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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.
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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.