By Paul Krugman
Opinion Columnist
Flags flying above the Federal Reserve building in Washington.CreditChris Wattie/Reuters
Image
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.
Advertisement
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.
You have 3 free articles remaining.
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.
Advertisement
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.
Advertisement
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.
The Times is committed to publishing a diversity of letters to the editor. We’d like to hear what you think about this or any of our articles. Here are some tips. And here’s our email: letters@nytimes.com.
Paul
Krugman has been an Opinion columnist since 2000 and is also a
Distinguished Professor at the City University of New York Graduate
Center. He won the 2008 Nobel Memorial Prize in Economic Sciences for
his work on international trade and economic geography. @PaulKrugman
Posts
No comments:
Post a Comment