The Outsider Perspective Issue 495 | The Beltway Outsiders

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Good Friday Morning! There is a new diet sweeping President Trump’s cabinet, and it smells like a German deli. RFK Jr., Commerce Secretary Howard Lutnick, Transportation Secretary Sean Duffy, and Vice President JD Vance have all gone in on grass-fed steak and fermented vegetables, mostly sauerkraut. Kennedy told a Michigan crowd he lost twenty pounds in thirty days, then added that Vance is on it too and “you can see how different he looks.” The man is seventy-two and reviewing his vice president’s body fat in public.

The architect is a doctor named Sean O’Mara, whose “optimization plans” start at eight thousand dollars and whose direct consultation runs eighteen. For that, he will lead you through the refrigerated aisle and show you which sauerkraut sits far enough from the light to keep its microbes alive. Lutnick now eats blocks of blue cheese and parmesan plain, no cracker. Vance snacks on grass-fed jerky aboard Air Force Two. Trump, for his part, ate pizza and fries and drank a Diet Coke at the NBA Finals, which tells you who is actually running the asylum.

The diet’s sulfurous side effects have caused what the Journal politely calls “domestic friction,” and Kennedy travels everywhere with a personal stash of sauerkraut. His wife, the actress Cheryl Hines, described the routine on a podcast: “He’ll be in the car, dressed up. I’ll have my little clutch, right? One of my good bags… And he’ll hand me a bag of sauerkraut and say, ‘Can you put this in your bag?’ And I’ll say, ‘I actually cannot.'”

This week, I am writing about the one economic story Washington keeps insisting it solved: inflation. At his first meeting as the new Fed chairman, Kevin Warsh admitted the country has missed for five years. He is right, and the cure is the one thing no one will touch.

Quick Hits:

The Supreme Court found no drug exception to the Second Amendment. On Thursday the justices ruled unanimously in United States v. Hemani that the government cannot strip a person of his gun rights simply because he uses marijuana. Gorsuch ran the federal ban through the Supreme Court’s Bruen test, which measures gun laws against the nation’s founding-era tradition, and found no match. The government’s best analogy was to old laws that jailed “habitual drunkards,” and Gorsuch took it apart: those laws targeted people too drunk to run their own lives, not everyone who used a substance. The ruling still lets the government disarm anyone it can prove is actually dangerous. What it ends is the automatic, evidence-free ban. The Court got this right, and all nine justices agreeing in a drug case is no small thing.
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A German Named Freddy Understands America Better Than The New Republic Does – Conservative Institute

Why Are We Walking Away From Trump’s Victory Over Iran? – Conservative Institute

The Hero We Won’t Follow

The Fed just admitted it missed inflation for five years. Reagan showed how to kill it. No one in 2026 will pay the price.

A family filling the tank this spring paid more than four dollars a gallon for the first time since 2022, then watched the total at the grocery register climb to match. The cause sat eight time zones away, in a war that closed the Strait of Hormuz. The effect showed up in Tennessee and Ohio and everywhere else, the way it always does.

On June 17, the Federal Reserve told that family what it already knew. The Fed held its benchmark rate at 3.5 to 3.75 percent. But nine of its nineteen officials now expect to raise rates by the end of the year. In March, none of them did. One expects a cut. In March, twelve did.

The man who delivered that turn is Kevin Warsh, Donald Trump’s own pick for chairman, chosen after the president vowed to name only someone committed to lower rates. Warsh’s first meeting moved the conversation to higher ones. Pressed on inflation, he said: “We’ve missed for five years, and we’re going to fix that.”

The inflation Washington declared beaten was never beaten. The cure is on the record too, and no one in this country is willing to take it.

The inflation we were told was beaten was never beaten

When the Fed cut rates in 2024, I wrote that it had no evidence it had solved inflation. By the spring of 2025 I put it in writing again: inflation was “still there, lurking in the shadows,” and until it was officially dead, every government decision would stay hard. I made the longer case in March, when futures markets first crossed a fifty percent chance of a rate hike instead of a cut.

The Fed’s preferred gauge, core PCE, has run above its own two percent target every month since March 2021. Not near it. Above it. The most recent reading sits at 3.3 percent. That is more than five years of missing, which is the exact number Warsh used. The remission Washington celebrated was a slower rate of increase, not a cure. Prices never came back down. They just rose more politely.

This week the Fed stopped pretending

For a year the argument in Washington was how fast the Fed would cut. Trump ran on it. He attacked Powell for refusing. The whole premise was that rates were coming down. On June 17 that premise died inside the Fed’s own projections.

Warsh stripped out the forward guidance his predecessors used to hint at the next move and declined to submit a rate forecast of his own. He launched five task forces to rebuild how the central bank works, and promised the committee would “unambiguously and unanimously” deliver price stability. The odds of a rate increase by September jumped above fifty percent, from about thirty the day before.

Because inflation kept rising while the Fed held rates flat, the real cost of borrowing has been falling on its own. The Fed calls this passive easing. Policy has been loosening into an economy that did not need the help. The Fed spent the year telling itself it was being patient. It was adding fuel.

We have run this experiment before

In the 1960s, Lyndon Johnson tried to pay for the Great Society and Vietnam at the same time and let the printing presses settle the difference. Richard Nixon answered the resulting inflation with wage and price controls and by cutting the dollar loose from gold, which made it worse. Gerald Ford handed out “Whip Inflation Now” buttons. Jimmy Carter presided over inflation above thirteen percent and lost his job over it.

Four presidents, one instinct: make the inflation go away without the pain that makes inflation go away. Each deferral made the next one costlier. The bill compounded until somebody finally paid it.

The 1970s had OPEC. We have Hormuz.

That decade’s inflation had an accelerant: two OPEC oil shocks that sent gas lines around the block. This one has Iran. The war closed the Strait of Hormuz, through which roughly a fifth of the world’s oil moves, and the International Energy Agency called it the largest supply disruption in the history of the oil market. Brent crude ran above a hundred dollars a barrel. Pump prices crossed four dollars.

The difference cuts in our favor. There are no gas lines and no rationing. This is a milder strain of the same illness, not a return of the whole disease. But it landed on an economy whose underlying fever, as the Fed just admitted, never broke. An oil shock does less damage to a healthy economy and more to a sick one. Ours was already running warm.

Warsh has three bad options and a boss who promised a fourth

Gold tells you where confidence has gone. It traded above four thousand dollars an ounce this spring, after touching a record near fifty-four hundred in January. People do not pile into gold because they expect prices to come back down. They buy it because they have stopped believing anyone will bring them down. That is the public’s verdict, priced in ounces.

Warsh inherits that verdict and three doors, each opening onto something bad.

Cut rates now, and he risks reigniting the inflation he just promised to kill, with the blowback landing on a Republican president and a Republican Congress a year before the midterms.

Hold higher for longer, and he risks grinding the economy into a stall while families keep paying.

Raise rates, and he detonates the entire premise Trump sold the country.

The fourth door, the one Trump promised, was lower rates at no cost. It does not exist. The market is held aloft instead by the AI build-out. The S&P 500 closed above seventy-six hundred for the first time at the start of June, its twenty-fourth record high of the year, as hundreds of billions in data-center spending pour through the economy and the wealthiest households spend their paper gains. The boom is real. It is also papering over the pressure underneath rather than relieving it. Once expected to push prices down, the AI surge now looks, in the Fed’s own read, like a near-term source of inflation.

Reagan dealt with inflation. We won’t.

We have watched inflation killed once. It took a president who decided to do it and accept the cost.

Ronald Reagan came into office in 1981 with inflation near twelve percent, and he fought it on two fronts. He backed Paul Volcker’s Federal Reserve as it raised the benchmark rate to roughly twenty percent, the highest in American history, and held it there while the economy fell into the deepest recession since the Depression. Unemployment hit 10.8 percent. Homebuilders mailed the Fed two-by-fours they could not use. Auto dealers mailed it keys to cars they could not sell. Farmers drove their tractors to Washington and ringed the building. Reagan did not call it off.

The second front went after costs. He signed a 1981 tax cut that dropped the top marginal rate from 70 percent to 50. The 1986 reform took it to 28, and his deregulation worked to expand what the economy could produce. One front strangled demand. The other grew supply and pulled prices down from the opposite direction. It took both to break inflation. Tight money alone would have been a depression with nothing on the other side to grow into.

The pain was the point. A twenty percent interest rate is the gap between a family buying a home and a family renting for another decade, multiplied across the country, on purpose, for years. Reagan wore a recession in his own first term to get it, and decided that killing inflation was worth losing seats over. He was right.

Arthur Burns ran the Fed through the early 1970s and never killed inflation. He caved to Nixon, kept money loose to help the president’s reelection, and helped touch off a decade of inflation. The libertarians at the Cato Institute say we should stop blaming Burns. They are wrong. Either you deal with inflation or you do not, and Burns did not.

Jerome Powell will leave the same complicated legacy: he never solved inflation. He raised rates enough to look serious and never enough to kill the thing. He eased in 2024 into an inflation he had not beaten, under pressure from a Biden White House that needed a soft landing before an election and a Trump White House that wanted cuts the moment it arrived. Burns had Nixon. Powell had both parties. The result was the same.

Warsh inherits that record and none of what broke inflation the last time it actually fell. There is no president driving a war on costs, and no White House willing to eat a recession to kill the fever. The political will is missing, and so is the second front.

So we have chosen the other path, the one with no name because no one will say it out loud. We are holding rates higher for longer while running the economy as hot as we can, hoping the AI money and a lucky end to the Iran war close the gap before the voters notice. It is the Johnson move and the Nixon move and the Ford move. Reagan fought inflation on two fronts at once. We are fighting on neither. Trump was handed an unsolved problem and picked the easy door. He chose to run the economy hot and blame the Fed, rather than take the medicine or own the trade-off.

We are heading to the polls with the fever still running

Inflation has been the issue voters name first in every Marquette Law School poll since 2025, the latest at thirty-seven percent. Only twenty-two percent now think Trump’s policies will bring it down, a figure that has fallen by nearly half since he was elected. It is the issue the party in power can least afford, and the cure for it is the one thing no party will campaign on, because the cure is a recession nobody ordered and everybody feels.

So the fever runs. Warsh meets again in six weeks, and the country will lean in to read a man who has decided to tell it almost nothing. The honest answer is the one his own projections already gave. Inflation was never beaten. The cure exists. Reagan ran it once and paid for it in his own first term.

He is the hero of this story. We know what he did. We know why it worked. We are not willing to do it. The cure is on the record. So is our refusal to take it.