was behind the controversial proposal to have Trump nominate a shadow Federal Reserve chair to undermine current chair Jerome Powell.
“Trump could just nominate and confirm the next Fed chair, after Jay Powell, and just have this Fed chair go around and give all sorts of speeches and influence the markets,” the Fed Guy Joseph Wang explained to Straight Arrow News. “In that way, that’s very creative. I don’t know that it will happen.”
A Treasury secretary runner-up, former Fed governor Kevin Warsh, has also been floated as the man to replace Powell as Fed chair when his term expires.
As for Bessent, investors seemed to like the moderate pick on Monday, Nov. 25, the first trading day since the announcement.
Republicans feel good about the economy now that Trump has won
For the first time in four years, Republicans are feeling good about the economy. Economically speaking, only one thing has changed.
There’s a distinct difference in reports of consumer confidence along political lines since President-elect Donald Trump was declared the winner of the presidential election.
The latest consumer sentiment survey from the University of Michigan out Friday, Nov. 22, shows Republicans are feeling pretty peachy about economic expectations moving forward while sentiments from Democrats took a dive. It’s a mirror image of what happened after the 2020 election when President Joe Biden beat out President Donald Trump.
The latest data point confirms other sentiment surveys since Trump was declared the winner on Nov. 6.
In a Morning Consult survey, which shows five-day moving averages, there’s been an immediate shift in political lines since Trump won. As soon as Trump won, Republicans moved from negative into positive territory regarding the economy. However, Democrats slid from more positive to closer to the negative threshold.
Consumer sentiment has historically been a key indicator of the health of the economy. Consumer spending makes up two-thirds of the country’s economic growth, and people spend money when they’re feeling good about economic conditions, so businesses look at consumer sentiment to see how fast the wheels are turning.
In recent years, though, this measure has gotten increasingly political, as this election shows. That may make it a less reliable look at true economic conditions.
Overall, consumer sentiment measured by the University of Michigan is up slightly in November and up 17% over the past year, but sentiment is still far from its pre-pandemic levels. Expectations for the economy are up more than 35% in the past year, likely driven at least in part by lowering inflation.
Can Trump get rid of income tax and replace revenue with tariffs?
In a presidential campaign cycle filled with tax cut proposals, one is loftier than all the rest. Former President Donald Trump has repeatedly floated the idea of getting rid of individual income tax and replacing it with revenue from tariffs.
“Were you serious about that?” Joe Rogan asked Trump of replacing income taxes with tariffs.
“Yeah, sure. But why not?” Trump replied.
This country can become rich with the proper use of tariffs.
Former President Donald Trump
In a Bronx barbershop, Trump expanded on the proposal.
“When we were a smart country, in the 1890s and all, this is when the country was, relatively, the richest it ever was,” he said. “It had all tariffs. It didn’t have an income tax.”
A time before income tax
While income tax has been around for thousands of years, the United States has not. When the Constitution granted Congress authority to impose taxes, most of them were excise taxes, which are taxes placed on specific goods, like alcohol and tobacco.
The country’s first income tax came in 1861 to raise money for the Civil War. It was a flat tax and later repealed in 1872.
This 1868 illustration shows soldiers and others with a prominent banner reading, ‘Reduce taxation before taxation reduces us,’ ahead of the 1868 U.S. presidential election. (Getty Images)
In 1890, the McKinley Tariff, named after then-Rep. William McKinley, raised the average duty on imports to around 50%.
From 1868 until 1913, 90% of all federal revenue came from taxes on liquor, beer, wine and tobacco, according to the Internal Revenue Service.
“And then around in the early 1900s, they switched over, stupidly, to frankly, an income tax,” Trump said.
This was the result of a years-long push by progressives to lower tariffs. The income tax became a fixture of U.S. tax policy via constitutional amendment in 1913.
“The country had grown too big and our industries were stable enough that it wasn’t realistic, nor was it necessary, for us to be able to continue to raise most of our revenues through tariffs,” David M. Walker, former Comptroller General of the United States and chair of the Federal Fiscal Sustainability Foundation, said.
An all-tariff policy today not ‘realistic’
“I don’t think it’s feasible to go from our current system to where we’re totally relying on tariffs. It is possible to go from our current system to where we’re relying primarily, not exclusively, on a progressive consumption tax,” Walker told Straight Arrow News. “But it would be a dramatic change from where we are right now, and government doesn’t tend to do things dramatically all at once.”
Walker served under Presidents Bill Clinton and George W. Bush. He has also run for office in Connecticut as a Republican. He told SAN Trump’s proposal to replace income taxes with tariffs is not realistic today.
“I think it’s important to understand that in 1912, right before the income tax came in the U.S., federal government was only 2.5% of the economy, 2.5%. And now we’re approaching 25% of the economy and growing,” Walker said.
The federal government today is a lot bigger than in the 1800s. And for better or worse, federal spending plays a much more critical role in U.S. economic growth.
The debate around ‘who pays for tariffs’
A lot has changed in the U.S. since the turn of the 20th century. But what is remarkably similar is the debate around tariffs.
“The Republican campaign orators and pamphleteers say that the various import duties levied by Congress are paid by the foreigners who send goods to America, and they deny point blank that the price of any article which may be called a necessary expense will be increased to Americans by the operation of the new tariff law … It is no longer necessary to meet theories with theories. Let the facts, which are multiplying every day, tell who it is that pays the onerous tariff taxes. They will answer that the American people pay these taxes and that the burden of them rests most heavily on the poor.”
The article then went paragraph by paragraph detailing how merchants are marking up everything from clothing to crockery to groceries to horse clippers, all within weeks of the McKinley Tariff passing.
The tariffs proved pretty unpopular and Republicans lost dozens of House seats that election, including Rep. McKinley himself. But McKinley didn’t stay knocked down for long. He later became governor of Ohio and then president.
‘He has one medicine for all ills.’ President McKinley is shown as a physician dispensing strong ‘tariff’ medicine. (Getty Images)
“A president who was assassinated named McKinley, he was the tariff king,” Trump told Rogan. “He spoke beautifully of tariffs. His language was really beautiful.”
Today, Trump makes the same claim of tariffs as Republicans in 1890. It is the same claim he made in his first term as president.
“So we’re taking in many billions of dollars, there’s been absolutely no inflation, and frankly, it hasn’t cost our consumer anything, it costs China,” Trump said of his China tariffs in 2019.
But by 2020, thousands of American companies sued the Trump administration, demanding a reversal of the tariff policy and refunds on tariff payments made by the companies. Among those thousands of companies was Tesla, the company that made current Trump surrogate Elon Musk rich.
Tesla had argued in its lawsuit that the tariffs were “arbitrary and capricious,” and said the administration “failed to consider relevant factors when making its decision, and failed to draw a rational connection between the facts found and the choices made.”
Analyzing Trump’s other tariff proposals
Economists and analysts across the board continue to say that Americans pay for tariffs.
“The truth of it is that it is a tax,” said Preston Brashers from the conservative think tank The Heritage Foundation. “It is something that gets passed along to consumers, and in some cases, it’s going to be something that’s passed along to producers here in the United States when they’re buying products from overseas.”
Trump said his tariff plans will “be bringing in billions and billions of dollars, which will directly reduce our deficits.”
Estimates consistently project the revenue Trump’s tariff proposals would raise will not pay for Trump’s tax cut proposals. These estimates do not consider the loftier “get rid of income tax” idea.
“The important thing with these tariffs is, if they work as intended, they will reduce trade, and so they don’t raise as much revenue as you might think,” Marc Goldwein from the Committee for a Responsible Federal Budget said.
You’re not going to see a fundamental shift away from our historical revenue sources because the gap is just too great.
David M. Walker, former Comptroller General
“Let me give you the bottom line,” Walker said. “Neither major candidate for president has taken our deteriorating financial condition seriously. Both of them are making promises that will make our situation worse rather than better. But one also has to consider that this is what I call the silly season. Lots of promises are made and you have to assess what is the political feasibility of those promises happen[ing], and in some cases even what is the constitutionality of some of those things happening.”
“I think what’s more realistic is you could see selected imposition of tariffs on certain goods from certain countries in order to try to help level the playing field and in order to try to help promote more domestic jobs,” Walker added. “But you’re not going to see, I think, across-the-board approaches, and you’re not going to see a fundamental shift away from our historical revenue sources because the gap is just too great.”
Under the title ‘It Takes Taxes and Bonds,’ the Uncle Sam character, a personification of the United States of America, writes in a large ledger labeled ‘War Budget,’ 1940s. (Getty Images)
Even history shows where tariff-driven revenue fell short: times of war. The United States had to temporarily turn to an income tax to fund the Civil War. The threat of war pushed remaining states to ratify the 16th Amendment, allowing Congress to tax incomes. And during World Wars I and II, Congress dug deep into the income tax coffer to pay for it.
Famous New York lawyer Amos Pinchot led the charge pushing Congress to raise income tax rates on the wealthy ahead of American involvement in World War I.
He correctly predicted, “If we ever get a big income tax on in wartime, some of it – a lot of it – is going to stick.”
IMF warns against tariffs: They make the country’s residents ‘poor’
The International Monetary Fund (IMF) gave its latest forecast on the world economy on Tuesday, Oct. 22. During the meeting, IMF Chief Economist Pierre-Olivier Gourinchas warned trade restrictions could put downward pressure on that growth.
The global financial agency declined to comment on certain elections of proposals by presidential candidates. Excluding 2024 election promises, the IMF says its seen a tripling in trade-distorting measures from the U.S., China and EU from 2019 to now.
“When we look at the impact that rising trade tensions could have, there are two dimensions of this,” Gourinchas explained. “One is, of course, increasing tariffs between different blocs, that will disrupt trade, that will misallocate resources, that will weigh down on economic activity. But there is also an associated layer that comes from the uncertainty that increases related to future trade policy, and it will also depress investment, depress economic activity and consumption.
“And when we put these two together, we find an impact on world output that is of the order of about 0.5% of output levels in 2026. So it’s a quite sizable effect of both an increase in tariffs between different countries and an increase in trade policy uncertainty,” he continued.
He said it’s not just something that ultimately harms the global economy.
“They’re also hurtful for the countries that implement them as well because the impact on global trade also makes the residents of the country poor,” Gourinchas said.
It’s not a new view for economists worldwide. The nonpartisan Peterson Institute for International Economics estimates former President Donald Trump’s higher-end tariff proposals would cost the typical U.S. household $2,600 a year. However, it’s a finding the Republican candidate rejects.
“The higher the tariff, the more likely it is that the company will come into the United States and build a factory in the United States so it doesn’t have to pay the tariff,” Trump said.
In the latest AP-NORC poll, voters said they trust Trump more than Vice President Kamala Harris when it comes to tariff policies. As for whom voters trust more with the economy, Trump holds a slight edge at 43% compared to Harris at 41%.
When it comes to the current state of the U.S. economy, only 38% say it is somewhat or very good. The results are drastically different depending on the voter’s political party, with 13% of Republicans calling it good compared to 61% of Democrats.
Despite the vibes inside the country, the IMF rates the U.S. economy as “very good.”
“There is strong productivity growth that we see when we look at the U.S. that’s somewhat unlike other advanced economies, in fact, when we look around the world,” Gourinchas said.
The IMF expects the U.S. economy to grow at a 2.8% rate in 2024, compared to 1.8% among advanced economies as a whole.
September surprise: US adds 254,000 jobs, unemployment dips to 4.1%
The U.S. economy added far more jobs than anticipated in September while the unemployment rate ticked down to 4.1%. According to the latest data from the Bureau of Labor Statistics (BLS), the U.S. added 254,000 jobs in September when economists expected around 150,000. In August, preliminary data showed 142,000 jobs added and 4.2% unemployment.
With the release on Friday, Oct. 4, the BLS revised July’s numbers up by 55,000 to 144,000 jobs added for the month. It also revised up August’s numbers by 17,000 jobs, from 142,000 to 159,000 jobs added.
In total, jobs added in July and August are 72,000 more than previously reported by the Labor Department.
The latest jobs report comes less than a month after the Federal Reserve lowered its benchmark interest rate by 50 basis points. The U.S. central bank has a dual mandate to maintain stable prices and reach full employment.
This stronger-than-anticipated report will put the Fed’s November meeting in focus, where it is anticipated it will cut rates again by 25 bps.
The Bureau of Labor Statistics said the number of people not working who want a job is at 5.7 million. Construction employment continues to trend up, adding 25,000 jobs in September. The construction sector has consistently grown over the last 12 months, adding an average of 19,000 jobs per month.
Jobs in food services and drinking establishments rose by 69,000 in September, considerably above the 12-month average of 14,000 per month. This sector contained the largest increase in jobs for the month.
Health care added 45,000 new jobs, which is below the average monthly gain of 57,000 over the last 12 months.
The latest jobs report comes amid two large labor disputes.
Powell says Federal Reserve is in no ‘hurry to cut rates quickly’
Experts say the greatest threat to the economy in the next year isn’t the upcoming election or even conflict in the Middle East or Ukraine. More professional forecasters say a monetary policy mistake by the Federal Reserve poses the greatest downside risk.
This month, the Federal Reserve adjusted its policy rate for the first time in 14 months. The Fed cut its benchmark interest rate by 50 basis points in a supersized kickoff to the rate-cutting cycle. But in a speech Monday, Sept. 30 in Nashville, Fed Chair Jerome Powell essentially said not to read too much into the size of that first cut.
“This is not a committee that feels like it’s in a hurry to cut rates quickly. It’s a committee that wants to be guided,” Powell said. “Ultimately, we will be guided by the incoming data, and if the economy slows more than we expect, then we can cut faster. If it slows less than we expect, we can cut slower. And that’s really what’s going to decide it.”
We’re recalibrating policy to maintain the strength in the economy, not because of weakness in the economy.
Federal Reserve Chair Jerome Powell
The Fed’s goal is a soft landing, where they raise rates high enough to bring down inflation without triggering a recession. So far, they’ve reached the rate-cut part of the equation without a recorded recession.
“Our design overall is to achieve disinflation down to 2% without the kind of painful increase in unemployment that has often come with these inflation processes,” Powell said during the National Association for Business Economics annual meeting. “That’s been our goal all along. We’ve made progress toward it. We haven’t completed that task.”
The Fed’s preferred inflation gauge is down to 2.2%, a hair above its 2% target, while core inflation is higher at 2.7%. Meanwhile, the unemployment rate climbed to 4.2% from the 3.4% low hit in January and April 2023.
Federal Reserve board members and bank presidents project unemployment will rise to 4.4% by the end of this year and next, while core inflation won’t hit the 2% target until 2026.
While unemployment is higher than the modern-era lows experienced not too long ago, Powell rebuffed worries about the weakening labor market.
“Just take the current situation,” he said. “What you see is solid growth in the economy and what you see is a solid labor market. So in a way, the measures we’re taking now are really due to the fact that our stance is due to be recalibrated, but at a time when the economy is in solid condition, that’s what we’re doing. We’re recalibrating policy to maintain the strength in the economy, not because of weakness in the economy.”
The Fed will meet two more times this year, with its next 2-day meeting right after the election.
Right now, markets are leaning more toward a 25-basis-point cut rather than a 50-basis-point cut in November, according to CME’s FedWatch. Assuming those in the 25-basis-point camp are correct, that would bring the target range down to 4.5% to 4.75%.
Traders are then projecting the rate will drop down to between 4% and 4.25% following the December meeting, which would equate to a 50-basis-point cut. That’s higher than the 4.4% the Fed itself is projecting.
The federal funds rate now sits between 4.75%-5%, down from 5.25%-5.5%. This marks the first rate cut in four years after inflation spiked amid the COVID-19 pandemic.
“Recent indicators suggest that economic activity has continued to expand at a solid pace,” The Federal Open Markets Committee said in a statement. “Job gains have slowed, and the unemployment rate has moved up but remains low. Inflation has made further progress toward the Committee’s 2% objective but remains somewhat elevated.”
Inflation cooled for the fifth straight month in August at 2.5%, inching closer to the Federal Reserve’s target of 2%. But core prices, which strip out food and energy, stayed stagnant at 3.2%.
“In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks,” the statement read. “The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2% objective.”
The S&P 500, NASDAQ and Dow notched gains in immediate response to news of the rate cut.
The Federal Reserve has a dual mandate of full employment and price stability. To keep those numbers in line with a strong economy, they use tools like adjusting the federal funds rate, which is the overnight lending rate for banks but in a downstream way affects interest rates on everything from mortgages to car loans.
‘Recession pop’: Can great music signal an economic downturn?
It’s tough to identify if the economy is in a recession. Economists toil over economic data to try to find the most accurate indicators. Gross domestic product and unemployment numbers are great data points, but what does the state of pop music tell us about economic conditions?
Traditionally, two consecutive quarters of negative growth is the preferred method to tell a recession took place. When it comes to unemployment, the Sahm Rule is triggered when the three-month moving average of the unemployment rate is half a percentage point above the 12-month low. The McKelvey Rule is essentially the same but is triggered when the unemployment rate is 0.3 percentage points above the 12-month low. The inverted yield curve, when short-term Treasury yields exceed long-term yields, is also a recession indicator.
Exploring Recession Pop: A Journey Through Music and Hardship * Recession Pop, characterized by its upbeat and escapist dance music, emerges during times of economic turmoil as a form of distraction and catharsis. * This phenomenon is not new, with historical examples dating back to the Great Depression and recurring during subsequent periods of hardship. Pre-Recession Examples: * Dance music as a form of escapism can be traced back to the Great Depression era, where swing and jazz provided solace amidst economic struggles. * In the UK, the Winter of Discontent in 1978/1979 saw the rise of ABBA’s albums, offering a similar escape during a period of social and economic unrest. The Great Recession (2000s): * The late 2000s Great Recession saw a surge in dance-pop music, offering a distraction from economic woes. * Artists like Black Eyed Peas, Rihanna, Katy Perry, and Lady Gaga dominated the charts with infectious hits. * Songs like Flo Rida’s “Club Can’t Handle Me” provided a sense of camaraderie and hope amid uncertainty, embodying the spirit of Recession Pop. * Dance music acts as a survival mechanism, providing a temporary reprieve from the harsh realities of the world. Post-Pandemic (2020s): * The COVID-19 pandemic brought about a resurgence of dance-pop and disco music, echoing the Recession Pop trend. * Artists like Dua Lipa, Doja Cat, and Beyoncé spearheaded this revival, offering upbeat and nostalgic tunes during difficult times. * Sample-heavy tracks and uplifting beats became prevalent, serving as a source of comfort and nostalgia for listeners. * Despite the challenging circumstances, the music industry continued to thrive, providing a beacon of light in dark times. * Recession Pop reflects the resilience of music as a form of escapism and catharsis during times of hardship. * Despite economic downturns and global crises, dance-pop music remains a source of joy and unity for listeners worldwide. * As we navigate through uncertain times, the enduring popularity of Recession Pop serves as a reminder of the power of music to uplift and inspire in the face of adversity. #JoesAlternativeHistory#RecessionPop#MusicHistory#GreatRecession#LadyGaga#2000sPop#BlackEyedPeas#BoomBoomPow#WinterOfDiscontent#GreatDepression#DuaLipa#Beyonce#DojaCat#ABBA#PopCulture#PopCultureHistory#recession
But then there is the notion that “pop music is brilliant” when the economy is about to face serious problems. That is where the idea of “recession pop” comes into play.
What is recession pop?
In short, recession pop is seen as the Top 40 hits that are released during an economic downturn. The most clear example was during the Great Recession.
“I would define recession pop from the years just leading up to the recession, so the end of 2007 probably at least through 2012,” Charlie Harding, an NYU Professor and co-host of the podcast “Switched on Pop,” said.
Meanwhile, Joe Bennett, a musicologist and professor at Berklee College of Music, said it’s a label that applies “to a particular body of work, which I would broadly describe as super cheerful dance floor bangers that came out sometime between 2008 and 2011.”
Super cheerful dance floor bangers that came out sometime between 2008 and 2011.
Musicologist Joe Bennett describing recession pop
Since it is not a particularly scientific indicator, Harding said the recession pop label could even go all the way into 2014 because “lots of people were still really feeling that recession well into the early 2010s.”
Is recession pop a real thing?
It’s hard to officially quantify whether pop music really reflects the economic times, but both Harding and Bennett said the interpretation is often up to the listener.
“You can find what we might say are reflective songs, where the dark times people are experiencing are indeed dealt with within the song lyric,” Bennett said. “And we might also find what you might call escapist songs. ‘What the heck, let’s party.’”
“So songwriters are not necessarily social commenters, but like all of us, everyone who creates popular culture, they are living in that culture at the time they are making the object and the market that is the pop music fans who are buying or streaming the single are also in that social context and liking what they like in the context that they’re in,” he continued.
“As much intention as a songwriter might have, whatever they might intend, the listener is going to take it and do what they want with it,” Harding added. “A great example of listeners completely misusing a song would be ‘Hey Ya’ by OutKast, which is one of the most requested songs at weddings, and yet the song is about relationships that never last.”
“The recession affected different people very differently,” Harding said. “If you lost your home, you’re gonna remember what that song is on the radio when you had to pack up and leave. It’s really different than maybe someone for whom their family got through it okay, and they’re just like, ‘I just love my recession pop bops.’”
The history of popular music is littered with songs known as “party anthems.” But the recession pop era may have had less economic-based reasons for those hits.
“I think there’s ways in which the music was great, and I think there’s other ways in which it feels a little bit reductive,” Harding told Straight Arrow News. “We’re talking about a period in which the digitization of music was fully taking over.”
Despite the idea that recession pop is specific to the Great Recession, Bennett points to music that came out amid the Great Depression to illustrate how music reflects the times.
“Bing Crosby’s ‘Brother Can You Spare a Dime?’: it was a big hit in the early ’30s, and that’s a song about a returning war veteran who’s homeless and looking for money,” he said. “In 1933, Ginger Rogers has a hit with ‘We’re in the Money.’ Is that sort of an ironic title? It’s certainly a very cheerful lyric. Maybe it’s a fantasy about having money, because a lot of people wouldn’t have in the U.S. in the early 30s.”
Nostalgia effect
With all the evidence to support the idea of recession pop, it’s hard to say one era’s music is better than another, which can make it a particularly difficult economic indicator to nail down.
“If recession pop is a nostalgic way of looking back and trying to make sense of this period of total dislocation and fragmentation, all the power to listeners to call this stuff recession pop, even if it just happened to be the upbeat, fun thing that was occurring at that time,” Harding said. “People are trying to make this connection to music that happened 10 to 15 years ago.”
There is good reason for music dubbed recession pop to be resonating with people in their 30s that may have nothing to do with the quality of the tunes or state of the economy.
“It fits with the general cycle of popular music nostalgia,” Bennett said.
Bennet added most people believe the best music was released when they were 17 years old.
“A lot of the psychology research into nostalgia suggests that it works on something like a 15-year cycle,” Bennet continued.
“It’s more of an after-the-fact analysis, which is a fun and useful way of creating playlists: being nostalgic, digging into our memory, perhaps making sense of an era that was really dark and challenging for people and making light of it after the fact,” Harding said.
Pop music today
While recession pop is likely just a label put on music after the fact, it gives us an opportunity to look at what makes a hit song and how that has changed in the last 15 years.
“I think what makes a great pop song is accessibility,” Bennett said. “Particularly if you’re releasing a single, you want it to appeal to millions of people.”
“It has to have an amazing concept,” Harding added. “[It] has to have a memorable hook, and it has to capture the zeitgeist.”
Harding likens making a great pop song to winning the lottery. Many wonder how some artists have been able to hit the jackpot over and over again. But what makes a great pop song has changed over time. Today, more and more records are being discovered on short-form video apps like TikTok and Instagram.
“TikTok is a much faster-moving medium so people need to grab their audience’s attention to stop them from vertically scrolling onto the next thing,” Bennett said of the app that broke artists like Lil’ Nas X. “As we know from TikTok, that sort of meme community will often seize on a particular part of the song, a particular audio excerpt, and use that to make its meme, its dance routine, whatever it is.”
But even though artists need to get to the hook quicker than ever before, Harding said they have more to say than ever before.
“There is this expectation that we are more giving of ourselves in our lyrics today,” Harding said. “And so I think of an artist like Charlie XCX, who, on ‘Brat,’ talked about how she wanted to write lyrics that were as if she was just texting a friend. And this is the album that has broken through for her, because some of these lyrics, they don’t have these perfect rhymes. They have the perfect imperfections.”
And there’s no bigger artist giving themselves to their music than Taylor Swift.
“I think on a lot of metrics, Taylor Swift is the biggest artist to have ever lived, in terms of the longevity of her career; the fact that she is what should be a late-stage career artist, and yet she is at her peak,” Harding said. “She has had multiple peaks that just keep getting bigger and bigger and bigger.”
Meanwhile, Bennett pointed out that Swift herself was not immune to the recession pop movement.
“Her two significant albums at that time would have been ‘Fearless,’ which came out in 2008 and then ‘Speak Now,’ which originally came out in 2010,” Bennett said. “And of course, both of those contain a whole bunch of songs in that vein: ‘Love Story,’ ‘You Belong with Me,’ ‘White Horse,’ ‘The Story of Us.’”
In the end, while there may not be a deliberate intention to make music that makes listeners feel good or sad during tough economic times, it’s clear music resonates with people and reminds them of those snapshots in time.
Fed expected to slash rates by 25 bps in September. What’s next?
After the Wednesday, Sept. 11, inflation report came in on target, markets are even more confident the Federal Reserve will cut its rate by 25 basis points following its policy meeting next week. In August, Fed Chair Jerome Powell said it was time for policy to adjust after an “unmistakable” weakening in the labor market. But how much adjusting is coming down the pike after September?
The federal fund target range is a benchmark rate for lending. Since July 2023, the Federal Open Market Committee has held the range between 5.25% and 5.5%, its highest level in more than two decades.
Markets initially expected rate cuts to come much earlier in the year, but after inflation remained stickier than anticipated, September would mark the first rate cut since early 2020 after five straight months of cooling consumer price inflation.
If the Fed decides to cut in September, it will mark the beginning of a rate-cut cycle. After the Fed’s decision on Sept. 18, the committee will meet two more times in 2024, the two days after the November election and Dec. 17-18. For more on how much the Fed may cut this year and next, Straight Arrow News spoke with the Fed Guy Joseph Wang.
The following transcript is edited for length and clarity. Watch the full clip in the video above and catch the entire interview on Straight Arrow News’ YouTube page.
Joseph Wang: So the market is pricing in a very, very aggressive Fed cut cycle, so aggressive that the market is pricing by the end of next year, the overnight rate will be below 3%. So that’s from 5.5% today to below 3% next year.
Now that’s a very aggressive rate path, expected policy pricing by the market, and that seems to assume a significant deterioration in the economy.
Let’s look at the big picture, though. The most recent GDP statistics in the US were revised upwards from 2.8% annual growth rate to 3%, so the economy is actually growing fine. There’s really no indication that we would just suddenly go from 3% to a recession where we don’t grow, we shrink.
Jobs reports, again, slowing, but we’re still creating over 100,000 jobs a month. When we’re in a recession, we don’t create 100,000 jobs a month, we lose 100,000 jobs a month. And so the pricing in the market seems to be pretty aggressive from my perspective, I think there’s too much doom and gloom being priced in.
My base case expectation is that rather than having a series of huge cuts that the market is assuming that we have, [we have] some steady 25-basis-point cuts, and maybe the cut cycle ends, let’s say around 3.5%, rather than below 3%. I say this because, by all indications, the economy continues to have momentum and there’s a good case to be made that rather than falling into recession, we really are just normalizing now.
One other thing that I would mention is that something that’s happening today that hasn’t happened before is that we have tremendous amounts of fiscal spending. The government is expected to have a fiscal deficit of about a couple trillion dollars, basically forever, and when you have the government spending so much each year, that’s very supportive of demand. It’s upward pressure on inflation. It’s not a very good management of the currency, but it is supportive of demand.
And so when you have that kind of fiscal spending, I think that’s a good tailwind. Now, one other thing to keep in mind is that what happens in November could have very big implications for macro policy. We have two candidates with very, very different visions of the world. We also have to look at Congress to see whether or not they are able to carry out their different visions of the world.
So there’s a lot of uncertainty there. But based on what I see right now, the economy is still okay, and the rate cuts in the markets are too aggressive. We’ll have some, but it doesn’t seem like we would have so many, because it doesn’t seem like at the moment that we are tumbling into recession.
Inflation cools to 2.5% in August but monthly core prices came in hotter
Consumer price inflation cooled for the fifth straight month in August at 2.5% annually, inching closer to the Federal Reserve’s target of 2% inflation one week before the central bank’s next rate decision. Monthly prices rose 0.2% from July, according to data released by the Bureau of Labor Statistics Wednesday, Sept. 11.
Core inflation, which removes volatile and energy prices, rose 3.2% annually and 0.3% compared to July. While the annual number came in as expected, the monthly increase is hotter than the 0.2% expected.
Shelter continues to be the main driver of core inflation as the index went up 0.5% compared to July and is still up 5.2% year-over-year. Shelter price increases are responsible for 70% of the annual rise in core prices.
The price of groceries didn’t budge on a monthly basis, and food away from home rose 0.3% over July. Energy prices dropped 4% annually while gas prices are down 10.3% compared to August of last year.
New car prices were unchanged for the month and fell 1.2% on an annual basis. Used cars, which had a massive spike amid the latest inflation run, dropped 10.4% compared to August 2023.
The BLS also reported the airline fares index rose 3.9% in August after declining in each of the previous 5 months.
August’s inflation report is one of the last data puzzle pieces ahead of the Federal Open Markets Committee meeting next week. The Federal Reserve is expected to cut interest rates for the first time since 2020. The central bank has a dual mandate and uses inflation data and unemployment to make its policy decisions.
The U.S. economy missed expectations and added just 142,000 jobs in August, but the unemployment rate did come off July’s surprise 4.3%, settling at 4.2%.
