The potential for sweeping changes to the Federal Reserve under President-elect Donald Trump has become an increasingly pressing issue. As his return to the White House looms, one question is emerging: Will the central bank continue to operate as it has—or will it be dismantled entirely?
Elon Musk, a significant supporter of Trump, has further fueled this debate by resharing a post from Republican Senator Mike Lee of Utah on social media. The post calls for the abolishment of the Federal Reserve, accompanied by a “100” emoji from Musk, signaling his agreement with Lee’s stance.
Lee argued that the Federal Reserve is an example of how the U.S. government has deviated from its constitutional principles, calling for an end to the central bank. His comments came after Federal Reserve Chairman Jerome Powell stated he would not resign if asked by Trump. Despite the clear push from some in the Republican Party to eliminate the Fed, Trump himself has not publicly supported such a drastic move.
While calls to abolish the Federal Reserve are not new—former Congressman Ron Paul famously campaigned on this issue with his 2009 book End the Fed—the question now is whether Trump will embrace these calls or opt for more nuanced changes. In the past, Trump has voiced support for altering the Fed’s policies, particularly concerning interest rates, but he has refrained from endorsing the complete abolition of the institution.
The Federal Reserve has long been an independent body tasked with regulating interest rates to ensure price stability and maximum employment. The idea of shifting its responsibilities to the Treasury Department, as proposed in a bill introduced by Lee and Rep. Thomas Massie, is part of the larger effort to reclaim power over monetary policy. However, Trump’s potential influence on the Fed remains limited. Presidents do not have direct control over interest rates, and while Trump has pushed for rate cuts during his campaign, the Fed’s primary goal is to make decisions based on the long-term health of the economy.
During his first term, Trump repeatedly criticized Fed Chair Jerome Powell for maintaining high interest rates, at one point threatening to remove him. However, the law is clear: The chair of the Federal Reserve can only be dismissed “for cause,” and the president cannot simply remove a Fed appointee due to policy disagreements. Powell himself has stated that he believes any such removal would not be permitted under the law.
With Republican control of the Senate and a majority of conservative justices on the Supreme Court, Trump could find more opportunities in the coming years to challenge the Fed’s independence. However, history suggests that such challenges may not be successful. The Supreme Court recently upheld the constitutional structure of the Consumer Financial Protection Bureau, which, like the Fed, operates with independent authority, reinforcing the notion that dismantling such agencies is not an easy task.
As Trump prepares for his second term, the future of the Federal Reserve remains uncertain. While some of his supporters push for its abolition, the legal and political hurdles to such a move are significant. The fate of the Fed may depend on how the incoming administration navigates the balance of power and whether it can shift the focus of U.S. monetary policy.
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