President Donald Trump announced on Friday that he intends to nominate one of his former campaign advisers, Stephen Moore, to fill one of the two open seats on the Federal Reserve Board.
It is my pleasure to announce that @StephenMoore, a very respected Economist, will be nominated to serve on the Fed Board. I have known Steve for a long time – and have no doubt he will be an outstanding choice!
— Donald J. Trump (@realDonaldTrump) March 22, 2019
Moore is a staunch Trump loyalist who co-authored the book Trumponomics: Inside the America First Plan to Revive Our Economy. Trump endorsed the book on Twitter for doing “a great job in capturing my long-held views and ideas.”
Like Trump, Moore in recent months has strongly spoken out against current Fed Chairman Jerome Powell and the board’s decision to gradually raise the interest rate as the economy started gaining steam in late 2015 and through Trump’s first two years in office, sparking concerns about inflation that so far have not been realized.
During an interview with Fox Business that ran on Friday morning, Trump blamed the Fed for the fact that the economy didn’t grow at a faster rate over the last year.
“Frankly, if we didn’t have somebody that would raise interest rates and do quantitative tightening, we would have been at over 4 instead of a 3.1,” Trump said.
The Fed suggested in December that more rate increases were in store for 2019, prompting more attacks from Trump. But on Wednesday, the central bank’s policymaking Federal Open Market Committee (FOMC) announced that rates would hold steady for now.
Who is Stephen Moore?
Moore is better-known for his fierce loyalty to Trump than for his brilliant economic intellect. In December, for instance, one of Moore’s CNN appearances raised eyebrows when Washington Post columnist Catherine Rampell fact-checked him in real time for false claims he made about how Fed rate increases had led to “deflation in the economy.”
Moore, who was a CNN contributor from 2017 until news broke of his nomination by Trump, didn’t just go on TV to talk about economics. He also defended now-failed US Senate candidate Roy Moore when he was accused of molesting a teenage girl, arguing that the Democrat running against him (now-Sen. Doug Jones) was just as bad because he supported abortion rights.
Moore also went viral for a cringeworthy interview on Don Lemon’s CNN show, in which he tried to slut-shame Stormy Daniels. In addition, he is a climate change denier who once said on CNN that scientists lie about climate science to get “really, really, really rich.”
As New York Magazine’s Jonathan Chait details, Moore’s views on monetary policy have oscillated with the winds of partisanship. During the Obama years, he urged the Fed to aggressively raise interest rates, citing unfounded fears of hyperinflation. But now that Trump is in office, he thinks rate hikes are bad.
More from Chait:
He is capable of writing entire columns that contain no true facts at all. He made so many factual errors he achieved the rare feat of being banned from the pages of a Midwestern newspaper. He has sold his policy elixir to state governments which have promptly experienced massive fiscal crises as a direct result of listening to him. He believes what he calls “the heroes of the economy: the entrepreneur, the risk-taker, the one who innovates and creates the things we want to buy” should be lionized, and that the idea that a recession might be caused by anything other than excessively high rates on these heroes defies “common sense.” He was pulled into Trump’s orbit during the 2016 campaign and co-wrote a ludicrous hagiography of Trump and his agenda. By all appearances, Moore opposes mainstream fiscal theories because he simply doesn’t understand them.
Trump has nominated four Fed board members, including Powell. But while most observers have agreed that his previous nominees were qualified for the job, Moore isn’t. Justin Wolfers, an economics professor at the University of Michigan, responded to Trump’s announcement by tweeting that Moore’s nomination “is the first genuinely bad Trump pick for the Fed.”
Here's my challenge to any informed voter of any partisan leaning: Call your favorite economist. Whether they're left, right, libertarian or socialist, none of them will endorse Stephen Moore for the Fed. He's manifestly unqualified.
— Justin Wolfers (@JustinWolfers) March 22, 2019
Moore’s nomination illustrates Trump’s impulsiveness
Bloomberg’s Jennifer Jacobs reported that Trump decided to nominate Moore last week over lunch after his chief economic adviser, Larry Kudlow, showed him a Wall Street Journal op-ed Moore had co-written titled, “The Fed Is a Threat to Growth.” (Kudlow is a friend of Moore’s and also has a long history of being very wrong about economic policy.)
From Bloomberg:
Moore blamed the Fed for slowing the economy while championing Trump’s policies in a March 13 Journal column that he co-authored. Trump’s chief economic adviser Larry Kudlow showed the op-ed to Trump over lunch last week, according to two people familiar with the matter.
Trump remarked to Kudlow that he should have appointed Moore to be Fed chairman, the people said, and directed Kudlow to call Moore and gauge his interest in a board seat. This week, Trump called Moore himself and asked if he’d accept a nomination to the board.
Although Trump was impressed by Moore’s Wall Street Journal op-ed, the director of the Center for Monetary and Financial Alternatives at the Cato Institute, George Selgin, responded to it by writing a letter to the publication pointing out that Moore doesn’t appear to know what “deflation” means.
“‘Deflation,’ first of all, means an absolute decline in prices, and not merely a decline in the rate at which prices increase,” Selgin wrote. “And notwithstanding Mr. Moore’s assertion that ‘the consumer-price index has been remarkably flat or slightly negative,’ neither the CPI nor any other popular price index has actually declined in during the last six months.”
New York Magazine business columnist Josh Barro pointed out that with outspoken critics on both his left and right flanks, Moore’s prospects for Senate confirmation are uncertain.
This is why I think Moore won’t be confirmed. There’s reason for people to hate him from his right and his left. https://t.co/FyFVCXeXmh
— Josh Barro (@jbarro) March 22, 2019
Trump has a point about interest rates, even if his motivations are self-interested
As Vox’s Matthew Yglesias has explained, there are good arguments for why the Fed should not raise interest rates at this time:
Low interest rates are, fundamentally, pretty nice. If you need a loan to buy a house or a car or a major appliance, you can get one for cheap. If your business needs a loan to expand its office space or obtain more business equipment, you can get one for cheap. And those cheap durable goods and business investments aren’t just pleasant for the people who directly buy them; they also boost output and employment throughout the economy.
The reason you don’t just keep rates low forever is that too much easy money will lead to inflation.
But there’s no actual inflation problem in America today. The Fed is supposed to be targeting a 2 percent inflation rate, but once you strip out the price of volatile food and energy commodities, inflation has been consistently lower than that.
Moore, however, isn’t making an argument along those lines on the merits — he’s trying to make it because he’s a staunch Trump loyalist, and that’s Trump’s position. Trump, in turn, appears to be motivated by little more than being able to say he presided over stronger economic growth than President Barack Obama.
3.1 GDP FOR THE YEAR, BEST NUMBER IN 14 YEARS!
— Donald J. Trump (@realDonaldTrump) March 22, 2019
Even if Moore’s nomination isn’t successful, it appears that Trump doesn’t have to worry about more interest rate hikes this year. In a statement the Fed released on Wednesday along with the announcement that there would be no rate increase for now, the FOMC said that it would be “patient” before any further increase in rates — a comment many interpreted as an indication that the rate increases the Fed teased in December may not come to fruition because of global slowdown fears.
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