Wiser voices than mine have said as much.
Nevertheless, I don’t think economists have done a great job of explaining why Stephen Moore is such a bad pick to serve on the Federal Reserve Board.
The Fed is perhaps the closest part of government that I can think of right now that has some measure of independence. Unlike, say, former Attorney General Jeff Sessions, Federal Reserve members do not serve at the pleasure of the president. The Federal Reserve Act strictly limits the ability of the president to remove board members thusly:
Upon the expiration of the term of any appointive member of the Federal Reserve Board in office on the date of enactment of the Banking Act of 1935, the President shall fix the term of the successor to such member at not to exceed fourteen years, as designated by the President at the time of nomination, but in such manner as to provide for the expiration of the term of not more than one member in any two-year period, and thereafter each member shall hold office for a term of fourteen years from the expiration of the term of his predecessor, unless sooner removed for cause by the President.
Note that these are very long terms to be served and removal otherwise must be “for cause.” This restriction apparently came as a bitter revelation to Trump.
It’s not quite tenure, but it’s close.
There is good reason for this. Generally, government should be accountable, but monetary policy should be well-insulated from accountability. If interest rates were set directly by Congress or the president, they would do so in a manner that optimized the case that they were doing a good job to their constituents rather than in a way that would enhance the long-term health of our economic system. Good monetary policy necessitates doing difficult, unpopular things. Even without accountability, doing unpopular things is hard. When you can be fired for it, it is neigh impossible.
In return, the Board must promise to do a good job. It must make its decisions in a fair manner to maximize our long-term economic prospects even if that might hurt a favored political interest.
It is this requirement that makes Stephen Moore comically unqualified.
Through Trump’s term, Moore has repeatedly claimed we are experiencing deflation.
He is factually wrong. But more disturbing is that he argued the exact opposite during the Obama administration:
Moore is a political operative who happened to get some sort of economics degree from somewhere. If the Senate unwisely decides to confirm him, he will work to boost short-term, nominal growth prior to an election even if it risks making an impending recession worse. If Trump fails to win reelection, he will then punitively work to trigger a recession.
At least, he has given every indication that he would operate in such a way.
I mean maybe he should be confirmed to a special post where they carefully note what he recommends and then carefully do the exact opposite. Is there anything this miserable clown hasn’t been wrong about for the last 20 years? He’s like the rights economic policies (or lack thereof) given physical form.Report
While I will never understand why a country full of people with individual debt measured in the hundreds of thousands would want to avoid inflation, Mankiw is enough for me.
Hey, let’s put Mankiw on it.Report
Fear. It’s all about the fear. There are some groups that would actually be hurt. But I think most folks would be net winners. I expect I would be on net slight loser to balancing out.
But, yeah when you generalize to say “Big banks and rich people get hurt and regular people with student loans and fixed mortgages get ahead.” It seems like higher inflation should be a slam dunk. The generalization is probably the largest blocks that will see significant impacts and almost everything else washes out.Report
Greider’s Secrets of the Temple talked about this 30 years ago. Monetary policy is driven by the holders of US Treasuries, according to Greider, who don’t want to see the value of there holdings wiped out by inflation. (caveat: I haven’t read this book since it came out, so I may be misremembering.)Report
Mankiw is not a horrible choice. He seems to suffer from similar issue as Krugman, but from the other end of the political spectrum. They are so used to being the smartest guy in the room, they seem to forget how much is unknown and random. They speak with far more certainty that is almost certainly warranted.Report
Stephen Moore: “I’m kind of new to this game, frankly, so I’m going to be on a steep learning curve myself about how the Fed operates, how the Federal Reserve makes its decisions.”Report
I am shocked, shocked Trump is destroying a norm to increase his personal power. Also that world’s most thoughtful and moral man Ben Sasse is fine with it. Also the budget deficit in February was $234 billion, a record, during a boom.
Long live the party of fiscal responsibility.Report