The Federal Reserve is giving no credence to calls for emergency rate cuts or panic over the labor market or stock market since July’s disappointing jobs report. Following signals that inflation continues to ease, all signs point to a September rate cut, though there is a lot of data to be released between now and then.

The next time investors, economists, central bankers and other attentive Fed audiences will hear publicly from Fed Chair Jerome Powell is at his Jackson Hole Economic Symposium address.

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People around the world will be listening for Powell to set the stage for the Fed’s next interest-rate decision. For more on what Powell might say, Straight Arrow News interviewed Central Bank Central Editor-in-Chief Kathleen Hays, who will be attending the symposium.

The following transcript has been edited for length and clarity. Watch the interview in the video above.

Simone Del Rosario: You’re going to be in Jackson Hole for this big speech that Fed Chair Jerome Powell will make. What are we going to hear from him that is different from what we hear in the FOMC press conferences?

Kathleen Hays: That’s a really good question, because in the press conferences, he gets hammered with questions. He will not be taking questions in Jackson Hole, No. 1. No. 2, I wonder if he’ll want to put the inflation that’s been experienced, where the Fed is now and where it’s going, into a bigger framework.

It was a tricky time. There were supply shocks, and one of the supply shocks was the labor market. There weren’t as many people there and so wages went up. Now all these things have happened and here we are now. And somehow give us this broader sense of how they’re looking at things now.

Could he talk about the neutral rate? Are we closer? Do we have to [move] the neutral rate up or down, etc.? What are the metrics they’re looking at?

One person suggested to me that he thought they could look at the upcoming framework review, which is going to start sometime in the fall. Remember, they changed their framework just when the pandemic was starting to say, “We have to see maximum inclusive employment before we would hike rates, and we’d have to see inflation at or above, I believe it was 2.5% and rising before we would start hiking rates to bring it down.”

Some people think that was one of the reasons that they move so slowly, too slowly, slower than they should have to start hiking rates when they did. And maybe that’s something he’ll address.

I myself think he’s going to keep it pertinent. He’s going to keep it more in terms of what everybody’s trying to figure out right now. And give us more of a framework, a bigger sense of being willing to move slowly, I’m not sure.

It’s up to him. And I think, after all the emphasis we’ve seen here and the market upheaval recently, it will behoove him to help us all understand better where they are now and what’s going to drive their coming steps. And maybe even cool off some of the idea that there’d be any emergency cuts because because markets go crazy for a day or two.

Simone Del Rosario: It would be interesting to hear him put this journey into perspective. It’s been a tough one for people out there, to live through a peak of 9% inflation, to continue to see inflation, for it to take so long for it to come down. We’re sitting here right now with a headline number of 2.9% and that looks incredibly promising when you look back at what we’ve been through to this point. So it will be interesting to hear if he puts the last several years into perspective, given everything that the economy has gone through since the COVID-19 pandemic. 

Following the latest jobs report that showed a weakening labor market, consumer prices rose by less than 3% on an annual basis for the first time since March 2021. Given the Federal Reserve’s dual mandate of price stability and maximum employment, one is coming into focus while the other is slipping away.

How to interpret the data is up for debate and begs two big questions: How big of a rate cut will the Federal Reserve make and is it still on schedule for September? 

In July, the U.S. economy added 114,000 jobs, a huge miss from the 175,000 jobs expected. Unemployment ticked up to 4.3% from 4.1% in June. But consumer price inflation rose just 2.9% annually, inching closer and closer to the Fed’s target of 2%.

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The Federal Open Market Committee won’t formally meet in August. Instead, central bankers will get together for The Federal Reserve Bank of Kansas City’s Jackson Hole Economic Symposium next week, where Fed Chair Jerome Powell will deliver an address.

“This is his opportunity to send us a clear message on some aspect of what the Fed is thinking about,” Central Bank Central Editor-in-Chief Kathleen Hays told Straight Arrow News.

While analysts still expect a cut in September, it’s unclear how big the Fed will go. Hays said calls for a 75-basis-point cut are out of touch and mostly a response to the “stock market carnage” from early August. She added that the odds of an emergency rate cut before the next meeting have dwindled the inflation data released Wednesday, Aug. 14. 

Hays said the central bank leaders she speaks with are still looking at a cut between 25-50 basis points.

The following transcript has been edited for length and clarity. Watch the full interview in the video above.

Simone Del Rosario: There’s been so much conversation about how much the Fed is going to cut. People are even throwing out 75 basis points. This inflation report does not point to that.

Kathleen Hays: Oh, heavens, I don’t think anything pointed to a 75-basis-point emergency rate cut. Because [the] stock market had a big decline and then the yen carry trade blew up after the BOJ made its rate hike, that was not entirely expected, so they all fed together. It was a confluence of forces.

One of the people I spoke to said that these calls for 50-basis-point cuts, even 75 basis points, kind of smacked of investor entitlement. ‘Oh, if things are going bad, the Fed has to hop in and do something.’ So I think 75 basis points was more out of that ruckus, that big stock market carnage, if you will. 

In terms of the numbers, it seems to me the Fed is moving slowly. Miki Bowman from the board of governors, in the last few days said she’s not convinced it’s time to cut yet. She thinks the labor market still looks pretty strong. Raphael Bostic, who’s president of the Atlanta Fed, in the last couple of days said he’s sure they cut rates by the end of the year, but he doesn’t think they’re necessarily there yet. Mary Daly, president of the San Francisco Fed, says that she does think they’re going to need to cut in the last part of the year.

It’s just a question now of when they start and how much they do. Does that mean they’re going to do 50-basis-point cuts? Doesn’t the more cautious, gradual, 25-basis-point cut get you there? If suddenly the labor market starts looking a lot weaker, then you could say that could mean they would speed things up. But even Austin Goolsbee, president of the Chicago Fed who’s one of the more dovish people on the Federal Open Market Committee, still says yes they need to cut, policy is restrictive, and there’s a concern if they wait too long the labor market will really start weakening

Simone Del Rosario: Most everybody was targeting September for a rate cut until that jobs report came out and then it was, ‘Why didn’t the Fed cut in July?’ We’re looking at a Fed that has been incredibly cautious. That said, we do have quite a bit of data between now and September. What does that jobs report in less than a month look like for the Fed to have more urgency? Do you think it’s going to be another bad jobs report? Or do you think that’s going to stabilize a little bit?

Kathleen Hays: Well, jobless claims just came back down to 233,000. And I think what’s very important [is the] Bureau of Labor Statistics had a very important number that they sort of downplayed in that report. We know that the unemployment rate jumped up to 4.3% from 4.1% and it wasn’t because necessarily people were losing jobs. It was because more people were coming into the labor force again. And when you start looking for a job and you don’t have one yet, you’re counted as unemployed.

I think even more important is the fact that the number of people who could not go to work because of weather, and that’s a category in the BLS numbers, was up over something like 460,000 in July. That month usually averages about 40,000. So many people have looked at that and said, ‘Hmm, maybe that’s one of the reasons. That was the week of the hurricane that we got that jump in unemployment. Maybe that affected payrolls.

We don’t know for sure but I think that’s one of the things that will be very interesting to see. Does the labor market, via the next jobs report look like, as some would say, normalizing? As former St. Louis Fed President Jim Bullard, said to me recently, he thinks you’re getting more to the natural rate of unemployment. The 3% employment, when it got that low, was kind of abnormal, right? And this is now more of a normal rate of unemployment. He’s convinced that the Fed will do 25 basis points in September. And remember, he was calling for that at the beginning of the year. He thinks they need to get less restrictive, and they can do it gradually.

The ‘Taylor Rule’ John Taylor from Hoover, from Stanford University, he thinks [that according to his rule] the funds rate needs to get down to about 4.5%, maybe 4%. And they could do that with two 25-basis-point cuts and a 50-basis-point cut.

That July weakness in the labor market is going to have to be verified by the August report. If it isn’t, it seems to me that’s going to be the perfect opportunity for them to say, ‘Yes, we know we can start cutting now, we can start normalizing. But 25 basis points at a time is enough.’

Simone Del Rosario: Is there any chance that they don’t cut? Let’s say, to your point, we get the next jobs report and it has normalized and this last month was a fluke. Then you get another inflation report like this. Is it convincing? 

Kathleen Hays: My bet would be that they’d have to see another inflation report that is not as good as this one. Yes, this one made some progress on the headline. You can look at the monthly numbers as well. I think it would take something that looks like it’s pushing inflation back up again for them not to cut now.

The doors wide open, but thank goodness you’ve got Jay Powell at Jackson Hole next week and giving his all-important [speech at the] Kansas City Fed Symposium conference Friday morning. This is his opportunity to send us a clearer message, on some aspect, of what the Fed is thinking about. He doesn’t have to do that. I don’t think it’s going to be just looking at the economy and inflation. He’ll probably put this in a bigger context. At the same time, I think people are going to be waiting for him to just give us a little more guidance on where you’re leaning now.

After mortgage rates hit their lowest levels in more than a year last week, applications to refinance surged 35% compared to the previous week. The Mortgage Bankers Association Refinance Index is up 118% from a year ago.

The average 30-year fixed mortgage rate has gone from under 3% in 2021 to nearly 8% in October 2023, driven by movement from the Federal Reserve’s federal funds rate, the interest rate banks are charged for overnight lending.

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Mortgage rates fell last week to 6.47% in anticipation that the Fed will lower rates after a weak jobs report for July. Following more softening in inflation in July’s consumer price index, the measure is 2.9% annual inflation, edging closer to the Fed’s 2% target, experts are pinning more certainty on a September rate cut.

Straight Arrow News interviewed Federal Reserve expert Kathleen Hays following the inflation release and got her thoughts on how it could impact the housing market. Hays is the editor-in-chief of Central Bank Central.

Below is an excerpt, edited for length and clarity. Watch the exchange in the video above.

Simone Del Rosario: We’ve seen mortgage rates go down to levels lower than they’ve been in more than a year. This is done in anticipation that the Fed is going to be cutting rates. So when the Fed does cut its rate, how are people going to be affected? Are rates going to come down even more? Has the air already been taken out of the tires because they’re expecting the cut? What’s happening there?

Kathleen Hays: Well, of course, we had the big bond market rally so that’s pushed deals down a lot. And that was one of the things, of course, that intensified after we got the Fed decision and then the unemployment rate going up, making people that much more worried about it.

Of course, that’s the direct link between mortgage rates and the bond market, right? The 10-year-note yield, when it goes down, you’re going to see mortgage rates come down too.

On a human level, doesn’t anybody know somebody who’s trying to find a house and they can’t because people still don’t want to move out of their low-mortgage-rate mortgages? They don’t want to sell their house yet. Doesn’t anybody want to sell their own house and they figure, well, I don’t know, the mortgage rates are so high, maybe I’ll wait.

Part of the issue with the how much home prices will come down is the fact that inventories are low. And when the Fed cut rates so much during the pandemic, there was a huge bout of home buying, and that’s another reason why, even with somewhat lower [mortgage] rates now, the home sales are not up that much yet. But I think it’s a very important factor right now.

Now, if someone could get a 5.5% mortgage, they would snatch it up, right? And when it got so low, ‘Oh God, if I had to pay 3.75%,’ you know? So it’s a very powerful thing that could happen.

As the Fed starts cutting rates, presumably yes, bond market will rally, you’ll get yields coming down more, and that’s going to fade through and be a very important factor. So that’s kind of in abeyance right now, but it’s a little bit complicated, and home prices are much higher than they were.

Home affordability is so much worse than it was, partly because of what happened back during the pandemic, but it’s something to look forward to. And in terms of the housing industry, [there are a] lot of calls for, ‘We need more homes now.’

That’s the thing. We need more construction. Well, if I’m a contractor, if I’m a developer, if I’m a builder, if I can see mortgage rates coming down, presumably that would encourage me that that’s going to heat up the market, and it’s going to make more sense for me to do that.

Many argue the Federal Reserve missed the boat after failing to cut rates to ease financial conditions two days before latest jobs report triggered a recession indicator on Friday, Aug. 2. The Federal Open Market Committee is not scheduled to meet again until Sept. 17-18.

Now, experts are making the case for deeper rate cuts in light of rising unemployment. Some are even suggesting the Fed issue an emergency rate cut between now and the September meeting.

Former Fed adviser and CEO of QI Research Danielle DiMartino Booth said that while the Fed is behind the ball, an emergency cut would do “more harm than good.” In an interview with Straight Arrow News, she talked about the signs Fed Chair Jerome Powell missed that led to July’s decision.

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The following transcript has been edited for length and clarity. Watch the full interview in the video above.

Simone Del Rosario: I know you have been warning about these underlying symptoms of recession for some time. The Fed chose not to cut in July and then two days later had this jobs report that wrecked the markets for a moment. Where are you? Are they okay to wait until September to cut? Do you want to see something from them in the meantime?

Danielle DiMartino Booth: It would, at this point, be akin to yelling fire in a crowded theater if they were to come in with an emergency rate cut. Those are usually reserved for end of the world type of moments, financial pandemics, financial crises, credit events. So I think at this point it would do more harm than good.

I was strongly of the mind that they should have cut rates at the July meeting. At the podium, when he was pressed, [Fed] Chair [Jerome] Powell did acknowledge that there was a discussion about whether or not to cut rates in July. So you know that even though the decision was unanimous, there were no dissents, that there were some who believed that they should have started in July.

There’s a company called MacroEdge and they do a very transparent job of tracking job cut announcements. We’ve had an average of 100,000, more than 100,000 job cuts announced over the last four or five months here in a time of the year that is typically benign. Usually you see your worst month of the year be January, that’s when the CEO and the CFO come in and clean house. But April was worse and it’s been just awful ever since then. For heaven’s sake, we’re seven days into the month of August and we’ve already seen 40,000 job cuts announced.

We’re talking about Jay Powell here, he founded the Industrial Group when he was at The Carlyle [Group]. He speaks to lot of CEOs. He knows that they’re in the process of reducing their head count. So just in terms of data on the ground, anecdata, it’s all around him and it’s been all around him.

This is nothing new, companies aggressively laying off. Again, it’s been occurring for most of 2024 and yet he’s been ignoring it. So I really do think that he should have [cut rates] on July 31.

The reason I think that we’ve seen the Wall Street Journal mention 50 basis points is because that’s now become a base case for September 18 or we wouldn’t have read it in the Wall Street Journal.

Simone Del Rosario: We are going to get another month of jobs data before the Fed meets again. What sort of labor picture do you think it’s going to paint when we look up the first Friday of September to see what happened in August?

Danielle DiMartino Booth: I mean, anything is possible with this Bureau of Labor Statistics. I’m done guessing what they’re going to do and what they’re going to report. When the data is eventually revised by law, we see where it really, really is.

For me at least, because there is this systematic downward revision of the data, I just feel like it’s a politicized institution at this point. And I don’t say that lightly, and I’m certainly not trying to be insulting to anybody inside the organization.

But you typically see the unemployment rate continue to increase after it’s stopped rising by a tenth of a percentage point. It’s what you’ve seen in many, many recessions looking back: Initially there’s a very gradual rise in the unemployment rate and then it really starts to take off. And we are seeing companies being much more aggressive and large with their layoff announcements and it is actually manifesting in the jobless claims data as well.

Simone Del Rosario: Is it politicized or are they just not as accurate at this point? Is the survey outdated or do you firmly believe that there are underlying political reasons why the picture is rosier when they first paint it than it turns out to be later?

Danielle DiMartino Booth: Again, we are having this discussion in August 2024 and we’ve been seeing downward revisions since January 2023. If, at this point, there has not been an internal recognition that the model is broken and it’s been addressed, then it’s what we call willful blindness.

So at some point you have to recognize that something is broken and address it, not just ignore it, unless you’re ignoring it willfully. And again, I’m not trying to be insulting of the institution, but we’ve just seen a headline in a $25 trillion economy that funding for the household survey is going to be cut. That’s the most ridiculous thing I’ve ever heard in my life.

In a world in which we have big data, artificial intelligence, ways to streamline operations, make certain practices and methodologies more efficient, that we can’t better track the U.S. labor force, it just seems nonsensical to me.

The creator of a recession indicator that was triggered this past week said her rule is broken this time around and there’s no recession right now. But not everyone agrees. In fact, a different recession indicator points to the U.S. having entered a recession in October of last year.

“We’re not in a recession,” Sahm Rule creator Claudia Sahm told Straight Arrow News. “It’s never time to panic, but it’s also not recession time either. So it’s not a recession. And yet the risks are there.”

Recessions are declared by the National Bureau of Economic Research in hindsight by looking at the economy’s growth over previous quarters. Recession indicators like Sahm’s look at rising unemployment rate trends for more immediate indications the country has entered a recession.

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While Sahm’s rule was triggered by last week’s release of July’s jobs data, a different recession indicator was set off last October. In simple terms, the McKelvey Rule hits when the three-month average rise in unemployment hits 0.3 percentage points above the year’s low, compared to Sahm’s 0.5-percentage-point threshold.

That’s one reason why former Federal Reserve adviser and current CEO of QI Research Danielle DiMartino Booth says we are already in a recession.

The following transcript has been edited for length and clarity. Watch the full interview in the video above.

Danielle DiMartino Booth: I do think we’re in recession. Everything that we’ve seen from the Bureau of Labor Statistics with regards to the fourth quarter of 2023 indicates that they’re going to be revising into negative territory the final three months of 2023.

So that would stretch job losses from the third quarter of 2023 – when there were 192,000 jobs lost in the United States – that would stretch that into the fourth quarter and give us a six-month stretch of job losses upon revising the Bureau of Labor Statistics survey data with the hard data that we get from the Census Bureau, where companies are legally obligated once a quarter to report their headcount.

And that’s kind of the ultimate decision. That’s when the ink dries, if you will, on the payrolls data that we see the Bureau of Labor Statistics release.

Simone Del Rosario: So we’re looking at a recession that would have started in October of last year?

Danielle DiMartino Booth: I personally see the recession as having started in October 2023 because that’s the first time that the McKelvey Rule, which is less arduous than the Sahm Rule – and it doesn’t date back to 1948, it dates back to 1968 – but it has not missed a single recession since then.

Rather than a 0.5-percentage-point increase in the unemployment rate off of its lowest level in the prior 12 months, it is a 0.3-percentage-point increase in the unemployment rate over the prior 12-month period’s low.

Again, it has a spotless track record since 1968. It was triggered in October of 2023. The Bureau of Labor Statistics said that we lost 192,000 jobs in the three months ending Sept. 30, 2023. So the National Bureau of Economic Research could theoretically backdate it further, but again, the McKelvey Rule is what I’ve relied on.

The former chief economist at Goldman Sachs, he was interviewed by the Wall Street Journal in January 2008 when his rule was triggered, and he was asked the same question: ‘Well, your McKelvey Rule was triggered in December of 2007. Do you think we’re in recession?’ And he said, ‘Well, you know, my rule might be broken,’ basically.

But of course, the NBER did backdate that recession to December 2007 and the McKelvey Rule was not broken. Luckily, the Bloomberg Economics team agrees with me that recession, that job losses started in October 2023.

Simone Del Rosario: Why isn’t the Federal Reserve looking at these data points?

Danielle DiMartino Booth: I think the Fed is choosing to look the other way in this instance. There are some regulations that the Fed has been working on that could really define Chair Powell’s legacy – that would begin to regulate the private equities, the hedge funds, the BlackRocks of the world that are in some cases larger than banks if you consider the trillions of dollars that they have under management – and in order to push through with some of these regulations, he really does need higher-for-longer [rates] on his side.

He needs the higher-for-longer policy enough to go with what the Bureau of Labor Statistics first reports, even though we know that since January 2023, we’ve seen one downward revision after another to the data. It’s become systematic, in fact, the persistence with which we’ve seen downward revisions to what’s first reported. But again, I think [Fed Chair Jerome] Powell’s got his own reasons.

Simone Del Rosario: How do you square this idea that we could be in a recession right now with the GDP numbers that we’re seeing? The latest reading, the advance estimate, showed an annual growth rate of 2.8%.

Danielle DiMartino Booth: So we had 2-point-something percent in 2001 when it was first reported. Of course, it was another six quarters later that we revised it and found out that it was a negative number.

It takes magnitudes of the amount of time to get correct unemployment data, correct payrolls data. You can double the time that it takes to figure out what the actual GDP is that’s associated with that time frame.

If you find out that you’re 830,000 jobs shy of what you thought you were, which is what we found out in the third quarter of 2023 looking backward with hard data in hand, then you have to subsequently go back and back out. Well, 830,000 people were not actually working; 830,000 people were not actually producing the economic output that we thought we were. So you’ve got to back that out.

It takes a lot of time for the Bureau of Labor Statistics data to work its way into subsequent revisions for the Bureau of Economic Analysis data, for GDP.

It’s at inflection points. It’s when contractions become expansions, when expansions become contractions, that these big statistical agencies have trouble seeing the turning point, given their modeling.

But it wasn’t until 2018 that we saw the final GDP revision from the Great Recession that ended in June 2009. Again, the recession ended June 2009. We didn’t get the final revision for GDP for that recession until 2018.

Simone Del Rosario: On one hand, this can seem incredibly frustrating if people feel like we’re in a recession, they feel like the economy’s not good, and yet we continue to get, on the surface, economic releases that show a pretty strong economy. But that said, if, to your point, we are already in a recession, does that take some of the panic away since we’ve already been going through it, or is it going to get worse? What’s your read on that?

Danielle DiMartino Booth: Well, your average recession is 10 months long in the post-war era. So using that average length of time, we should theoretically be starting to recover and coming out of recession.

That being said, the Federal Reserve has waited now 12 months, now longer than 12 months, and the longer it waits, typically the deeper and longer the recession is as a result.

There have been some great studies that empirically demonstrate this. The period leading up to the Great Recession, 2007-2009, the Fed waited 15 months. It’s the longest the Fed’s ever waited.

So we’re just at the 12-month mark now. But it certainly looks like we’re going to get to the 14-month mark if it’s Sept. 18 that we can anticipate that first rate cut. So that’s about as long as the Fed has ever waited to provide relief in the form of the beginning of an easing cycle.

Pressure is building on Big Tech after a federal court ruled Google is a monopoly. Google isn’t the only one the government is going after. Apple, Meta and Amazon are actively fighting lawsuits. 

While Google’s appeal plays out, tech firms will be eyeing the courts, Federal Trade Commission and Department of Justice for clues to a shift in the regulatory landscape.

For how Google’s ruling might impact current and future antitrust cases, Straight Arrow News interviewed former FTC chair and commissioner Bill Kovacic.

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This interview has been edited for length and clarity. Watch the interview in the video above.

Simone Del Rosario: Does this serve as a flashing red light for other Big Tech firms?

Bill Kovacic: It does indeed. They’ve seen the light flashing yellow for several years because, not only in the United States but around the world, we find competition authorities and individual jurisdictions beginning new investigations, initiating cases, and in the case of the European Union adopting new regulatory frameworks, theirs called the Digital Markets Act.

The Big Tech sector has seen gathering storm clouds now for a number of years, going back to, I’d say, the middle of the previous decade. But we’re now seeing the delivery of policy measures that foreshadowed evermore significant forms of intervention. And this is an indication, not only that the government can win, it can marshal the resources to do this kind of work well, it can bring the cases to a successful conclusion at the trial.

But also it means that there will be more to come and there are other significant matters in the pipeline: another Department of Justice case involving Google involving ad serving; a case by the FTC challenging Meta for its acquisition of Instagram 10 years ago; an FTC case against Amazon; a Department of Justice case against Apple; state government cases attacking a number of these large enterprises.

I think for the business community, especially for the tech community, it’s an indication of things to come and that the successful defense of their position is not going to be something they can take for granted.

Simone Del Rosario: How does [the Google ruling] measure up to the Amazon situation where they’re being accused of having self-preference for their own products?

Bill Kovacic: This involves, I think in some ways, a harder case for the Federal Trade Commission. The FTC is arguing that you’ve given your own products, your own services, a better display compared to others, that you’re favoring them. I think the FTC is going to have a somewhat harder time dealing with the argument [of], ‘I’m a successful firm, don’t I have the freedom to offer consumers not only the better product, but to put my product first? To say, look at my product. Why should I have to display the products of my rivals in a better light?’

Amazon would not have unlimited freedom to make certain choices that are going to be the subject of the case. But Amazon’s arguments are arguably more within the framework of Supreme Court jurisprudence that has been encouraging of the ability of dominant firms to decide who they’ll deal with and how they’ll deal. And a concern on the part of judges that they shouldn’t be involved in making technical decisions about how companies operate, determining who they can deal with, the terms on which they can deal with other parties. So I think the FTC in some ways faces a somewhat harder challenge in the light of this existing jurisprudence.

But from Amazon’s point of view, watching the outcome in this first important [Google] case, it’s a warning that the government can prevail. The government can make well-founded arguments. They can present them capably. They’re probably going to be found to be a dominant enterprise and the real question will be, is this self-preferencing behavior acceptable?

I think what all leading firms learn from the experience we’ve just observed is you can take absolutely nothing for granted in this process. And it’s an environment in which judges might well be persuaded that you made an incorrect judgment about where the line of illegality is and you stepped over it. At a very basic level, this is an important caution that says you can lose these cases if you’re a defendant.

Simone Del Rosario: I’m curious what your take is on the types of cases against Big Tech that current FTC Chair Lina Khan has been taking. What do you make of her strategy when it comes to going after Big Tech?

Bill Kovacic: She has put in motion one significant case on her own watch: that’s the Amazon case we mentioned before. The other major case that she has she inherited from the Trump administration. That’s the challenge to Meta for its acquisition of Instagram.

But the Amazon case is a very ambitious case. It is trying to define a new conception of what dominant firms can do, especially dominant firms that act as the owners of a platform on which products are sold, but their own products and the products of other parties operate on the same platform; to identify what a dominant firm can do by way of featuring its own products and perhaps treating the products of third parties on its platform, its competitors, differently.

That would be a significant development in the jurisprudence. I guess to put it in a very general way, it is a riskier case than the case that the DOJ is running against Google, the case that’s running against Apple, the other case that’s running against Google. And this is consistent, I think, with the chair’s philosophy, that a major role of the FTC should be to take on cases that involve more ambiguity, to take on cases that aren’t squarely within a framework where liability has been routinely found, but to move the frontiers outward.

So there’s a greater risk appetite at work there. The DOJ cases are very ambitious as well, but I’d say a signature element of the chair’s own program is to be willing to push the frontiers and to accept the risk that there will be judicial resistance and to accept the risk that there’ll be judicial rejection.

But for the sake of provoking the conversation with the courts and bringing these issues to the courts on a repeated basis, there’s a willingness, not simply in the area of Big Tech, but in other areas of the commission’s jurisdiction, to try to move the frontiers of enforcement outward and to acknowledge and accept the risk that these are hard cases to win. And [she does] not expect to prevail every time, but the very fact of bringing the cases, continuing the conversation with the courts, will have real value.

In the wake of a federal judge ruling that Google is a monopoly for its search business practices, all eyes are turning to other antitrust cases in the works. But even before the Google decision brought by the Justice Department, the Federal Trade Commission and its celebrity chair were feeling the political heat.

FTC Chair Lina Khan has made a name for herself by placing a target on massive tech companies in the United States. The 35-year-old was appointed by President Joe Biden to shake up antitrust enforcement. But some Democratic megadonors are hoping Vice President Kamala Harris will ease the regulatory scrutiny and appoint a more moderate chair.

Last month, LinkedIn co-founder Reid Hoffman called on the vice president to replace Khan if she is elected in November. The billionaire previously donated $10 million to the Biden campaign before the president dropped out of the race and has since thrown his support behind Harris.

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“I do think that Lina Khan is a person who is not helping America in her job and what she’s doing,” Hoffman told CNN in July. “And so I would hope that Vice President Harris would replace her.”

Hoffman has since clarified that his position on Khan is not a condition for supporting Harris. But his comments, and similar ones made by IAC Chair Barry Diller, are catching attention.

“Hoffman’s comment is highly provocative and I think [it is] unusual to say, ‘Bring me the head of the FTC chair, get her out of the chair’s position,'” former FTC chair and commissioner Bill Kovacic told Straight Arrow News. “A new president could not literally fire her. She can’t be removed from the commission but she can be demoted simply by the president signing a letter saying, ‘You are the former chair now, now you’re a commissioner.'”

But the opinion of Khan is split and that split doesn’t happen on political lines. Earlier this year, vice presidential candidate J.D. Vance said the FTC chair was “doing a pretty good job.”

The following transcript has been edited for length and clarity. Watch the full response in the video above.

Simone Del Rosario: To hear that an FTC chair is being brought up in the conversation of a presidential election and donations to the Democratic candidate for president, what do you make of this environment? What does it tell you about how [Khan has] been received in this world and the direction she’s decided to take?

Bill Kovacic: I suppose in the modern world, nothing should surprise us, but Hoffman’s comment is highly provocative and I think unusual to say, ‘Bring me the head of the FTC chair, get her out of the chair’s position.’ A new president could not literally fire her. She can’t be removed from the commission, but she can be demoted simply by the president signing a letter saying, ‘You are the former chair now, now you’re a commissioner.’

As a footnote, Lina Khan is the most famous competition policy enforcer in the world today, globally. There’s no part of the world you can go to without people knowing who she is. And if you identify yourself as a U.S. citizen, you will be asked immediately, ‘Do you know about Lina Khan?’

So to step forward and say, ‘I want her out of there, in fact, her departure by suggestion is a condition of our support and our enthusiasm for your campaign,’ is quite extraordinary. It does show how Lina Khan has touched a nerve. And I’d say a very sensitive nerve within that community to the degree that no other regulator in my lifetime – going back into the 1970s since Michael Pertschuk who was the chair of the FTC and a strong advocate of powerful competition and consumer protection intervention – nobody has aroused that kind of specific condemnation in that period of time.

I suppose the chair can look at that and say, ‘Good, it’s working. If they loved me, I’m not doing my job.’ And I think in part, she defines her effectiveness, a rough measure of her effectiveness is the vocal exuberant statement of firms in the sector who are saying these things because here we have an agency that’s doing things that really do hurt in some ways.

So I find it an extraordinary comment, but it truly is a testament to how she has changed the debate, changed the focus of attention, and has brought to bear the resources of her agency in a way that has aroused their concern.

A fascinating question is how much will Vice President Harris respond to this if she becomes President Harris. What would happen in a President Harris administration with regard to policy and Big Tech? Would she, in small steps, walk away from the approach that the Biden administration has taken? Will she quietly seek appointments to bring a more moderating influence into the Federal Trade Commission or the Department of Justice? Or will she say, ‘This is why we are in the White House. This is why we have power. We’re gonna exercise it this way.’

Would elected officials such as [Sen.] Elizabeth Warren, [Sen.] Bernie Sanders, as well as some of their counterparts in the Republican Party, the [Sen.] Josh Hawley team, for example, would they rise up and say, ‘You will not touch these programs? We demand that these programs go ahead. This is crucial to the larger progressive agenda and you will not undercut it.’

I suspect if [Harris] took visible steps to retreat from the Khan program or the program that Jonathan Kanter has laid out in the Department of Justice, she could very well face the wrath of the progressives, left and right, in Congress. I don’t think she’d want to provoke that fight openly, so the means of adjustment might be far more subtle and less visible to the naked eye.

The appointment of individuals who have a somewhat more cautious approach to applying the law; one approach would be to say with respect to these Big Tech cases, ‘We already have a very full plate and part of my job is to bring them home, to make sure that they land safely and that the projects work. I’m going to do that. I’m going to worry less about initiating new path-breaking measures. I’m going to make sure that those are brought to a successful conclusion.’ That could be one approach she takes.

Another area where she could back off is merger control. And I think for the Big Tech companies, for [Marc] Andreessen, for Hoffman, for others, they are less disturbed by the big monopolization cases than they are by the aggression with which the FTC and the Department of Justice have gone after deal making. And that might be an area where the Harris team, after January of 2025, backs off a bit and isn’t quite so aggressive as the FTC and DOJ have been.

That would be the barometer for me. That’s the real indication of whether we’re seeing an adjustment in attitude towards tech is the question of merger control. I would not expect her to tamper with these big cases.

I wouldn’t expect [former President Donald] Trump to do it either. The DOJ search case that we’ve been talking about began in his presidency. The FTC case against Meta began in his presidency. The investigation of Apple that led to a case began in his presidency. And he has no fondness for that sector. His vice presidential candidate partner, Senator [J.D.] Vance, has no fondness for that sector. He said, ‘I think Khan’s doing a good job.’

I could imagine that both of them would say, ‘What’s the right remedy in this case? It’s to break them up. We have to de-concentrate these sectors to take their power away because we don’t trust them,’ for different reasons.

With regard to these Big Tech monopolization cases, I think those carry on where we could see a change in both a Harris administration and, maybe more visibly in a Trump administration, is a change in merger control. And maybe that’s what Hoffman and his counterparts have been complaining [about]. That’s their real grievance here is that we can’t do deals.

The antitrust ruling against Google on Monday, Aug. 5, is groundbreaking. By declaring Google is a monopoly, it marked the biggest tech antitrust ruling since Microsoft in the ’90s.

It’s not that the government never takes up these cases; it’s that the government doesn’t often win. And to be fair, it hasn’t won yet. Google plans to appeal and the tech world is closely watching how this one shakes out. 

For what punishments Google could face to how long this case will drag out, Straight Arrow News tapped the expertise of Bill Kovacic, a former FTC chair and commissioner.

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This interview has been edited for length and clarity. Watch the interview in the video above.

Simone Del Rosario: What do you make of Google’s assertion that its product is just better?

Bill Kovacic: The language and the music of earlier decisions from the Supreme Court has been one that’s very solicitous of the successful firm that achieves prominence through superior performance. So in making that argument, they are appealing directly to a policy position that has appeared in a number of earlier decisions that you can’t take a successful enterprise and punish it for offering a better product.

Through the trial and certainly through the appeals, they will say, “We may not be the perfect company, but there’s no way to explain our position except for our ability to provide our users a better and better experience and certainly superior to anyone else’s.”

That’s a very important argument, but there are still limits on the steps they can take to reinforce the preeminence.

Simone Del Rosario: Let’s say that this judgment stands. What’s going to happen to Google? What are the likely punishments that Google will face?

Bill Kovacic: Judge Mehta, who is the trial judge in the Google case, decided to split the proceedings into two parts. The first part was going to be the trial on whether the law had been broken. That part has been concluded with his opinion that finds that yes, indeed, in some respects, the law was broken.

The second part was that if there was a finding of liability, we’re going to have a separate proceeding on remedies. He’s going to have a meeting with the parties in early September to schedule the hearing or hearings that will take place to address the remedy.

We probably will see, I suppose, several days of testimony by experts who lay out their views about what the remedy should be. Should it simply be an injunction that tells Google not to engage in the same behavior? Should it mandate that the company take affirmative steps to correct the effects of the behavior that it’s engaged in so far? Will the court go further to say a restructuring of the company is important? That a divestiture of some kind, say, for example, divesting the Android franchise would be an appropriate solution.

The judge is going to have a significant proceeding on the remedy, I suspect, by the end of this calendar year. He will reach his decision about what that remedy should be. We’ll see the final opinion on remedy come out, again, by the end of 2024 with inevitable appeals to the U.S. Court of Appeals to the District of Columbia, which would be step one. That would take up most of 2025.

The Supreme Court is not obliged to review this case. It has complete discretion over its docket with respect to antitrust matters. My intuition is that this will be a compelling case for them to review. This will be a case that they want to review to come in on these basic questions about the application of the antitrust law to Big Tech, to dominant firms generally. So my own quiet wager is that the Supreme Court would take the case. That takes us through most of 2026.

So if all of these appeals come about, we’re a good two years away from a final answer with respect to liability and to remedies. And for a case that began in 2020, in the second half of 2020, I guess all of us can look at that and say, “Is that a sensible way to make decisions about such fundamental matters of economic policy and operation,” a case that lasts the better part of seven years? But that’s what we’re in for going ahead. That’s roughly the timeline that might unfold.

Simone Del Rosario: And just to clarify, the remedies can be prescribed before this appeal process goes through even if they can’t be enforced, is that correct?

Bill Kovacic: Correct. The appeal would take place after the decision on remedies so that the parties would be filing their appeals with respect to decisions about whether the law was broken and with respect to the judge’s decision about what the appropriate remedy will be. It’s proceeding on remedies next, then the parties can appeal any part of what’s taken place before.

Simone Del Rosario: And you mentioned some relatively low-level remedies, an injunction, fines. Would that be enough to stop this behavior that the courts found was monopolistic?

Bill Kovacic: This is a point of enormous and contentious debate. I would say if you go back to the beginning of the U.S. antitrust system, the remedy that generally has been seen to be, by many observers, the necessary remedy for illegal monopolization, is structural relief, simply put, a breakup. You force the company to make major divestitures.

That is the big visible solution that many observers look for. By contrast, the injunction that you referred to is seen as often being too timid a solution, too difficult to oversee and apply, too easily evaded by companies that will adapt immediately to any control on conduct that you put before them.

Part of what makes up the debate today is a more sympathetic view about these injunctions. And the more sympathetic view basically goes like this. One is that the injunction forces the company to change its decision-making process. It means that more matters are run by the lawyers first. And instead of the business people simply acting immediately and impulsively on ideas they have, it’s got to go through the legal department.

The legal department, being somewhat more inherently cautious as a matter of culture, applies the brakes a bit to this process so that there’s an internal decision-making process that means that the company is less aggressive in the way in which it operates.

A second consequence is that there’s an awareness on the part of other firms that they have a bit more room to maneuver. They take advantage of the hesitation and limits on the dominant firm to find crevices in the market in which they can enter to expand their operations over time.

Now one theory is that when the government settled its monopolization case against Microsoft, a case brought in the late ’90s and settled in the early 2000s – in parallel with a case that was settled by the European Union, also involving claims of illegal conduct against Microsoft – initially the conduct-related remedies were heavily criticized as being too weak.

A new reinterpretation of that is that those remedies actually gave breathing room for what were then nascent tech competitors named Google, for example, and that it opened the path for Google to prosper.

So I’d say there’s an important strand of modern commentary that says conduct remedies can be a lot more potent than you might think. They may take longer to unfold. They don’t have the big bang explosion of a giant fireworks display. They’re less visible in that respect. But then they can have a powerful impact on the way that the market operates.

I think that even the specialists in the field would say there’s a lot of uncertainty about what the best solution is. You make your best judgment. It’s partly an act of faith that you’ve got the right solution in place. But I’d say that there’s a somewhat more sympathetic view of conduct remedies emerging that might incline the judge to say, that would be enough.