I’ll say this about the rumored choice of Steve Moore for the Federal Reserve Board; he’d be the first Trump pick that actually reflected President Trump’s views on monetary policy. And what are Trump’s views?
1. Favoring tighter money when a Democrat is president, and the economy is depressed and clearly needs easier money.
2. Favoring easier money when Trump is president, and the economy is booming and does not obviously need easier money. (You can argue it might need slightly easier money, but it’s not as “obvious” as it was during the recovery from the Great Recession.)
These are Trump’s views, and they also seem to be the views of Steve Moore. As you may gather from this post, I’m not a fan of politicizing the Fed. And even if Moore’s views are not politically motivated, they reflect a set of policy preferences that are far too procyclical. And this is true regardless of whether or not a year from now it’s clear that the economy needed easier money right now.
PS. Steve Moore might be a good choice for Treasury, as he favors lower taxes on capital income.
Update: This is an interesting comment, coming from someone who is about to join Jerome Powell at the Fed:
Economist and conservative commentator Stephen Moore said Sunday that the Federal Reserve is “the swamp” and President Trump needs to drain it, even if it means exercising his power to remove Federal Reserve Chairman Jerome Powell.
I wonder if he’ll be confirmed by Congress.
READER COMMENTS
David Henderson
Mar 22 2019 at 2:50pm
Very good choice for Treasury. Potentially bad choice for Fed.
Chris
Mar 23 2019 at 10:16pm
I don’t think there’s any need to qualify with “potentially.”
http://gregmankiw.blogspot.com/2019/03/memo-to-senate-just-say-no.html
Dilip
Mar 22 2019 at 4:00pm
Catherine Rampell mirrors your arguments to a T:
https://twitter.com/crampell/status/1109121395219415040
Benjamin Cole
Mar 22 2019 at 10:10pm
As long as Trump is President…maybe Moore is ok for the job. It is interesting that Moore characterized the Fed as part of the swamp.
There are concerns that the Fed has become too solicitous of the needs of the financial industry. I mean, what is interest on excess reserves all about? The Fed opposition to narrow banking?
Moreover, why has Trump been right on monetary policy for the last year, and the Fed has been wrong?
Benjamin Cole
Mar 23 2019 at 12:09am
Reading up on Moore, I see he said Donald Trump should “receive the Nobel Prize in Economics.”
Yes, President Donald Trump.
Some might say Moore is unhinged. Perhaps.
If he expands on his praise of Trump in confirmation hearings, then maybe.
Are there prizes and accolades a rung or two up from the Novel Prize, for which Moore can nominate Trump?
Scott Sumner
Mar 23 2019 at 5:16pm
Ben, You said:
“As long as Trump is President…maybe Moore is ok for the job.”
Not sure why you say that, but they are appointed for 14 year terms, and Trump has less than 2 years left.
Benjamin Cole
Mar 23 2019 at 7:23pm
Scott Sumner: Yes you are correct. And if a Democrat should replace Trump as president, then I think we could expect Moore to favor a tighter monetary policy, and that could be economically catastrophic.
But then also, Trump could be reelected. It does not seem likely, but then I never thought Trump would get elected in the first place.
Barkley Rosser
Mar 24 2019 at 5:07pm
It is not obvious that Fed policy over the past year has been wrong, although arguably the last rate hike was too much. They have not been saying so, but my suspicion is that at least several of the decisionmakers at the Fed have been supporting rate hikes in order to give the Fed the tool to provide stimulus when the economy does indeed go into a downturn. They were doing this while the economy was expanding well, the obvious time to do that. As the economy (and the stock market) weakened at the end of the year, clearly the time for this came to an end.
As it is, the Fed (and the US) is in much better shape on this front that either the ECB (and the eurozone) as well as the Japanese central bank and its economy. Neither has engaged in barely any rate increases, and neither is in any position to do any noticeable rate cutting if needed to counter a downturn. Of course they are all reducing budget deficits now, so making room for a possible increase in fiscal policy stimulus, if that is needed, whereas the US has been alone among high income nations in running in the opposite direction, reducing our ability to expand a fiscal srtimulus further if needed. We shall need that cushion of somewhat higher interest rates that can get lowered when the downturn finally does arrive whenever.
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