Update 341: Trump Seeks to Put Moore on FRB
Raising Independence, Qualifications Questions
On Friday, President Trump nominated Stephen Moore to a 14-year term as a member of the Federal Reserve Board of Governors to fill one of two open Fed Board seats. Moore is a former Trump employee who some fear is woefully unprepared not only for the job but for confirmation hearings unkind.
That may not be of much concern but the Fed is.
Let’s see what lies ahead for the debate on Fed independence and Moore’s unique qualifications in the headlights of the eventual hearings in Senate Banking.
The Federal Reserve Board (FRB) runs the Federal Reserve, which has a dual mandate of pursuing price stability and maximum employment with a wide array of policy tools. The Fed has also become increasingly important as a bank regulator in the wake of the 2007-09 financial crisis.
Given the Fed’s importance, a member of the FRB has traditionally been an academic superstar or accomplished regulator, or at least someone who understands economics and supports the various critical functions and operations of the agency. Stephen Moore is not that person. His nomination is another in a long line of Trump appointees who are not only unqualified, but have actively advocated for the outright dismantlement and dissolution of the very agency they’re appointed to serve.
Moore was a senior economic advisor to the Trump presidential campaign, served on the Wall Street Journal editorial board, co-founded the conservative 501(c)(4) Club for Growth, and is currently a visiting fellow at the Heritage Foundation. Moore’s closeness to the sitting president raises alarm bells, especially considering Trump’s recent assaults on the Fed’s independence and Moore’s own economic ineptitude.
Musings of a Mathemagician
Stephen Moore gained prominence in 2013, teaming up with Kansas Governor Sam Brownback to cut taxes on wealthy individuals and eliminate taxes on pass-through businesses. Moore said the tax cuts would bring an “immediate and lasting boost” to Kansas’ economy, but as the Center on Budget and Policy Priorities details, state revenues fell $700 million in the first year and never recovered. Five years later, the Republican-controlled Kansas legislature voted to raise taxes. Following this economic disaster, Moore attempted to take on his critics in the pages of the Kansas City Star, but its editors discovered so many factual errors that they refused to publish any of his future work.
As a Fed Board member, Moore would have oversight over the nation’s commercial banks, an alarming prospect given his criticism of safety and soundness regulations in the Dodd-Frank Act (DFA). In 2015, Moore penned an op-ed in the Wall Street Journal lamenting the onerous regulations DFA placed on small businesses. Moore has erroneously argued that overregulation has led to consolidation in the banking system. However, bank consolidation ramped up in the 1980’s and 90’s when both Democrats and Republicans loosened rules on mergers and acquisitions. This pattern of shading facts and ignoring data is not new to Moore and would not serve the country well if he becomes a Fed Board member.
License to Shill
While conservative outlets are hailing Moore’s position as a senior economist with the Joint Economic Committee and the Heritage Foundation, he does not have a doctorate in economics and his economic analysis is almost always proven wrong. He has no major academic or financial market experience. Moore’s greatest accomplishment, in fact, seems to be his loyalty to the president.
Before serving at the behest of candidate Trump, his lobbying group Club for Growth focused on cutting taxes for millionaires and limiting government regulation. Top Club for Growth recipients for the 2018 midterm cycle included:
- Sen. Ted Cruz: $232,882
- Sen. Josh Hawley: $270,206
- Sen. Rick Scott: $167,674
As a Wall Street Journal editorial board member, Moore supported the president’s “pro-growth economic policies” and regularly attacked the president’s enemies as his own, including most recently, the Federal Reserve and Chairman Powell.
From the Sublime to the Ridiculous
President Trump’s previous nominations to the Board, including Fed Chair Powell, Vice Chairs Clarida and Quarles, Bowman, Goodfriend, and Liang have been mixed in terms of their partisan leanings, but their qualifications as respected economists were indisputable. Putting Moore on the FRB could diminish the authority of the Fed in previously unimaginable ways, which may be precisely why he was chosen.
Senate Democrats will obviously take issue with Moore’s complete lack of qualifications and disturbing comments on “whether we need a Fed,” but as Trump’s Fed nominees have fallen from the sublime to the ridiculous, it begs the question — if not Moore, then who?
Nominate a Clown, Expect a Circus
With the yield curve inversion last week and the chaotic last quarter of 2018, appointing a Fed governor who questions the very purpose of the institution is a dangerous and destructive move. This latest appointment is not just bad news for the near-term economy, either. The Federal Reserve has spent decades gaining the trust of Americans and Congress as politically independent, and Stephen Moore’s outright partisanship and loyalty to the sitting President could disrupt years of institution-building in a moment.
The FRB requires strong, experienced, and politically independent board members of intellectual integrity who believe in its mission and can keep an even keel. Expect fireworks during his Senate Banking nomination hearing, the date of which is yet to be decided.