The tax cut fizzled; send in the clowns!
As far as I know, the Federal Reserve — the world’s most important economic policy institution — doesn’t have an anthem. But if it were to adopt one now, the choice would be obvious: “Send In the Clowns.”
You see, the Fed’s governing board currently has two vacancies, and Donald Trump has proposed filling those vacancies with ludicrous hacks. If he succeeds, one of our few remaining havens of serious, nonpartisan policymaking will be on its way toward becoming as corrupt and dysfunctional as the rest of the Trump administration.
Stephen Moore and Herman Cain are, of course, completely unqualified — I say “of course” because their lack of qualifications is, paradoxically, a key qualification not just for Trump but for the G.O.P. in general.
There are plenty of genuine monetary experts with conservative political leanings, some of them quite partisan. But modern Republicans have shown consistent disdain for such experts, perhaps because of a sense that anyone with real expertise or an independent reputation might occasionally be tempted to take a stand on principle.
There’s no risk that either Moore or Cain will ever take such a stand. In fact, what seems to have recommended both men to Trump was their evident willingness to completely reverse their policy views when politically expedient.
Both were hard-money men during the Obama years, demanding higher interest rates despite very high unemployment. Both have now taken to berating the Fed for failing to print more money in the face of low unemployment — because that’s what Trump wants.
That said, there’s a difference between the two men.
I wrote about Moore a couple of weeks ago, noting that he has long been a prominent fixture in the conservative movement; he is, basically, a classic right-wing hack who tries (incompetently) to impersonate an economic expert. Cain, on the other hand, is a spam king whose business model involves making his email list available to direct marketers.
Put it this way: In recent years Moore has been out there predicting magical results from tax cuts, putting out fake economic numbers, and giving speeches to FreedomFest. At the same time, Cain has been offering a platform for peddlers of get-rich schemes and cures for erectile dysfunction. So it says something about what Trump wants that he apparently sees the two men as equally valuable allies.
What does Trump want? His attempted beclowning of the Fed follows, I’d argue, from the fact that his one major legislative success, the 2017 tax cut — which he predicted would be “rocket fuel” for the economy — has turned out to be a big fizzle, economically and, especially, politically.
.It’s true that U.S. economic growth got a bump for two quarters last year, and Trumpists are still pretending to believe that we’ll have great growth for a decade. But at this point last year’s growth is looking like a brief and rapidly fading sugar high.
Meanwhile, the tax cut remains unpopular, partly because few people perceived personal benefits, partly because voters appear to be less concerned about paying too much than with the sense that the rich — the prime beneficiaries of the Trump cut — are paying too little.
Some leaders might see such disappointments as reasons to make a course correction. But this is Trump: When the going gets tough, he blames someone else. Everything would have been great, he insists, if the Fed hadn’t thwarted his plans.
There’s a good argument to be made that the Fed misjudged the economy’s strength, that it raised interest rates too fast and that the economy would be doing somewhat better if it hadn’t. In fact, it’s an argument I agree with.
But that’s not what Trump is saying. He wants the Fed to act as if we were still in a deep depression; he wants it both to cut rates and to resume the emergency policies it pursued — and he denounced — when we had more than twice as much unemployment as we do today. This would, he insists, turn the economy into the “rocket ship” he originally promised.
You don’t have to be a gold bug or even an inflation hawk to see these demands as deeply irresponsible. Indeed, they sound a lot like the “macroeconomic populism” that has repeatedly led to economic disaster in Latin America, with Venezuela the latest example.
Running the printing presses to fight a depression, as the Fed did after the financial crisis, is prudent and sensible; running them because you refuse to accept the reality that your policies aren’t delivering an economic miracle is different, and always ends badly.
Now, even putting both Moore and Cain on the Fed board probably wouldn’t be enough to push America over the monetary edge. And so far, markets don’t seem worried about the potential for runaway inflation.
But maybe investors should be worried, at least a bit, by the spectacle of a president who would rather appoint hacks and debase the Fed’s integrity than admit that his policies aren’t working as promised. U.S. policymaking is looking ever more like that of a corrupt third-world regime. And that is bound, sooner or later, to have consequences.
Opinion: Fed nominee Stephen Moore’s only qualification is saying what his GOP masters want to hear
A thoroughly partisan hack, Moore has no consistent economic beliefs or theories
(Project Syndicate) – In December 2015, the right-wing commentator Stephen Moore, President Donald Trump’s pick to fill a vacancy on the Federal Reserve Board of Governors, savagely attacked then-Fed Chair Janet Yellen and her predecessor, Ben Bernanke, for maintaining loose monetary policies in the years following the Great Recession.
According to Moore, who is not a Ph.D. economist, investors had “become hyper-dependent” on the Fed’s “zero-interest-rate policy … just as an addict craves crack cocaine.” This “money creation,” he surmised, had yielded “nada” in terms of “helping juice the economy, creating jobs, or giving the American worker a pay raise.”
Worse, the United States had already “tried this before — twice — and both times the story ended badly with a pop of the bubble … in 1999-2000 and … in 2008-09.” The lesson, he concluded, is that, “Micromanaging the economy through the lever of money creation at the grand fiefdom within the Fed doesn’t work.”
Or does it? Moore himself is probably not the most reliable judge.
On Dec. 26, 2018, he savagely attacked Yellen’s successor, Jerome Powell, for raising interest rates to unwind the very approach that he had condemned three years earlier. “If you cut engine power too far on a jetliner,” he warned, “it will stall and drop out of the sky.”
Moore complained that, after having “risen by 382 points on hopes that the Fed would listen to Trump and stop cutting power,” the Dow Jones Industrial AverageDJIA, -0.11% had “plunged by 895 points” on the news of another interest-rate hike. This, he concluded, was evidence that “the Fed’s monetary policy has come unhinged.”
Moore called on Powell to “do the honorable thing … and resign.” But, failing that, he hoped that Trump would simply fire the Fed chair. “The law says he can replace the Federal Reserve chairman for cause,” Moore observed in an interview that same week. “Well, the cause is that he’s wrecking our economy.”
.. Of course, a less-generous interpretation is that Moore has not changed his view of the economy, and was acting in bad faith during the years of the Obama administration. Or, less likely, he is acting in bad faith now, after having conducted himself in an honest manner up until 2016.
As it happens, none of these interpretations applies, because they are all predicated on the false assumption that Moore actually has an informed perspective of the economy. To my mind, he does not.
True, Moore has consistently advocated low government spending and opposed progressive taxation. He might even support more open immigration policies, as one would expect from a self-proclaimed free-market conservative. Then again, his views may have changed since he started advising Trump in 2016. After all, he already seems to have abandoned his previous commitment to free trade.
That comes as no surprise. Throughout his career as a partisan talking head, Moore’s economic analysis has never had any basis in empirical reality. To the contrary, he has repeatedly shown that he will say whatever needs to be said to please his political master.
Needless to say, Moore is wholly unfit to serve in the office to which he is being nominated. He has absolutely no business overseeing U.S. monetary policy. The same is true of any president who would appoint him and any senator who would vote to confirm him.
Stock Market Rout Has Trump Fixated on Fed Chair Powell
President Trump has unabashedly hitched his political fortunes to a rising stock market. Now, with stock prices in retreat, he has become increasingly fixated on the idea that one man is to blame for the recent rout: Jerome H. Powell, chairman of the Federal Reserve.
After the Fed raised its benchmark interest rate on Wednesday, the fifth consecutive quarterly increase, Mr. Trump fretted to aides that Mr. Powell would “turn me into Hoover,” a reference to the man who was president in the early years of the Great Depression.
Mr. Trump has said choosing Mr. Powell for the Fed job last year was the worst mistake of his presidency, and he has asked aides whether he has the power to fire him.
But the volatile stock market, which just posted its worst week since 2008, is falling in part because of Mr. Trump’s own policies, including
- an escalating trade war with China,
- a shutdown of the federal government and
- the fading effects of the $1.5 trillion tax cut Mr. Trump ushered in at the end of 2017.
While the Fed’s rate increases have upset investors — who seem to have a darker view of economic growth than the central bank does — some analysts said Mr. Trump’s musings about the Fed would only exacerbate anxieties.
“If Powell gets terminated, what we’ve seen happen in the markets in the past few weeks will look like a walk in the park,” David Rosenberg, chief economist at Gluskin Sheff, said in an email on Sunday. “The dollar will go into a tailspin, and even confidence in the Treasury market will erode, especially among foreign creditors.”
Mr. Trump’s economic advisers scrambled over the weekend to reassure markets that Mr. Trump was not, in fact, planning to fire Mr. Powell. Treasury Secretary Steven Mnuchin tweeted what he said was a quote from Mr. Trump accepting that he did not even have the power to do so.
Mick Mulvaney, the incoming acting White House chief of staff, implied on Sunday that Mr. Trump had, in fact, inquired about removing Mr. Powell, saying on ABC’s “This Week” that the president “now realizes he does not have the authority.” But Mr. Mulvaney added that he had heard this from Mr. Mnuchin, not from Mr. Trump.
.. Mr. Mnuchin has worked in recent days to obtain Mr. Trump’s assurance that he would not remove Mr. Powell, according to an administration official who spoke on condition of anonymity. But that person cautioned that Mr. Trump could change his mind. The person noted Mr. Trump has a tendency to nurse grudges even when he temporarily sets a subject aside.
.. Some economists argue the Fed should continue its stimulus campaign to drive up employment and wages. They note that the Fed is about to undershoot its 2 percent inflation target for the seventh consecutive year, suggesting there is no need to step on the brakes.
.. In fact, during his presidential campaign, Mr. Trump accused the Fed of getting political, saying that the bank’s chairwoman at the time, Janet L. Yellen, should be “ashamed” for keeping interest rates low — a move he said was meant to help President Barack Obama.
But it is far from clear such a decision would serve the president’s purpose. A replacement for Mr. Powell would require Senate confirmation, and this person would join a policymaking committee that voted unanimously for the December rate increase. That committee also might be inclined, on future rate decisions, to demonstrate its independence from the president.
.. Mr. Trump also chose three of the other four members of the Fed’s board, all of whom joined Mr. Powell in voting for all four 2018 rate increases.In conversations with friends and advisers, Mr. Trump has acknowledged responsibility for the selection of Mr. Powell. He told Stephen Moore, an economist at the Heritage Foundation, that it was “one of the worst choices I’ve ever made,” according to Mr. Moore.Some of Mr. Trump’s economic advisers have encouraged him to remove Mr. Powell, arguing that the decision would reverse recent stock declines.Sarah Binder, a professor of political science at George Washington University, said presidents had often tried to shape Fed policy, but the current episode stood apart because Mr. Trump appeared to be acting against his own interest in a stable economy.
“I think what is the unusual part here is that it seems the president has created the crisis,” she said. “His intervention certainly seems to be making things worse for him and worse for the Fed and worse for the economy. It’s just very shortsighted, and we’re not used to that.”
Time for G.O.P. to Threaten to Fire Trump
Republican leaders need to mount an intervention.
Up to now I have not favored removing President Trump from office. I felt strongly that it would be best for the country that he leave the way he came in, through the ballot box. But last week was a watershed moment for me, and I think for many Americans, including some Republicans.
It was the moment when you had to ask whether we really can survive two more years of Trump as president, whether this man and his demented behavior — which will get only worse as the Mueller investigation concludes — are going to destabilize our country, our markets, our key institutions and, by extension, the world. And therefore his removal from office now has to be on the table.
I believe that the only responsible choice for the Republican Party today is an intervention with the president that makes clear that if there is not a radical change in how he conducts himself — and I think that is unlikely — the party’s leadership will have no choice but to press for his resignation or join calls for his impeachment.
It has to start with Republicans, given both the numbers needed in the Senate and political reality. Removing this president has to be an act of national unity as much as possible — otherwise it will tear the country apart even more. I know that such an action is very difficult for today’s G.O.P., but the time is long past for it to rise to confront this crisis of American leadership.
Trump’s behavior has become so erratic, his lying so persistent, his willingness to fulfill the basic functions of the presidency — like
- reading briefing books,
- consulting government experts before making major changes and
- appointing a competent staff — so absent,
his readiness to accommodate Russia and spurn allies so disturbing and his obsession with himself and his ego over all other considerations so consistent, two more years of him in office could pose a real threat to our nation. Vice President Mike Pence could not possibly be worse.
The damage an out-of-control Trump can do goes well beyond our borders. America is the keystone of global stability. Our world is the way it is today — a place that, despite all its problems, still enjoys more peace and prosperity than at any time in history — because America is the way it is (or at least was). And that is a nation that at its best has always stood up for the universal values of freedom and human rights, has always paid extra to stabilize the global system from which we were the biggest beneficiary and has always nurtured and protected alliances with like-minded nations.
Donald Trump has proved time and again that he knows nothing of the history or importance of this America. That was made starkly clear in Secretary of Defense Jim Mattis’s resignation letter.
Trump is in the grip of a mad notion that the entire web of global institutions and alliances built after World War II — which, with all their imperfections, have provided the connective tissues that have created this unprecedented era of peace and prosperity — threatens American sovereignty and prosperity and that we are better off without them.
So Trump gloats at the troubles facing the European Union, urges Britain to exit and leaks that he’d consider quitting NATO. These are institutions that all need to be improved, but not scrapped. If America becomes a predator on all the treaties, multilateral institutions and alliances holding the world together; if America goes from being the world’s anchor of stability to an engine of instability; if America goes from a democracy built on the twin pillars of truth and trust to a country where it is acceptable for the president to attack truth and trust on a daily basis, watch out: Your kids won’t just grow up in a different America. They will grow up in a different world.
The last time America disengaged from the world remotely in this manner was in the 1930s, and you remember what followed: World War II.
You have no idea how quickly institutions like NATO and the E.U. and the World Trade Organization and just basic global norms — like thou shalt not kill and dismember a journalist in your own consulate — can unravel when America goes AWOL or haywire under a shameless isolated president.
But this is not just about the world, it’s about the minimum decorum and stability we expect from our president. If the C.E.O. of any public company in America behaved like Trump has over the past two years —
- constantly lying,
- tossing out aides like they were Kleenex,
- tweeting endlessly like a teenager,
- ignoring the advice of experts —
he or she would have been fired by the board of directors long ago. Should we expect less for our president?
That’s what the financial markets are now asking. For the first two years of the Trump presidency the markets treated his dishonesty and craziness as background noise to all the soaring corporate profits and stocks. But that is no longer the case. Trump has markets worried.
.. The instability Trump is generating — including his attacks on the chairman of the Federal Reserve — is causing investors to wonder where the economic and geopolitical management will come from as the economy slows down.
- What if we’re plunged into an economic crisis and we have a president whose first instinct is always to blame others and
- who’s already purged from his side the most sober adults willing to tell him that his vaunted “gut instincts” have no grounding in economics or in law or in common sense. Mattis was the last one.
We are now left with the B team — all the people who were ready to take the jobs that Trump’s first team either resigned from — because they could not countenance his lying, chaos and ignorance — or were fired from for the same reasons.
I seriously doubt that any of these B-players would have been hired by any other administration. Not only do they not inspire confidence in a crisis, but they are all walking around knowing that Trump would stab every one of them in the back with his Twitter knife, at any moment, if it served him. This makes them even less effective.
Indeed, Trump’s biggest disruption has been to undermine the norms and values we associate with a U.S. president and U.S. leadership. And now that Trump has freed himself of all restraints from within his White House staff, his cabinet and his party — so that “Trump can be Trump,” we are told — he is freer than ever to remake America in his image.
And what is that image? According to The Washington Post’s latest tally, Trump has made 7,546 false or misleading claims, an average of five a day, through Dec. 20, the 700th day of his term in office. And all that was supposedly before “we let Trump be Trump.”
If America starts to behave as a selfish, shameless, lying grifter like Trump, you simply cannot imagine how unstable — how disruptive —world markets and geopolitics may become.
We cannot afford to find out.