President Trump is considering nominating Herman Cain, who abandoned his 2012 presidential bid in the face of escalating accusations of sexual misconduct, for a seat on the Federal Reserve Board, according to two people familiar with the matter.
Mr. Trump has been considering tapping Mr. Cain, the former chief executive of Godfather’s Pizza, for several weeks but is waiting for a federal background check before officially nominating him to the Fed, one of these people said.
The decision to consider Mr. Cain signals the second time in weeks that Mr. Trump has floated candidates with deeply-held political views to fill a seat on the Fed, which is a traditionally independent body. Mr. Trump also plans to nominate Stephen Moore, a conservative economist and longtime economic adviser, as a Fed governor.
Mr. Moore’s potential nomination has been clouded by revelations of ethical and financial issues that surfaced in recent weeks, including a 2013 contempt of court charge stemming from failure to pay child support to his former wife. The White House has said it remains committed to nominating Mr. Moore, who is currently undergoing a background check.
Mr. Cain’s nomination is being supported by Larry Kudlow, who heads the National Economic Council and also recommended Mr. Moore for a Fed seat, according to a person familiar with the discussions.
It is unclear whether Mr. Cain will clear the background check. His presidential campaign came to a screeching halt after several women came forward with accusations of sexual harassment.
A Chicago woman said that Mr. Cain made an unwanted and rough physical advance on her when he was the chief of the National Restaurant Association, a lobbying group. Within days, a second woman who worked in the government affairs office of the restaurant association came forward with her own claims.
Mr. Cain has long proclaimed his innocence and sought to cast blame for what he called a smear campaign on political rivals and the news media.
The op-ed that got Stephen Moore his Fed nomination is based on two major falsehoods
President Trump reportedly chose Stephen Moore for one of the vacancies at the Federal Reserve Board after reading a Wall Street Journal op-ed Moore wrote attacking the Fed. The piece, co-authored with Louis Woodhill, made two central claims: (1) we’re experiencing deflation, and (2) the way to address it is to follow a rule adopted by Paul Volcker in the 1980s.
Slight problem though: Both of those claims are flat-out false. There is no deflation, and Volcker never created the imaginary “rule” Moore is now attributing to him. I know, because I asked Volcker — as Moore once suggested I do.
Deflation, for those unfamiliar, means prices are falling. There are three major measures of price changes: the consumer price index, the personal consumption expenditures (PCE) price index, and the “core” PCE price index (which excludes energy and food, which can be volatile). All three show modest but positive year-over-year price increases.
.. Moore and Woodhill explain this away by saying that in fact we shouldn’t be looking at overall price changes — instead we should be looking at just a small subset of prices, specifically commodities. Commodities refer to goods that are interchangeable with one another, such as metals, oil, soybeans, wheat, etc.
Now, there’s a reason why when people talk about inflation or deflation they usually focus on the overall index rather than some cherry-picked subset of products. Some products see prices go up (doctor visits); others see them go down (TVs); what we want to know is the big-picture trend. Sure, it’s possible that changes in commodity prices might eventually flow through to elsewhere in the economy. It’s also possible that commodities have weird, anomalous price changes driven by sudden shocks — a crop failure, say, or discovery of gold, or an oil embargo. These supply or demand shocks tell us little about whether there is too much money chasing too few goods, which is really what the Fed is trying to track.
Moore historically has had trouble distinguishing whether price changes in commodities are driven by monetary policy (that is, the Fed allowing too much or too little money to slosh around) or market-specific shocks. For instance, when I’ve appeared with him on CNN before, he has cited as evidence of “deflation” the fact that U.S. soybean prices have fallen. And hey, soybean prices are down! But as everyone in America except apparently Moore is aware, soybean prices have fallen primarily because China stopped buying U.S. soybeans in retaliation for Trump’s trade war, not because of changes in the money supply.
Nonetheless, Moore claimed in this op-ed, as well as in that CNN appearance, that his confused understanding of inflation and Fed policy was endorsed by none other than the godfather of sound Fed policy: former Fed chairman Paul Volcker.
.. On CNN, Moore said that we should follow the “Volcker Rule,” which he claimed was a rule Volcker set when he was chair in the 1980s that required linking interest rates according to movements in commodity prices. That is not actually anything close to what the Volcker Rule is about. It’s actually a regulation that prohibits banks from conducting certain investment activities with their own accounts, and has nothing to do with commodity prices or interest rates. I figured he’d misspoken, or gotten confused (this was around 7 a.m., after all), and moved on.
I was then surprised to see that Moore resuscitated this claim again in his recent Journal op-ed — you know, the one that earned him his Fed nomination. This time he didn’t foolishly refer to it the “Volcker Rule”; he said it was Volcker’s “commodity-price rule”:
The solution is obvious. The Fed should stabilize the value of the dollar by adopting the commodity-price rule used successfully by former Fed chief Paul Volcker. To break the crippling inflation of the 1970s, Mr. Volcker linked Fed monetary policy to real-time changes in commodity prices. When commodity prices rose, Mr. Volcker saw inflation coming and increased interest rates. When commodities fell in price, he lowered rates.
.. On Monday, I wrote to Moore to ask him where I could find more information about this rule, explaining that I had consulted Fed transcripts and other documents to no avail. He replied to say that Arthur Laffer, his longtime business partner and frequent co-author, had written “two very famous pieces” for the Wall Street Journal about the subject in the 1980s.
He eventually sent me one Journal op-ed from 1982, by Laffer and Charles Kadlec. It does not in fact say that Volcker adopted a price rule; rather, it says that Laffer and Kadlec speculated that such a relationship might be able to explain interest rate movements over the previous four months, and proposed how to test their theory. The headline, ending in a telltale question mark: “Has the Fed Already Put Itself on a Price Rule?”
Turns out Cato Institute senior fellow and economic historian George Selgin was also looking into Moore’s claim, and dug up another Laffer essay from this era. In this one (in Reason), Laffer explicitly says Volcker replied to that 1982 Journal op-ed to explain to Laffer why the Fed was not targeting commodity prices. Selgin also found a paper by another Fed official — written just after Volcker stepped down, in 1987 — arguing (apparently unsuccessfully) that the Fed should start adopting a rule such as the one Moore describes. Which, of course, implies that the Fed had not had any such rule when Volcker was in charge.
.. When I first, shall we say, expressed skepticism about Moore’s claim in that CNN debate, he suggested I get things from the horse’s mouth.
MOORE: Do you know what the Volcker Rule was? You know how he killed inflation? He followed commodity prices. Every time commodity prices went up, he — he raised interest rates, and every time —
RAMPELL: That’s not what the Volcker Rule is.
MOORE: Yes, it was. That’s what he did, and that’s how we conquered inflation, and that’s why —
RAMPELL: Google the Volcker Rule, people. That’s not what the Volcker Rule is.
MOORE: Yes, it was. Ask him. Ask him.
So I figured, why not ask Volcker? I sent an inquiry through his book publicist, who passed it along to Volcker’s assistant. The assistant replied: “I showed this to Mr. Volcker and he says that he does not remember ever establishing a commodity-price rule.”
There you have it. Trump has nominated to the world’s most powerful central bank a guy who has trouble telling whether prices are going up or down, and struggles to remember how the most famous Fed chair in history successfully stamped out inflation. But hey, Republican senators still seem keen on him because “the establishment” keeps pointing out how inept he is.
Swift Pushback on Stephen Moore
Some private-sector economists who’ve generally supported Trump’s efforts to accelerate growth with lower taxes, less regulation and fairer trade deals were nonplussed by the selection of Moore, an official at the conservative Heritage Foundation think-tank and an economic adviser to Trump’s 2016 campaign.
“The fact that Stephen Moore gets nominated and has a plausible path to confirmation but Peter Diamond didn’t is truly detestable,” said Neil Dutta, head of economics at Renaissance Macro Research. He was referring to Diamond, a Nobel Prize-winning economist whom President Barack Obama nominated to the Fed but ended up withdrawing from consideration in June 2011 in the face of Republican opposition.
“The upshot is that Stephen Moore will not have much influence if he sat around the table,” Dutta said.
While most presidential nominees keep a low public profile until they’re considered by the Senate, out of respect for the democratic process, Moore took to the airwaves hours after Trump announced his nomination two days ago. In a Bloomberg Television interview he called the Fed’s December rate increase, which was approved in a unanimous vote, “a very substantial mistake.”
.. The difference is they’re all respected Ph.D. economists, so concerns about politicizing the Fed didn’t become a much of a factor in their Senate confirmation hearings.
Moore, who has a master of arts in economics from George Mason University in Virginia, is better known for helping promote a fiscal agenda than he is for monetary-policy expertise. He co-wrote, with Laffer, a 2018 book on Trump’s economic strategy entitled “Trumponomics: Inside the America First Plan to Revive Our Economy.”
He also formerly wrote on the economy and public policy for the Wall Street Journal and is on his second stint at the Heritage Foundation.
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.