BREAKING: Worst Consumer Sentiment in History; DOJ Drops Criminal Probe of Chair Powell

Summary

Podcast Summary: Bulwark Takes – Episode: "BREAKING: Worst Consumer Sentiment in History; DOJ Drops Criminal Probe of Chair Powell"

Date: April 24, 2026
Hosts: JVL (Mike, for this transcript), Katherine Rampel

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Episode Overview

This episode dives into a frenetic week in U.S. economic and political news, with discussion led by JVL (referred to as Mike in the transcript) and Katherine Rampel. The main topics include:

• The DOJ dropping a politically charged criminal probe into Fed Chair Jerome Powell
• The political dynamic and implications of Fed chair succession and alleged politicization
• Alarming new lows in consumer confidence
• The federal bailout of Spirit Airlines in the context of “command economy” practices under President Trump
• The broader debate over government bailouts, economic management, and market distortions

The tone is sharp, sarcastic, and frequently incredulous about the bizarre state of U.S. economic politics in 2026.

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Key Discussion Points & Insights

1. DOJ Drops Criminal Probe Against Fed Chair Powell

[01:21 – 06:53]

• The hosts discuss Judge Jeanine Pirro's announcement to curtail the criminal investigation into Jerome Powell, Fed Chair. The context: Donald Trump, via Pirro, had pushed for a DOJ criminal investigation, widely seen as retribution for Powell's independent monetary policy.
• Katherine Rampel: “Donald Trump is really mad at Jerome Powell for not cutting rates as much as...total coinky dink.” (02:38)
• The probe is dropped but not definitively; Pirro keeps the door open for future action.
• The Inspector General (IG) at the Fed is already conducting a review—requested by Powell himself.
• Powell’s term as chair ends soon, with Kevin Warsh as the likely successor—but Senator Thom Tillis was blocking Warsh's confirmation until the probe closed.
• Memorable quote:
  • “This is actually a surrender cloaked as butching up?” – Mike [01:53]
  • "Powell...has called for [the IG investigation] publicly. So...nothing new here." – Katherine Rampel [04:26]
• Both hosts note uncertainty remains whether the drama is really over, or if investigations will be revived when politically expedient.

2. Implications for Fed Independence and the Incoming Chair

[07:05 – 10:25]

• Discussion shifts to concerns about the independence of the Fed under Trump, especially for incoming chair Kevin Warsh.
• No senators pressed Warsh on whether he would remain independent if Trump targeted him as he did Powell.
  • Warsh avoided both criticism of the probe into Powell and any specifics about Fed independence under political pressure.
• Rampel: “What would you do if Donald Trump called you an enemy of the people or otherwise smeared you or launched a fake, a bogus criminal investigation into you or threatened to fire you?...Nobody even pushed him on this question.” [07:39]
• Markets seem skeptical that Warsh will truly pursue aggressive rate cuts as Trump wants, especially after recent economic turmoil.

3. Historical Consensus at the Fed & the Risk of Open Division

[10:25 – 13:40]

• Historically, the Fed operates with near-unanimous consensus; major splits would be unprecedented and could undermine the Fed’s credibility.
• Warsh's track record: vocal about worries over inflation during the Great Recession, but still voted with the Fed majority.
• Mike: “They have to be publicly unanimous because that’s where the power of the central bank lies.” [13:04]
• Rampel expresses concern Warsh could face impossible choices—between Trump’s expectations and economic realities.

4. Consumer Confidence Hits Historic Lows

[16:52 – 23:51]

• The University of Michigan consumer sentiment survey reports its lowest reading ever, echoed by negative Gallup numbers.
• Mike: "They're historically bad." [17:07]
• Rampel: "That's the lowest reading on record." [17:16]
• Discussion: These indices are now more partisan than ever, meaning bad numbers don’t always equal bad behavior, though current spending remains strong (boat sales!) while people report economic pessimism.
• Rampel: “You have to take these numbers with a grain of salt because they have become much more partisan than they used to be.” [18:06]
• Contextual factors: rising unemployment, flat job growth, persistent inflation (notably spot food prices up 7.9% YoY due to diesel costs).
• Despite pessimism, current behavior doesn’t reflect 2008 crisis levels, but the fear of escalating economic problems is legitimate, particularly with ongoing “warflation.”

5. Political Blame for High Prices & Public Opinion

[24:27 – 26:10]

• Axios survey: 76% of Republicans blame Congressional Democrats for high prices—a reflection, the hosts argue, of partisan animus more than economic causality.
• Rampel: "The question may be phrased as who do you blame for high prices? But the way people hear it is, which party do you hate more?" [25:01]

6. Spirit Airlines Bailout – Crisis, Markets, and Cronyism

[26:10 – 35:49]

• Trump administration moving towards an effective federal purchase (bailout) of Spirit Airlines, which has filed for bankruptcy twice in two years.
• Searing, comedic contempt for Spirit (“worst airline in America, which is a competitive category”) and debate over whether this is a sound investment for consumers or just more political manipulation.
  • "This is the airline America deserves in 2026. It is the worst airline in America, which is a competitive category." – Mike [26:38]
  • "[On Spirit Airlines:] There's no doctor on a Spirit Airlines." [27:23, comedic interlude]
• Mike: "We live in a command economy...if the President tells someone...they will jump to go and pay whatever is asked for, because that's the world we live in now." [28:06]
• Rampel: The deeper problem isn’t just the stock market outcome—it's market distortion and the erosion of rule of law in business investments.
  • "This is like a huge distortion of how markets allocate capital, which maybe sounds like an abstract thing to worry about, but it’s a big problem." [29:37]
• Trump’s airline history (Trump Shuttle) used as a cautionary—and comedic—tale (“sank a lot of money into renovating the bathrooms to have gold colored laboratory fixtures...never turned a profit”). [31:48]
• Discussion of how this intervention could distort airline labor and pricing, possibly harming the broader industry as other airlines struggle with higher jet fuel ($360 million extra for Spirit alone due to Trump-driven price increases).

7. The Broader Bailout Debate and Moral Hazard

[36:50 – 45:41]

• Philosophical debate on bailouts—sometimes necessary (e.g., TARP/bank bailouts, perhaps the GM rescue for national security/manufacturing reasons), but often distortionary or a moral hazard.
• Mike: "Every bailout question is a prudential decision...one of the reasons you don't elect game show hosts as president..." [36:50]
• Rampel: "There are some bailouts that are important because of the, the, the knock on effects that might happen if the company goes under. Right. The externalities." [37:55]
• 2008 bailouts discussed as politically toxic but ultimately necessary to prevent systemic collapse, though would have been more palatable with criminal prosecutions.
• Rampel: The best medicine is preventative—avoid companies becoming “too big to fail.”
• Spirit is not a systemic risk—so rationale for taxpayer-funded rescue is unclear beyond political favoritism.

8. Looking Forward – A Politicized Economic Landscape

[45:29 – 46:12]

• Closing concern: future bailouts will be decided along political lines; the moral hazard is compounded by selective, politically motivated interventions.
• Mike: “Politically favorable groups to Trump will get bailouts and politically unfavorable groups won't. So it's a nice academic conversation, but we know how it's going to play out in reality." [45:29]

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Notable Quotes and Memorable Moments

• "Delicious or distasteful? I don't know. Both." – Katherine Rampel [01:17]
• "Powell can actually remain at the board for another couple of years as a regular board member, not as chair. This almost never happens...Powell had indicated that he might stick around at least until the investigation is dropped and maybe longer." – Rampel [05:55]
• "When Warsh was first announced as Donald Trump's Fed pick, you know, treasury yields actually went up a little bit, which suggests that while [Warsh] claims he would...cut rates, which is what Donald Trump wants, markets don't really believe him." – Rampel [09:29]
• "We live in a command economy...the President can't do bad stock picking because the President wields so much power...people will always do what he tells them to do.” – Mike [28:59]
• "This is bad even if this stock pays off. And I am dubious that it will pay off...Donald Trump actually has experience running an airline and that did not end up so well." – Rampel [30:59]
• "The best medicine is preventative...It's to have a system where something is not too big to fail." – Rampel [39:45]
• "Do the farmers deserve a bailout from the things that Donald Trump has inflicted on them? Do you know, other company like companies that have been paying tariffs, companies that are going to pay higher jet fuel prices or higher fertilizer prices or higher plastics prices or anything else? Do they deserve a bailout? It's not their fault that Donald Trump launched this war." – Rampel [44:47]
• Sarcastic closing monologue:
  "We were dead. The country was totally dead. We didn't even have a country two years ago. But now we're the hottest country in the world. A guy told me this, a big, tough, strong guy. He had tears in his eyes. Jpl Sir. He said, sir, we're so hot right now. We're like, Hansel, we're so hot right now." – Mike [45:42]

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Timestamps for Major Segments

• [01:01] – Show begins, economic news round-up
• [01:21] – DOJ drops probe of Fed Chair Powell, political backstory
• [06:53] – Uncertainty and implications for Tillis/Warsh/Powell
• [10:25] – Fed consensus and board dynamics, Warsh’s philosophy
• [16:52] – Consumer confidence hits worst levels
• [24:27] – Axios poll: blame and partisanship in economic attitudes
• [26:10] – Spirit Airlines bailout and “command economy” critique
• [36:50] – Philosophical and practical debate on bailouts
• [45:29] – Final thoughts on economic policy, bailouts, and political favoritism

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Recap

This episode is a real-time reflection on the blurred lines between politics and economic policy in 2026 America, highlighting collapse of norms around central bank independence, rise of market distortion through government favoritism, and the growing gap between how Americans feel about the economy and their actual economic behavior. The irreverent, sometimes exasperated tone underscores how surreal these developments feel to seasoned journalists and policy observers alike.

Transcript

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[Mike]

Hello, everyone. This is JVL here with my friend and colleague Katherine Rampel, author of our Receipts newsletter. We're here, as we are every Friday to talk about the economy. And as it is every Friday, the news is delicious.

[Katherine Rampel]

Delicious or distasteful? I don't know. Both.

[Mike]

Yeah, it's all the same. We open with breaking news that judge box of wine. Jeanine Pirro has announced that she is curtailing her investigation of the chairman of the Federal Reserve Board because she has asked, as of this morning, the Inspector General, the IG's office at the Federal Reserve to scrutinize these things. And so Judge Jeanine is looking like a real. She's so butch here, and she's like, you know, I've directed my office to close our investigation, but no. Well, no. Well, I will not hesitate to restart a criminal investigation should the facts warrant doing so. Catherine, could you please explain to the people that this is actually a surrender cloaked as butching up?

[Katherine Rampel]

Well, it's sort of a surrender and it's sort of not. So the background here is that Donald Trump, via Jeanine Pirro, has been launching this criminal investigation into Jerome Powell, the Fed chair.

[Mike]

But how is that possible? There's a line between the Department of Justice and criminal prosecutions in the president's office.

[Katherine Rampel]

Independent Catherine, I'm sure it was just a total coincidence that they launched this criminal investigation that had bullshit underpinnings. And also, Donald Trump is really mad at Jerome Powell for not cutting rates as much as, yes, total coinky dink. So that's that's the backstory here. Powell is actually slated to end his term as chair in about three weeks anyway. He, you know, he has a fixed term, and that term ends in mid May. There is somebody waiting in the wings to take over from Powell. His name is Kevin Warsh. He just had a confirmation hearing this week. And one thing that it has been standing in the way of Warsh getting that job is the fact that Thom Tillis, senator from North Carolina, has said, I'm not going to move forward any Fed picks until this investigation is dead, until it is gone. There, you know, with. With great finality. We know that it's over with finality, transparency, whatever language he used. And so it was basically Donald Trump keeping his own pick from getting in the job. So Tillis has. Has laid down this marker and, and Trump, instead of acquiescing and abandoning this political prosecution, persecution, whatever you want to call it, had tried to escalate. Now it looks maybe like a surrender. Except that a couple of things. First is that there was already an IG investigation going on before all of this.

[Mike]

Oh, yeah. Oh, interesting. Okay. So it didn't just start this morning.

[Katherine Rampel]

No. You know who called for the IG investigation?

[Mike]

Why? Who would that be?

[Katherine Rampel]

It was Jerome Powell. Because as far as he's concerned, he has done nothing wrong. He has nothing to hide, so he has called for it publicly. So to my knowledge, that has been going on, I think, for a few months. So nothing new here. In addition, not to sound like paranoid, but it's not totally clear that they are actually done with this investigation. Pirro says in that tweet they've dropped it for now. She will not hesitate to relaunch an investigation. And she was noticeably silent on whether or not she is going to appeal a judge's decision recently that basically blocked her from issuing subpoenas to the Fed. Previous to all of this, she had said very publicly, we plan to appeal, we plan to appeal. They can't stop us. So it's not really clear. To my knowledge, she has not said anything since then. Maybe I've missed something in the last hour or so. I don't know that Donald Trump has also said anything about the end of this investigation. And so again, Tillis and Powell have both said, like, until this is done, Powell is not going away quietly, and Tillis would not allow a successor to get into that, the top job. So I don't know what this is actually going to change until there's some clarity about what happens to that announced appeal and whether or not they're continuing to leave the door open to a political investigation slash prosecution of Powell. I don't know what that means. I think this will probably be enough for Tillis to say, fine, I will stop standing in the way of Kevin Warsh's ascension to Fed chair. He likes Kevin Warsh a lot. He said that very publicly. So this was not about him. This was about the investigation. I think we still don't know what it means for Powell, um, because let's say Warsh does get confirmed, as he's likely to be. If Tillis gets out of the way, Powell can actually remain at the board for another couple of years as a regular board member, not as chair. This almost never happens, like, once you've gotten demoted, who wants to stick around? But Powell had indicated that he might stick around at least. Well, he said he would stick around at least until the investigation is dropped and maybe longer. So I don't know. I don't know that the drama is actually over here.

[Mike]

I mean, I look at this, and if Tillis is willing to take this as his definitive, like, thing, I think he's crazy.

[Katherine Rampel]

I think he's been looking for an off ramp. Yeah.

[Mike]

You think he's looking for an off ramp?

[Katherine Rampel]

Yeah.

[Mike]

This is. He didn't think that he. So trouble of one would not surprise me at all if the minute wash is confirmed, they ramp things back up or something like that. I mean, it seems crazy to me. I do worry for incoming Chairman Kevin Warsh, though, because should. Should circumstances prevent him from cutting rates aggressively at the very first opportunity, it seems like he could be in for some criminal investigations himself.

[Katherine Rampel]

Yeah. And. And it's very disappointing, actually, that when he had his confirmation hearing earlier this week, no one asked him about that. There were a bunch of sort of oblique questions about Fed independence. And of course he gave lip service to Fed independence. Fed independence is important. It's great. It's the most important thing. Blah, blah, blah. All of that is true. But nobody asked him, like, what would you do if Donald Trump deployed the same weaponry that he's deployed against Powell instead against you? What would you do if Donald Trump called you an enemy of the people or otherwise smeared you or launched a fake, a bogus criminal investigation into you or threatened to fire you? Those are really the most critical pieces of information you want to know about Kevin Warsh. I mean, who knows if I guess he would answer honestly, but that's what we need to know. Like, how would he behave? It's one thing to say you will safeguard Fed independence. But what happens when you're actually under that same pressure? And Warsh would not even condemn the political investigation into Powell. Like, that was too far afield for him to say, like, this is inappropriate or there's no evidence here, or what, like, very basic banal things he could have said. He just said, I'm not commenting on any of that. So, you know, that was his opportunity to at least demonstrate some political independence. He had some other opportunities too, including answering a question about who won the 2020 election. But nobody, yeah, nobody even pushed him on this question of like, what would you do? And to your point, it is, I think, almost inevitable that he is going to come into conflict with the President's interest rate preferences pretty soon because of the war that the President has launched, the war and tariffs and other things that have made inflation worse. It's going to make it much harder for Warsh to push through interest rate cuts if he even wants them. You know, he's one of 12. He will be one of 12 votes setting interest rates. So it's not just up to him, it's up to the rest of the board as well, the board and Fed presidents. But I don't know that he wants it. Markets don't seem to think that he wants to cut rates, despite what he says. When Warsh was first announced as Donald Trump's Fed pick, you know, treasury yields actually went up a little bit, which suggests that while war claims he would, he wants to cut rates, which is what Donald Trump wants. Markets don't really believe him. And I think it's actually gotten much harder for him to take that path that Donald Trump wants him to take, given the war. So, you know, he's going to get tested pretty soon if in fact he gets confirmed.

[Mike]

I know practically nothing about the history of the Fed. Is it common at all to have a split of opinion between the chairman of the Fed and then the majority board? That seems like it would be wildly uncommon.

[Katherine Rampel]

It's so historically, there is almost always unanimous consent from the board. There have been a few rare cases where there's even one dissent or a couple of dissents, and those have been relatively recent, to be clear. So it's not like it never happens, but usually it's like one or two voices that are defecting and everybody else is voting as a bloc and that that block is what the Fed chair has kind of guided everyone toward because it's supposed to be a consensus based institution. You know, you can, you can disagree and people are always poring over the Fed transcripts years later to find out like, oh, who was actually disagreeing on this? Or like, what were they thinking at the time. But people will often express their reservations and still vote along with, you know, sort of what the board, what the rest of the committee, the fomc, the Federal Open Market Committee, what they like are leaning towards. And actually this was true of Kevin Warsh. So Kevin Warsh was on the Fed board from like 2006 to 2011, thereabouts. He was appointed by George W. Bush. And you can see in the Fed transcripts, which again came out years later, that he was worried about inflation. He talked a lot about how he was worried about runaway inflation. He was worried about inflation even when we were experiencing deflation and unemployment was like around 10%. He was worried about inflation the day after Lehman failed when again, the main concern would be about deflation, about like another Great Depression. So you can see this in the transcripts, but he still voted along with the rest of the board or the rest of the committee, despite his, his reservations that he expressed in those meetings. So I think it would be very unusual. Like I said, it may be unprecedented, probably unprecedented. But again, how is Warsh going to navigate this? Because he has to prove, or at least Trump thinks Warsh is going to prove his loyalty by doing what Trump wants. So I don't know. I mean, again, nobody pressed him on any of this, which I thought was very disappointing.

[Mike]

Seems crazy to not press him on these things. Yeah, because I would imagine that, I mean, you just. So first of all, it makes sense that they have to be publicly unanimous because that's where the power of the central bank lies. Right. I mean, they can have disagreements before they actually vote, but when, when it's all sort of going onto the record, you do need it to look like there is no daylight between people. That is all consensus about this is what the best thing is. What you don't want is like, well, we've got a, you know, a 75 split as to what we think is the right thing to do. All of a sudden that doesn't inspire any confidence in markets.

[Katherine Rampel]

And actually when Warsh testified this week, he did say he thought that there was too much group think in these meetings and that they need to be more forceful in expressing disagreement and all of that. And I think that all seems reasonable to me that people should be willing to disagree and make their case rather than just go along because it is a consensus based model. But there's a difference between doing that in good faith versus bad faith. And I Guess the question is, is Warsh going to say what he believes to be the right path for the economy in terms of what the Fed should do? Is he going to do what Trump wants to hear? I don't know. And I'm very concerned about what his tenure could look like. Not that it can't be fine. I mean, a lot of people I know who I respect sure say he's a good guy and he's smart and he definitely seems smart and that they're not worried about him selling out, blah, blah, blah. He has to say these things in order to get the job. Cut him some slack. I've heard various versions of this, like there's no way you could get that job and not say that they're, you know, and say that Joe Biden won the 2020 election because that's like a screening mechanism. That's like a screening mechanism.

[Mike]

Seems bad. If true, it's bad. And also if true, it's only true because everybody cooperates with it. Right? If people simply refuse to cooperate with it, well, eventually they would have to appoint somebody who didn't tow the line because there wouldn't be enough people. Whatever. Now we're getting far revealed.

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[Mike]

So what is going to weigh on this in addition to everything else? A piece of the puzzle will be consumer confidence. We have some new consumer confidence numbers. First from University of Michigan.

[Katherine Rampel]

They bad?

[Mike]

This is. They're historically bad.

[Katherine Rampel]

Yeah.

[Mike]

Wow. Look at line go down, line go down.

[Katherine Rampel]

Yeah. That's the lowest reading on record.

[Mike]

Yeah. So it looks like beginning in 2020, 22, consumer confidence started going up and then Donald Trump was elected and then consumer confidence started going down. If I'm reading this right, it's very, it's very hard to understand, but I guess eggs were super expensive so people had to do what they did. Can you talk to me a little bit about so what, what does consumer confidence mean in the real world? Right. When you look at this and is it still meaningful? You and I have like touched and fenced around this a little bit and just sort of for people who might be new here, just recapitulate for me like what this number means. And while you're doing that, Jamie, if we have the Gallup numbers, which are also pretty bad.

[Katherine Rampel]

Yeah, the Gallup numbers show that. So this is like the percent of people who think that the economy is getting better or worse or that it's good minus or good or poor. So a negative number means that they're more likely on balance to say things suck. Positive number means not getting directionality. Well, getting worse or that they are bad right now because it's like it's the two different measures, the two different questions, current economic conditions and economic outlook. So it's bad. So I think we've talked about this some. You have to take these numbers with a grain of salt because they have become much more partisan than they used to be. And by partisan, what I mean is Republicans are more likely to say bad things about the economy when there's a Democrat in the White House, vice versa. And so that was always the case to some extent. But there seems to have been a noticeable shift, like in the last decade where that partisan lens really, really has, has strengthened in how people answer these questions. It doesn't mean that the answers are meaningless. Right. Particularly since we have had a Republican in the White House for over a year now. So you can look at how bad things are today or in these, these kinds of metrics versus a year ago. You can also look at how do Independents feel about things or how do Republicans feel about the economy when a Republican is in the White House. So there are ways to tease out some maybe more meaningful numbers rather than just like, do people hate somebody from the other party? And they're, they're kind of sending this referred pain toward how they answer questions about the economy. So. And those things are also bad. Right? Like, Republicans have also become more likely to say that the economy.

[Mike]

Hold off on that. Jamie, we're going to go to that in a minute.

[Katherine Rampel]

Yeah. So I guess my point is that they're useful to an extent. They have to be viewed in the context of these partisan leanings. They also have to be viewed in the context of what people are actually doing. Economists talk about revealed preferences versus stated preferences. Stated preferences might be things like the economy sucks and everything is too expensive. Revealed preferences might be something like people are actually going out and spending lots of money. I know you like to talk about how many.

[Mike]

All time high.

[Katherine Rampel]

Right. Your favorite indicator, the boat indicator. So, you know, when those things are at a disconnect, I would probably put more weight on the what do people actually do? Rather than what do they actually say. But what do they say is not useless, is not meaningless, particularly since what they say they feel about the economy is maybe more likely to affect their behavior at the ballot box. So all of those things matter. But, you know, and it's fun to talk about how poor the ratings of the economy aren't now. But, you know, you have to put it in the context of, like, how people are actually behaving. I think one thing that's interesting to me about all of this is how much people hate this economy today when it's not actually that bad. Right. You and I have talked about this a bunch before,

[Mike]

but it isn't terrible. It's not Right. It's not. Autumn of 2008.

[Katherine Rampel]

Absolutely. Autumn of 2008, when Kevin Warsh was worried about hyperinflation.

[Mike]

Right.

[Katherine Rampel]

So the question is, like, how much worse would those numbers get if in fact the economy really, really soured? If we had mass layoffs and we're actually, I think we have some recent Wall Street Journal headlines about.

[Mike]

Yeah, we have those. Yeah, here we go. Meta laying off 10% of employees in May. Microsoft doing buyouts. Nike cutting people. So these are, these are things that are happening. And so I. Yeah, I would just put the consumer confidence numbers within. Within the broader picture, which is maybe they aren't indicative of where consumer confidence really is.

[Katherine Rampel]

Mm.

[Mike]

But an all time low in the survey doesn't mean that things are actually good in terms of consumer confidence. Right. It's like it may not be actually worse than it's ever been, but it's directionally not good.

[Katherine Rampel]

Yeah.

[Mike]

We do have slightly rising unemployment numbers. We do have very flat job growth. We do have somewhat persistent inflation which is starting to move up spot. You. You sent the spot food prices to me, which are up by 7.9% year over year from March, which is just a pure fuel cost. So, like, things are happening in the wider economy that do make sense as to why people might feel not good, even if it isn't the worst not good they've ever felt. Like directionally, this is probably right. I think we can say that.

[Katherine Rampel]

Yeah. Yeah, I think that's right. And the fears about the future, I think are very well grounded at the very least. Like, so maybe you would, at least. I would be a little bit more skeptical about how people feel about the economy today, how they rate economic conditions today. But I do think that that apprehension about forthcoming economic conditions is really legitimate and valid, particularly since, like you mentioned, food prices going up. You know, that was commodity prices for food. And as you note, that price increase is solely driven by higher diesel costs. That's not the only input that goes into food. Fertilizer has also gotten a lot more expensive and that hasn't been passed down the.

[Mike]

Not yet. The planting season cut off is like next week, I think, or something.

[Katherine Rampel]

Right. So we haven't even felt the full impact of the warflation here. We've only seen little tiny bits and pieces of it. And it's going to get a lot worse, I fear, particularly if the Strait of Hormuz continues to be effectively closed off for the near future. All of the alternative routes. Pardon.

[Mike]

I'm not worried about that. The President said last week that the Iranians had promised to never close it again.

[Katherine Rampel]

So they pinky swore. So I'm sure.

[Mike]

So very quickly, Jamie, you could throw that other thing up now because, Katherine, I would like to dunk on people I hate. And so Axios did this little survey of who people blame for high prices because a lot of people are very upset. If you go all the way to the bottom there, 76% of Republicans blame Democratic members of Congress for high prices. I just think that's amazing. I would like to sit down with Those people and ask them how, how are they doing it?

[Katherine Rampel]

The question may be phrased as who do you blame for high prices? But the way people hear it is, which party do you hate more? And that's how. That's to some extent.

[Mike]

Why would you say. See, I think that's infantilization.

[Katherine Rampel]

Yeah.

[Mike]

Like, I mean, people hear the words if they're, it isn't like they have some auditory problem that prevents their brain from processing. They, they choose to interpret it a different way or they really believe this. Like, I, I, I don't, I, I just, this is like, you and Sarah Longwell are always, like, trying to make excuses for the voters. I'm like, no, they're the same as you and me.

[Katherine Rampel]

Okay.

[Mike]

You know, you and I can hear the actual words coming out of people's mouths. So can the people who answer these surveys fair?

[Katherine Rampel]

Okay. Okay. Yeah. I mean, last topic.

[Mike]

Yeah, Sorry, go ahead. I didn't mean to cut you off. Go ahead.

[Katherine Rampel]

There was some. Sorry, I forget what it was, but there was some exchange recently. Oh, you know what it was? I think it might have been Kevin Warsh. I'm trying to remember where somebody basically blamed Democrats for the inflation that we have today. And it doesn't matter. Go on.

[Mike]

Okay, so Spirit Airlines, the president of the United States seems to be purchasing maybe a 90% stake. Wants to, wants to. We're going to do this. I am. I love this for America. I think it's great. I think as you had a sensational newsletter on this yesterday, one of your best ever, which is a high bar. I would encourage people to go sign up for the receipts. Go to the bulwark.com and sign up for the receipts. This is the airline America deserves in 2020. It is the worst airline in America, which is a competitive category. But Spirit is worse than Frontier. I think we can all say worse than JetBlue.

[Katherine Rampel]

You know, Sam Stein disagrees with you on that. We had this whole back and forth about whether really, okay, whether Frontier or Spirit was really deserved, like the, the superlative for worst possible.

[Mike]

Like I said, competitive category. But I would give it to Spirit.

[Katherine Rampel]

It sucks either way.

[Mike]

It's a terrible, terrible thing. And I. Jamie, can we just help this very, very funny bit that, that you found on this airlines flight. And there was like a medical emergency. You know, when they come on, they're

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[Mike]

And everybody was panicking.

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And I was just like, I go, there's no doctor on a Spirit Airlines. There's no medical professional on this Flight. This ticket costs $40. We're all unemployed. Okay,

[Mike]

so that's a, that's a very inspired bit. I would say that as you point out, this is an airline which has filed for bankruptcy twice in the last two years. On the other hand.

[Katherine Rampel]

Oh, you.

[Mike]

So you made the point that, like, this is a bad, this seems like a bad bet for American consumers. I don't know that it necessarily is because we live in a command economy. And so if in 18 months the President says it would be very good, you, David Ellison, have something else coming in front of the FCC that requires my approval, don't you think you should own an airline? I think that whoever it is who needs something from the federal government will jump to go and pay whatever is asked for, because that's the world we live in now.

[Katherine Rampel]

Yeah, I mean, economy. That may well be the case. Maybe it'll be the case that Trump has.

[Mike]

It would only be a bad investment if we were still in like a quasi free market system.

[Katherine Rampel]

Yeah, yeah. Maybe Trump did good stock picking here. I don't know. The problem is not by definition.

[Mike]

The President can't do bad stock picking because the President wields so much power over the, over the economy that people will always do what he tells them to do and he will find some rich person to buy this out from underneath him so that he does well.

[Katherine Rampel]

Yeah. Well, okay, so a few points of pushback here. Sure. Maybe it'll pay off. Maybe it'll be a great investment for the US Taxpayer despite the fact that, by the way, the reason why Spirit is finally maybe facing liquidation is that Donald Trump has spiked jet fuel prices. And you know, there is an arsonist

[Mike]

firefighter aspect to this, isn't there?

[Katherine Rampel]

Exactly. Yeah. He did them in. Basically. They were already struggling. As you mentioned, they had already filed for Chapter 11 bankruptcy protection, which doesn't force liquidation. It allows you to reorganize your debts. But now they're dealing with like a $360 million additional cost on their balance sheet as a result of Donald Trump. And I don't know that you can sell enough $40 tickets to fill that hole in the balance sheet. Okay. But let's say it pays off. The problem isn't only about whether stock price go up or down. It's also that this is like a huge distortion of how markets allocate capital, which maybe sounds like an abstract thing to worry about, but it's a big problem. It's why economies that have better rule of law or become economy or countries that develop better rule of law tend to have better economic outcomes because you don't have investors making choices about where to plunk their money based on who has the closest ties to the president or who has least pissed off the president. You end up with, you know, like, actually the Bloomberg had a great story about this a few months ago about how people who were trying to figure out where to invest, they were looking a little bit less at things like does this company sell a good product or have good management practices or have talented people working for it? And more about what political connections do they have to the president, which is not a good state of the world you want to be in. It ends up with lots and lots of market distortions. It ends up in the long run with worse living standards for the people because everybody's trying to shoehorn their business model into what will appeal to the President the most as opposed to what will produce the best product and get the most customers and all of that. So this is bad even if this stock pays off. And I am dubious that it will pay off. One thing we haven't even talked about is like Donald Trump actually has experience running an airline and that did not end up so well.

[Mike]

About the Trump shuttle.

[Katherine Rampel]

Yeah.

[Mike]

About the bathrooms.

[Katherine Rampel]

Yeah. So Trump Shuttle, Donald Trump owned for a whopping three years. It never turned a profit. He sank a lot of money into renovating the bathrooms to have gold colored laboratory fixtures. And yeah, it went bust.

[Mike]

Not actual gold, just gold colored.

[Katherine Rampel]

Yeah. Do you know why it ultimately went bust?

[Mike]

I feel like it had to do with fuel prices.

[Katherine Rampel]

Yes.

[Mike]

War in the Middle East.

[Katherine Rampel]

Yes.

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[Mike]

But that war was bad because Donald Trump didn't start it. Very different.

[Katherine Rampel]

I forgot that part.

[Mike]

They're very different. Catherine.

[Katherine Rampel]

Yeah.

[Mike]

The Trump's, the war that Trump starts are good wars by definition. And wars that were not started by Trump are bad wars.

[Katherine Rampel]

Yeah.

[Mike]

So I have an economics question for you here though, because when I look at the Spirit takeover, my, my first immediate concern is actually the effect this has on the other airlines because in a moment of like crisis for the industry caused by rising fuel costs, having the least fit of the airlines go belly up should be a slight lift to everybody else because suddenly you can pay a little bit less for labor because there's more labor in the market. You have more pricing power for tickets because the low price carrier has been cut out. And so it gives you a little more pricing power. And so having Spirit go away would make it like, you know, this much easier for all the other airlines to try to survive. And so this it isn't really just about helping Spirit. This does make life a little harder for everybody else. No. Yeah. And maybe it's at such a small degree that it doesn't matter.

[Katherine Rampel]

Yeah. And what we ultimately care about is what's good or bad for consumers, not what's good or bad for the competitors for Spirit. So I don't want to, like, put too much weight on that.

[Mike]

Well, I just mean helping them survive in a moment.

[Katherine Rampel]

Helping them survive.

[Mike]

Yeah. This is. In normal times, like, you don't really care about what's good for them, but in a situation where the fuel costs are going to get so high that it is possible that this will just be the first.

[Katherine Rampel]

Yeah.

[Mike]

Who is pushed into real problems.

[Katherine Rampel]

Yeah. I mean, they're all facing problems. There have been headlines every day about airlines cutting flights. This has been more of a problem in East Asia and in.

[Mike]

Right.

[Katherine Rampel]

And in Europe. We're like, you know, I forget who I left. Hansa just announced.

[Mike]

Yeah. Remember that they were, like, three weeks away from losing jet fuel, from being out of jet fuel or something.

[Katherine Rampel]

Yeah. But it's going to be a problem here in the US A huge problem, because a lot of the jet fuel that airlines in the US Use comes in. It's not actually made in the US or not refined in the US because of, like, where the refineries are and everything else. A lot of it comes in from Korea and is sent to the west coast of the U.S. but Korea has been, I guess, ratcheting back. Their exports to the US Are imports of their jet fuel. So it's going to be a big. Yeah. They want to hold onto it. So it's going to be a big problem here very soon. I mean, the best thing that Donald Trump could do or could have done would be, like, not starting the war, as opposed to starting the war, noticing all of these problems, not taking responsibility for those problems, and then, like, throwing taxpayer money at the cleanup effort, which is what this is. Right. When Donald Trump is talking about bailing out Spirit airlines, it is using your and my taxpayer money to bail it out, which, by the way, is also not very popular, but also probably not a great idea. So. And there's not going to be enough money to bail out all of the airlines. We have bailed out basically all of the airlines before it happened during COVID It's not unprecedented, but it is extremely expensive. And. And again, much more expensive than just not starting the problem in the first place.

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[Mike]

So I want to just close us out here by asking you if you have like a theological view about bailouts, because I do not like. My view of bailouts is basically that every bailout question is a prudential decision. And that there are, there are times in which the government really has no business bailing out a company or an industry. And there are times when it is very important that the government bails out that company or industry. And that part of the reason you don't elect game show hosts as president is because you want the people who have to make those decisions to be like, not perfect. They're never gonna be perfect, but like a little bit better than the average person. But maybe that's wrong. I mean, a lot of, you know, if you go to the Wall Street Journal, their editorial page think that all bailouts are terrible and so do you have like a holistic view of or philosophical view of bailouts, like bailouts good or bailouts bad? Or are you like.

[Katherine Rampel]

I think I'm like you in that there are some bailouts that are important because of the, the, the knock on effects that might happen if the company goes under. Right. The externalities. And so, and sometimes those things are not obvious to the general public. And so you get a lot of blowback. This, this happened with TARP, with the bailout of the banks in 20. Right? Yes, 2008, which everybody lays at Obama's feet, but it was actually under George W. Bush. Yeah, yeah. In any event, like that was super unpopular. I get it. These banks behave very badly and they don't like. And you know, on some moral level, like, it feels terrible to rescue them, but you're not rescuing them because you're worried about the bonuses or whatever of the people who work there. You're rescuing them because the financial system has its tentacles into everything else in the economy. And if you let Wall street burn down, that means Main street also burns down. And like, that's not always obvious ex ante. So, so I, like, that was a really politically difficult thing for politicians to deal with, I think. But it was ultimately the right thing to do, even if it's not obvious.

[Mike]

Meanwhile, could have been coupled with some criminal prosecutions.

[Katherine Rampel]

Well, the problem, yeah, I think would

[Mike]

have, would have been easier to swallow had there been criminal prosecutions of the people who made billions of dollars through.

[Katherine Rampel]

Yeah.

[Mike]

I mean, allegedly criminal activities relating to fraud.

[Katherine Rampel]

Yeah. Well, the problem is that a lot of the stuff that they did was not illegal.

[Mike]

Right.

[Katherine Rampel]

So it was bad and subsequently became illegal through some measures in Dodd Frank, which passed.

[Mike]

Sure.

[Katherine Rampel]

After all of this. But. And some of it was, like, hard to nail down besides. But yes, there was, there was plenty of bad behavior to go around. I don't know that we need to relitigate all of this, but there are other times when, you know, well, the, the best medicine is preventative. Right. It's to have a system where something is not too big to fail. It doesn't have, it doesn't cause systemic issues if, if one institution goes under. And like in the case of Spirit, I don't know what the systemic issues are. Like, what, what is the thing that they are worried would happen If Spirit goes under, it will be the case that a lot of people will lose their jobs. I'm not going to dismiss that. But there's a labor shortage, as I understand it, at other airlines. And so I'm a little less worried about all the pilots, for example, who have already been in short supply, supply not finding a place to land, so to speak. So, you know, it's not that that's unimportant, but, like, you have to think about what's. What is the thing we're worried about preventing and is that better or worse than the remedy that is being administered in this case, a potentially $500 million cash infusion courtesy of the American taxpayer. It's not clear that that shakes out. Then there are other things, like, you know, the bailout of the auto companies after the financial crisis. And I have less defined views on that. So, yeah, it's, it's case by case, in your view, like, what was, what are examples of good bailouts versus bad bailouts in recent history.

[Mike]

I think the GM bailout after the financial crisis is probably good, critically important to keep that type of manufacturing happening in the United States for sort of national security and defense purposes. And also a key part of this is, are you looking at critical industries which are being damaged as collateral damage from something that's happening elsewhere in the economy? Right. Which is what was happening in 2008, 2009 with GM? There are, I mean, so during the financial crisis, and I always get this wrong, I forget who went first, whether it was layman or Bear. But there was, there was a rule of thumb which was, I think you have to. Which is it you bail out the first one, but you let the second one fail, or is it you let the first one fail and you bail out the second one? I think the idea was they bailed out Bear Stearns and the reason for that bailout, that the logic behind it was you got to stop the panic. And so if you bail out the first one, the signal you're saying to the market is, everything's going to be okay, don't panic. But with the second one, you can't bail them out because you've got to show the rest of the market, okay, there are going to be penalties here. People are going to have to take their medicine. And so those sorts of things, like I am interested and I am listening to those sorts of calculations. When it comes. When you're talking about contagion, right? Because that is a. When you're looking at contagion, that's a different question than just company X. Is it bad for consumers or workers if it goes away? Like that is a, you know, we have a big systemic problem here. Can we stop the spread of it?

[Katherine Rampel]

So, yeah, if you talk to regulators who are around during that period, they will maintain that they were, they had the legal authority to help with Bayer and not with Lehman. I don't remember what exactly the rationale was, and I'm not a, you know, regulatory lawyer or whatever, financial lawyer, so I don't, I don't know if that's bullshit or not, but that is certainly the argument that they have made that it was not strategic. It was that they were able to do one thing, they were not able to do the other thing. I mean, the other piece of all of this that matters in addition to like, is it a waste of taxpayer dollars? Will it feel unfair to do these kinds of bailouts is the idea of moral hazard, which is that are you encouraging bad risk? Right.

[Mike]

Really about morality It's. Are you encouraging people to take bad risk, which is going to hurt everybody, hurt everybody else even more down the line?

[Katherine Rampel]

Yeah, yeah. So. And which is a really hard thing to wrap your head around. And, and it's like, if we bail out this company now, you know, if they bail out, in your example of Bayer vs. Lehman, if they bail out Bayer, does that encourage somehow worse behavior from Lehman? I mean, probably the dumb things that Lehman did, they had already done because

[Mike]

they happened after three weeks. Right. I mean, that was a. That was an all hands on deck. Holy shit. The global financial system is unraveling.

[Katherine Rampel]

Yeah, yeah, yeah.

[Mike]

There was no moral hands there.

[Katherine Rampel]

Yeah. I don't know. It'd be an interesting question to have someone on, like someone who actually works on the legal side of all of us to talk about at some point, maybe for one of our future live econ.

[Mike]

I mean, I would say this is, this is a very niche topic. The number of people who'd be interested in that conversation can be measured in the 10.

[Katherine Rampel]

I mean, it may become less niche in the coming year because Donald Trump is doing all of these things to undermine the business models of lots and lots and lots of companies. So the question is like, do the farmers deserve a bailout from the things that Donald Trump has inflicted on them? Do you know, other company like companies that have been paying tariffs, companies that are going to pay higher jet fuel prices or higher fertilizer prices or higher plastics prices or anything else? Do they deserve a bailout? It's not their fault that Donald Trump launched this war. And I think actually this is going to be a pretty timely unfortunately conversation in the months ahead.

[Mike]

Yeah. Except for the fact that we know how this will go, which is that politically favorable groups to Trump will get bailouts and politically unfavorable groups won't. So it's a nice academic conversation, but we know how it's going to play out in reality.

[Katherine Rampel]

Yeah, fair.

[Mike]

Okay, Catherine, it was fun as always. We'll be back next Friday to talk about all the fantastic economic news from this golden age of America, where we are the hottest country on earth. We were dead. The country was totally dead. We didn't even have a country two years ago. But now we're the hottest country in the world. A guy told me this, a big, tough, strong guy. He had tears in his eyes. Jpl Sir. He said, sir, we're so hot right now. We're like, hansel, we're so hot right now. All right, good luck, America. We'll catch you next Friday.

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