The American presidency is too complex for one individual to handle alone, even for one who regularly informs us of his greatness and his “I, alone, can fix it,” mentality. Success of the presidency and direction of the nation depends largely on the high-level appointees that advise the president and administer the sprawling executive branch of government.

The low quality, incompetence, malfeasance and outright corruption of so many of Trump’s appointees reflects the unfitness of this president to govern. Examples of those who never should have been nominated and, when nominated, should never have been confirmed, are too numerous to summarize here.

Until recently, an exception to unqualified appointees has been Trump’s nominations to the Federal Reserve Board — reliable Republicans, qualified, and respecting the role and independence of the Fed.

Let’s review some background. The two major policy tools with which to influence the macro economy are fiscal policy, a responsibility of the President and the Congress; and monetary policy, responsibility of the Federal Reserve System. These columns have long criticized the Trump/Republican fiscal policy highlighted by the 2017 tax bill that exacerbated after-tax income inequality. This expansionary fiscal policy added to federal deficits and further stimulated the economy at the very time when additional stimulation was not needed. But the politics of the times enabled the ill-timed tax bill that mostly benefitted large corporations and the nation’s wealthiest citizens, including major political donors.

In contrast to fiscal policy, monetary policy is designed to be independent of politics, more or less, anyway. The Board of Governors, commonly known as the Federal Reserve Board, is the main governing body of the system. Terms of the seven members of the board span multiple presidential and congressional terms. Once appointed by the president and confirmed by the Senate, board members are expected to function independently.

The chair and vice chair of the board are two of the seven members appointed by the president among the sitting members. The staggered 14 year terms of board members, and four year terms of the board president, serve to enable political independence of the members. The Federal Reserve’s influence on not only the U.S. economy, but on the world’s economies, is due in large measure to its perceived political independence and professionalism.

Current Board Chair Jerome Powell, a Republican, was initially nominated by President Obama in 2012, a rare instance when a president nominated a member of the opposing party. Powell was approved by the Senate Banking Committee by a vote of 22-1, the lone dissenting vote by Sen. Elizabeth Warren.

In February 2018, President Trump nominated Powell to replace departing chair Janet Yellen. Since then, Trump has frequently voiced his displeasure with Powell and the Fed, recently insisting Powell has been his “worst appointee.” 

Let’s review some background.

During his campaign, Trump blasted the Fed, accusing then-chair, Yellen, for keeping interest rates low. Recall that the economy was slowly ascending the long road to recovery. Keeping short-term interest rates low was the correct policy at the time. 

Toward the end of Yellen’s term, as the economy was recovering, the Fed began raising interest rates. Again, that was the correct thing to do, but Trump nevertheless excoriated the Fed for keeping rates “too low.”

In 2017, Trump takes over the presidency, inheriting the recovering economy that Trump previously insisted was a “disaster.” The momentum established under the Obama administration continued, with rising employment, buoyant financial markets and continued growth, albeit with continuing nagging deficiencies highlighted by income inequality. With continued economic expansion, the Fed continued its policy of gradually raising rates.

Not unexpectedly, President, Trump reverses course. Instead of criticizing the Fed for keeping rates too low for a struggling economy, he starts criticizing the Fed for raising rates during an expanding economy — his recommendations the opposite of sound monetary policy.

In February 2018, with the expiration of Yellen’s term as chair, Trump nominates, and the Senate confirms with a bipartisan majority, sitting board member Jerome Powell as chair. The Fed, under Powell’s leadership, continues its (correct) announced policy of raising rates.

Then we hit the brief December stock market dip. The Fed raises rates another fraction of 1%. With first quarter of 2019, signs of a slightly softening economy appear. Trump screams the Fed is responsible for slowing growth, should not raise rates further and should actually reduce rates — the very opposite of sound monetary policy.

With signs of a softening economy, the Fed backs off of its announced intention to raise rates throughout 2019. That’s not good enough for Trump.

One can quibble over whether the Fed raised rates too soon, not soon enough, or should have paused in December, rather than waiting until January. But the Fed has been basically on, what most economists would agree, is the right track.

 The larger issue here is about independence of the Fed. Trump believes that the Fed should act at his beck and call. He clearly would like to fire Powell, although he has not the power to do so.

Even more disturbing than Trump’s desire to do what he can’t do, is his potential nominees, Stephen Moore and Herman Cain, for the two vacant board seats. We can credit Trump for his previous three nominees for the board, and for elevating board member Powell to chair. In contrast, Moore and Cain are Trump lackeys, unqualified both by temperament and experience, to be independent thinking board members. Previous presidents have often criticized the Fed for actions they believed worked against them. But all have recognized the crucial independence of the Fed and the role that the world’s largest central bank plays in the American economy and, indeed, the world’s economies.

It is crucial that the Senate not confirm Moore and Cain. It must resist Trump’s attempt to further consolidate power by threatening independence of the Fed.

— John Waelti of Monroe, a retired professor of economics, can be reached at jjwaelti1@tds.net. His column appears Saturdays in the Monroe Times.