The Fed really is ‘crazy’ for undercutting Trump recovery
President Donald J. Trump has criticized the Federal Reserve System, more commonly known as the Fed, for attempting to slow economic growth for fear of the U.S. economy overheating. The president has waged a war against establishment institutions in the D.C. swamp, and his recent criticism of the Fed is well-founded because it is yet another institution taking actions that run contrary to President Trump’s pro-growth economic policies.
It is time for every institution in the federal government to get on the same page and promote policy that will accelerate the Trump economic recovery.
President Trump sees new Fed policies hiking interest rates and restricting opportunities for new capital infusions as being hostile to the many Trump policies that have turbo-charged the economy. After terming the recent interest rate increase as “crazy,” the president explained his objections towards recent Fed actions. Politico reported on Oct. 16 that the president “escalated his criticism of the Federal Reserve, calling the central bank his ‘biggest threat’ because it is raising interest rates ‘too fast.’”
The Fed is a threat, because it has become a rogue agency that believes it is wholly independent of any control by the executive branch.
The fact of the matter is that the independence is limited, and the Fed is still part of the Constitution’s Article II functions of the executive branch of the federal government. Taking actions that are hostile to the president’s policies should not be tolerated.
Former Obama-appointed Fed Chair Janet Yellen, who still is likely upset that President Trump did not nominate her to continue in that role, has been critical of the president and recently said, “I really think it is not a desirable thing for a president to comment so explicitly on Fed policy.” Yellen is wrong, because the president still is in charge of all the functions of the executive branch of the federal government. The president can change the leadership of any executive branch agency whenever he wants. Although there has been a tradition of a hands-off approach to the Fed, that approach is appropriately ignored when the Fed is taking actions that undermine the president’s economic policy.
Trump-appointed Federal Reserve Chairman Jerome Powell has taken criticism from the president for repeatedly hiking interest rates. The Hill reported on Oct. 15 that “since July, Trump has frequently criticized the Fed for raising interest rates from near-zero levels, a process it began in December 2015. The central bank has raised rates eight times since 2015 and six times under Trump, who often touts his preference for cheaper borrowing costs.” The Fed is acting on the worry that low interest rates could lead to inflation, yet long-term low interest rates have not proven to cause any measurable inflation. The Fed is promoting a solution in search of a problem, because inflation was not happening before the Fed tightened the money supply.
Like most institutions and individuals in Washington, the Fed has taken on more power than originally intended. According to the Fed’s own website, “the Federal Reserve System … is the central bank of the United States. It was created by the Congress to provide the nation with a safer, more flexible, and more stable monetary and financial system.” The Fed has expanded into new areas, but the primary function is the following: “Conducting the nation’s monetary policy by influencing money and credit conditions in the economy in pursuit of full employment and stable prices.” Right now, the Fed is manipulating interest rates in a way that hurts the idea of full employment and price stability.
Some recent other examples of problems at the Fed is the Fed’s attempt to expand regulatory influence to speed up payment systems, even though the private sector has numerous instantaneous methods of payment. Yet again, the Fed is looking for a solution in search of a problem. As with payments systems, it would be wise for the Fed to stop hiking interest rates to stay out of the way of the private-sector expansion.
The Fed needs to recognize that they already have far too much power over the economy and that power should be used sparingly.
If the president wants to fire a torpedo across the bow of the Fed, he should withdraw the nomination of Nellie Liang to be a board member of the Fed. That would show the Fed that the president means business and, if the Fed does not stop trying to sabotage the Trump economic recovery, he might have to take the more drastic action of asking for Chairman Powell’s resignation.
Corey R. Lewandowski (@CLewandowski_) served as a campaign manager to Donald J. Trump, the 45th president of the United States. He is co-author of “Let Trump Be Trump: The Inside Story of his Rise to the Presidency,” and senior adviser to the Great America Committee, Vice President Mike Pence‘s political action committee.
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