President Trump has made a lot of misguided appointments. But perhaps he would not be able to inflict more long-term damage than he had announced on Friday: Stephen Moore, Trump's choice to join the Federal Reserve.
The many economic claims of Moore over the years have revealed, it must be said, easy to confuse.
Ten years ago, as the Fed fought against deflation (ie rising prices) declines) Moore has absurdly alarmed hyperinflation (uncontrollable prices). increases) was close: the Americans could soon take "wheelbarrows full of money" to the Weimar in Germany. Moore has also repeatedly predicted that tax cuts would be profitable, both at the federal level and in Kansas, despite all the evidence to the contrary.
It is not only his predictions for the future that have proved chronically incorrect; it is also his characterization of the past and the present.
One newspaper banned him from his pages because of his difficulties in obtaining correct basic statistics. In the dozens of times I've been watching it on TV, it has consistently misstated easy-to-manage facts on Google. These include whether the country is experiencing deflation, whether Canada's tariffs are "twice as high as ours" and whether the Fed predicted that Trump would crush the stock market. (Nope, Nope and huh?)
Now, in a way, Moore has been appointed to the Fed. To understand why this is troubling, let's take a brief look at what the Fed is doing.
Congress has entrusted the Fed, the world's most powerful central bank, with a dual mandate: maximum employment and price stability. For decades – beginning with former President Paul Volcker – he has also been striving to forge a reputation for political independence, essential to his ability to achieve both goals.
Why? As I have already written, politicians are almost always urged to cut interest rates and print money, especially (ahem) in the run-up to elections. Easier financing can weigh on the economy in the short run, spur growth and reduce unemployment.
The tradeoff is that easy money, especially in times of strong economy, can lead to inflation. And this inflation can be caused not only by imprudently printing money aujourd & # 39; huibut by the perception that the central bank could do it in the future. When a central bank seems politically compromised – as has been the case in countries such as Argentina and Venezuela – it is not believed that this will make the unpopular choices necessary to curb inflation. Thus, companies are beginning to raise prices and wages in anticipation of an increase in funds invested in the economy.
Moore has recently wavered for more moderate money. And to be clear, reasonable people may disagree on whether this is the right policy to follow now.
The question is Why Moore supports this policy.
Today, while the economy is strong and growth has outpaced the trend, it wants both monetary and fiscal stimulus. But ten years ago, when the financial crisis threatened to plunge the United States into a deflationary spiral and a new depression, he called for rate hikes and austerity because these wheelbarrows filled with cash were supposed to be at hand.
How do you explain this sudden metamorphosis due to inflation (and deficit) hawk to dive? In short: a democrat was president then; a republican is president now.
Moore is a political agent: his political choices seem to be determined by what is best for his party and not what is best for the economy. You can see it in the way he chooses or distorts economic figures in television debates; or while he had once dubbed Trump's tax cuts allegiance, he had helped to conceive of "death to Democrats", predicting that the law would hurt unions, colleges, Obamacare and to the blue states.
And look, it's good for presidents to install political agents in more executive branch jobs. The secretaries of trade, transport, labor, etc., are there to execute the program of the president.
But the Federal Reserve is different. To function, he must be independent, both in practice and in perception. That's why the norm is that once the Senate has confirmed the Fed's favorite candidates to the Fed, its president leaves them alone.
Trump, on the other hand, worked wonders when his choice of Fed Chairman Jerome H. Powell refused to do what the White House had asked. Moore has encouraged the destructive explosions that are sweeping the market, publicly urging Trump to lay off not only Powell, but also everyone at the Fed.
None of this bodes well for the future of central bank independence – not just for the rest of Trump's presidency, but for the five or eleven years that Mr. Moore would sit if he was confirmed by the Senate, depending on the vacancy that Trump would eventually offer him. . Who knows what damage it might be tempting to inflict during this period to make a Republican president look good – or (based on his recommendations during Barack Obama's presidency), a Democratic president looked bad?
The Fed has spent decades cultivating its reputation for political autonomy. But reputations are hard won and easily lost.
Catherine Rampell is a columnist of opinion at the Washington Post. It often covers the fields of economics, public policy, politics and culture, with particular emphasis on data-driven journalism. Before joining The Post, she wrote about theater and economics for The New York Times.