The position of director of national intelligence was created after the 9/11 terror attacks to prevent another such assault on the American homeland. The DNI, as the director is known, must oversee 17 intelligence agencies with a total budget of about $60 billion. There are few jobs more important in the federal government — or the entire country. Yet President Trump treated the selection of a DNI with less care and forethought than he would give to picking an interior designer for Mar-a-Lago.
When Dan Coats decided last month that he had suffered enough as Trump’s DNI, Trump reportedly called Sen. Richard Burr (R-N.C.), chairman of the Senate Intelligence Committee, to ask what he thought about Rep. John Ratcliffe (R-Tex.) as a replacement. “Burr responded that he didn’t know much about the lawmaker but would consult with a few people,” Politico reported. “But less than a half hour later, Trump tweeted that Ratcliffe was his choice.”
Trump picked Ratcliffe, it seems, because he liked the congressman’s obnoxious questioning of former special counsel Robert S. Mueller III in July hearings and his role in spreading cuckoo conspiracy theories about a nonexistent “secret society” of FBI agents supposedly out to get the president. But it soon emerged that Trump didn’t know much about his new nominee.
In the days after Trump impetuously announced Ratcliffe’s nomination on July 28, The Post and other news organizations discovered that the three-term congressman from Texas had greatly embellished his résumé. He had boasted that he had “arrested over 300 illegal immigrants in a single day” and had “firsthand experience combating terrorism. When serving by special appointment in U.S. v. Holy Land Foundation, he convicted individuals who were funneling money to Hamas behind the front of a charitable organization.” Turns out that Ratcliffe had played only a small role in a sweep of undocumented immigrants and an even smaller role in the Holy Land case; an aide told the New York Times that Ratcliffe only “investigated side issues related to an initial mistrial.”
With Senate opposition growing, Trump withdrew Ratcliffe’s nomination on Friday just five days after putting him forward. He had lasted less than half a Scaramucci. In pulling the plug, Trump both credited and blamed the media, saying, “You are part of the vetting process. I give out a name to the press and you vet for me, we save a lot of money that way. But in the case of John [Ratcliffe], I really believe that he was being treated very harshly and very unfairly.”
Ratcliffe was treated “very harshly and very unfairly” — but by Trump, not the news media. There’s a reason presidents normally vet nominees before, not after, they’re announced. It’s better both for the prospective appointee and for the president to have any skeletons uncovered before swinging the closet door wide open.
By ignoring the traditional way of doing things, Trump subjected his personal physician, Rear Adm. Ronny L. Jackson, to considerable embarrassment in 2018 by nominating him to become secretary of veterans affairs and then having to withdraw the nomination after stories emerged accusing Jackson of “freely dispensing medication, drinking on the job and creating a hostile workplace.” The Defense Department inspector general even launched an investigation of Jackson. Learning nothing, Trump repeated the same mistake this year when he nominated Herman Cain and Stephen Moore to the Federal Reserve Board of Governors — posts for which they were utterly unqualified. Facing Senate resistance, Trump had to withdraw their names — but not before unflattering details of Moore’s divorce became public.
And those are the good-news stories: the nominees who never took office. Much more common for Trump has been his discovery, after the fact, that his appointments were terrible mistakes. His clunkers have included a secretary of state
- (Rex Tillerson) who devastated morale at the State Department; a national security adviser
- (Michael Flynn) who was convicted of lying to the FBI; three Cabinet officers (Interior Secretary
- Ryan Zinke, Veterans Affairs Secretary David Shulkin, Health and Human Services Secretary
- Tom Price) who were forced out for improper travel expenses and other ethical improprieties; a secretary of labor
- (Alexander Acosta) who had given a sweetheart deal to a wealthy sex offender; and of course a communications director
- (Anthony Scaramucci) who was fired after 11 days for giving a profanity-filled, on-the-record interview to a reporter.
Coats is the 10th Cabinet member to leave the Trump administration. In President Barack Obama’s first two years in office, not a single Cabinet member departed. Trump also has a record-setting rate of 75 percent turnover among senior, non-Cabinet officials. The cost of this constant churn and chaos is high: It becomes nearly impossible to develop or pursue coherent policies.Trump is a president straight out of “The Great Gatsby.” F. Scott Fitzgerald wrote of his protagonists: “They were careless people, Tom and Daisy — they smashed up things and creatures and then retreated back into their money or their vast carelessness or whatever it was that kept them together, and let other people clean up the mess they had made.” In Trump’s case, the thing that he has smashed up is America’s government, and the cleanup cannot begin until January 2021 at the earliest.
The bigger problem is Mr. Trump’s public assault on the Fed. Mr. Trump has made Mr. Cain’s nomination look like an attempt to undermine Fed independence rather than an attempt to put some fresh monetary thinking on the board. The same is true for our former colleague Stephen Moore, who is also on the receiving end of the left’s politics of personal destruction.
Real income for America’s bottom 90% reached an all-time high in 1999, and at the time Pew Research found that 81% of Americans agreed that free enterprise was a major reason for the country’s success in the 20th century. By June 2015, however, Gallup reported 47% would vote for a socialist.
What happened? Real income for the bottom 90%, as measured for the World Top Incomes Database, declined after 1999 and never rebounded. Two terms each of Republican and Democratic administrations failed to end this stagnation, which says all you need to know about why Donald Trump was elected president. Now wages are rising at robust rates—above 3% a year—thanks to cuts in taxes and regulation, with the largest wage increases going to low-wage workers. And the Federal Reserve has been itching to raise interest rates.
The Fed still operates on the “professor standard,” enshrined with Bill Clinton’s nominations of pure academics. Their textbooks say strong economic growth, particularly strong wage growth, causes inflation, which Fed policy should temper. Both the Bush and Obama administrations perpetuated the professor standard, and both presided over incom
Ending that stagnation is one goal that unites the political spectrum. But do we really expect that to happen under the professor standard? The academics’ favorite tool, the Phillips curve, tells them wage growth that is too strong can cause an outbreak of 1970s-style inflation, as former Fed Chair Janet Yellen alluded in her 2010 Senate confirmation hearing.
I have a different perspective. The professor standard doesn’t work, and the Fed needs new voices to argue for an approach that does.
The 1980s and 1990s brought prosperity across the board. This success was driven by a voting bloc of Fed governors, such as Wayne Angell and Manley Johnson, who favored a stable dollar and were able to swing the consensus. The dollar is a unit of measure—like the foot or the ounce—and keeping units of measure stable is critical to the functioning of a complex economy. The result of their stable-dollar policy was prosperity.
.. Since the Federal Reserve Act of 1913, there have been three distinct periods of sustained dollar stability:
- 1947-70 and
During these periods, real growth of gross domestic product averaged 3.9% a year and real income growth for the bottom 90% averaged 2.2%, according to calculations done by Rich Lowrie, senior economic adviser to my 2012 presidential campaign. During distinct periods of sustained dollar volatility—in 1913-21, 1930-46, 1971-82 and 2000-15, real GDP growth averaged only 1.9% and real income for the bottom 90% declined by an average of 1.3% annually.
The prosperity of the 1980s and 1990s gave way to stagnation precisely because dollar stability gave way to volatility. Blame the professor standard. Demand for dollars is determined globally on a real-time basis, but the Fed has preferred to look largely at domestic lagging indicators in determining supply. The frequent resulting mismatches cause dollar volatility, which the professor standard then dismisses as transitory.
America’s future prosperity, and especially the end to income stagnation, depends on getting this distinction right. The Fed has the tools to stabilize the dollar. The open-market desk can buy bonds to counter a downward trend in commodity prices and sell bonds to arrest an upward trend, resulting in ongoing stability in the dollar’s commodity value. The only thing missing are voices like Messrs. Angell’s and Johnson’s to advocate for it. If confirmed by the Senate as a Fed governor, I will speak up for dollar stability.
Last September the professor standard led Fed governors to pick up the pace of quantitative tightening and stick to its plan of rate hikes. Never mind that commodity prices were falling, meaning the dollar’s commodity value was rising, a market signal of deflationary pressure. Meanwhile, the forward outlook for industrial production and retail sales indicated signs of slowing rates of growth. This combination of slowing growth and a rising dollar is a deflationary slowdown. These are the worst conditions under which to raise interest rates, yet that’s what happened, not once but twice, presumably because wage growth was deemed “too strong.”
Markets rightly sent the Fed a strong signal to back off, prompting three subsequent dovish pivots. If the Fed listens to markets after the fact, why not listen to them before?
This mistake is not new. Had the Fed responded appropriately to the dollar’s commodity value at the turn of this century, it wouldn’t have tightened the U.S. economy into the 2000 deflationary slowdown, and technology speculation would have resolved itself without taking down the entire economy.
Had the Fed reacted to the dollar’s commodity value coming out of that recession, it wouldn’t have inflated the real-estate bubble, which led to the 2008 financial crisis. After June 2008, the dollar’s skyrocketing commodity value was screaming that there was a sudden, huge, global scramble for dollar-based liquidity. Unfortunately, the market’s cry fell on deaf ears, apparently because the signal hadn’t yet registered in the Fed’s lagging employment and consumer-price indicators. This deflationary pressure ignited the financial inferno that began in September 2008, yet the Fed didn’t begin quantitative easing to put out their fire until that December.
Senate Republicans are warning the White House that the 2012 presidential candidate will face one of the most difficult confirmation fights of Donald Trump’s presidency and are making a behind-the-scenes play to get the president to back off, two GOP senators said.
.. Republican senators have generally waved through Trump’s nominees over the past two years, but they are reluctant to do the same for the Fed, amid fears that Trump’s push to install interest-rate slashing allies will politicize the central bank.
The resistance comes as Senate Republicans also actively are pressing Trump to halt his purge at the Department of Homeland Security and reconsider economy-damaging auto tariffs.
Some GOP senators said that Cain’s difficult path might have eased Stephen Moore’s confirmation to the Fed, despite Moore’s own problems with unpaid taxes and his partisan reputation. After all, Republicans might be hard-pressed to revolt against both of Trump’s nominees.
..“I think the chances of getting both through, I would say at the moment, are pretty steep,” Thune said.
Neither Moore nor Cain has been officially nominated. A senator familiar with the nominations said Trump is “full speed” ahead on Cain even though FBI background checks and documentations of sexual harassment allegations have not yet been submitted to the Senate. A person familiar with the process expects the background check to raise more questions about Cain.
With that in mind, Republicans are trying to dissuade Trump from a brutal political fight that would highlight intraparty divisions; the nominations need a simple majority and no Democratic support can be counted on.
Trump’s intent to nominate Cain marks one of his most brazen moves yet to take on his own party, coming on the heels of his emergency declaration at the southern border that went against the wishes of GOP senators who stood by Trump during the shutdown.
And once again, Republicans are sending the president clear signals: Pick someone with less partisan credentials and less baggage. While Cain did serve on the Kansas City Federal Reserve Board, Senate Republicans say he now largely appears to be a Trump surrogate.
“I don’t think Herman Cain will be on the Federal Reserve Board, no. I’m reviewing [Moore’s] writings and I’ll make a determination when I have done so,” said Sen. Mitt Romney (R-Utah), who ran against Cain in the 2012 presidential race and seems confident Cain will either be derailed or not officially nominated.
“I feel that we can’t turn the Federal Reserve into a more partisan entity,” Romney added. “I think that would be the wrong course.”
.. Cain later endorsed Romney in 2012, but one of Romney’s colleagues said the Utah senator “is not fond of Herman.” Cain also challenged Sen. Johnny Isakson (R-Ga.) in a 2004 Senate primary race.
But more troubling to some in the Senate is that Cain founded pro-Trump group America Fighting Back.
“Do you seriously want a guy on the Fed that has a whole organization, the only purpose of it is to encourage Republicans to do whatever the president says he’d like you to do?” said one Republican senator distressed about the nomination. The senator said confirming Cain would be “hard,” but his nomination alone “might confirm Stephen Moore.”
Cain’s group recently said in a fundraising request that Republicans who opposed the president’s emergency declaration were “traitors.”
The rosier reception for Moore comes in part because Republicans will be reluctant to reject two of Trump’s Fed nominees, given their desire to protect their already shaky relationship with the president. In addition to their opposition to Trump’s tariff threats and his shake-up at the Homeland Security Department, Republicans also recently forced him to back off his demand for a new GOP health care bill.
Yet it’s not clear at all that the president is keeping in mind the fact that he will need to get 50 of 53 Senate Republicans to vote for these nominees. Asked about Cain, Sen. Pat Roberts (R-Kan.) said only: “I was not aware it was that serious of a consideration.”
Stressing that he was not singling out Cain, Sen. John Cornyn (R-Texas), a whip for six years, said the White House must simply do more to consult with Capitol Hill.
“It’s really important for the White House to work with us as they’re contemplating nominees to make sure that both the White House has reasonable expectations about confirmations. We can also communicate with the White House about what the challenges of a confirmation may be,” Cornyn said.
.. It’s not clear the president quite realizes the scale of the potential task ahead to confirm his two Fed picks. A half-dozen GOP senators are bracing for competitive races next year and do not want to be seen as Trump’s lackeys. Voting against those nominees could help them assert their independence in their voting record.
Then there are senators like Romney and Isakson who have shown little fear in confronting Trump of late. Romney voted against Trump’s national emergency declaration, while Isakson stepped into a void of Senate Republicans to defend the late Sen. John McCain (R-Ariz.) from Trump’s attacks.
They won’t be alone in scrutinizing these nominees.
“Mr. Cain did serve on the regional Federal Reserves, so that is good experience. His wanting to return to the gold standard is something that is very controversial. And I don’t know the details at this point about the sexual harassment allegations against him,” said Sen. Susan Collins (R-Maine). “Stephen Moore appears to have a host of financial and other issues that are going to need to be explored, as well as the fact that he is a very unconventional choice.”