Judd Gregg: The attack on the Fed

Judd Gregg: The attack on the Fed
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President TrumpDonald John TrumpMnuchin knocks Greta Thunberg's activism: Study economics and then 'come back' to us The Hill's Morning Report - House prosecutes Trump as 'lawless,' 'corrupt' What to watch for on Day 3 of Senate impeachment trial MORE and his minions are on the attack. 

This time — once again — it is the Federal Reserve that has earned his ire.

The president believes in easy money through low interest rates.


He, his Treasury Secretary Steven MnuchinSteven Terner MnuchinMnuchin knocks Greta Thunberg's activism: Study economics and then 'come back' to us Key House committee chairman to meet with Mnuchin on infrastructure next week The Hill's Morning Report - Trump trial begins with clashes, concessions MORE and his chief economic advisers argue the Fed should cut interest rates.  

Such a cut would artificially stimulate the stock market and reduce the cost of borrowing for the federal government. This would allow the Trump administration to continue its debt binge and weaken the dollar.  

These are all policies that the president and his people wholeheartedly embrace.

They do not admit this in the case of weakening the dollar, even though it fits nicely with their trade war initiatives, since such a trend will reduce imports and increase exports.

In order to pressure the Fed into cutting rates, Trump and his team have decided to make a political punching bag out of the chairman of the Federal Reserve, Jay Powell.

Trump and his followers must always have a boogie man, someone else to blame for failures.

The president and his trusty sidekicks fear that by the time the nation heads into the 2020 election, the economy will be slowing down and may actually be in — or clearly headed toward — a recession.

This is a reasonable concern.

The rest of the world is not doing well. 

Europe’s economies are anemic and the United Kingdom is still grappling with how to exit the European Union.

China has serious problems that have been building for years. It has camouflaged the massive amounts of non-performing loans on its banking books. It has also seen its growth fall to low single digits even as it needs to find work for a labor force that increases every year by around 20 million people.

The rest of the world depends on the growth of these developed nations. As the old adage goes, if we catch a cold, they catch a fever.

The real bright spot in world economic activity is actually the United States. 

America is doing well — and a great deal of the credit does belong to the president. 

He led the effort to cut corporate taxes to a level that keeps us competitive with the rest of the developed world. 

This has allowed American corporations to create jobs here. 

Meanwhile, the president’s cabinet continues to reduce the excessive and oppressive regulatory regime of the Obama administration. This gives breathing room to many entrepreneurs and relieves small businesses of these counterproductive burdens.

But the president and his cadre fear that any deterioration in the economy will give ammunition to their political opponents.

It seems they figure the good news may not be all that good as he heads into his reelection campaign. An enemy must be found — and soon — to bear the blame for this potential slowdown.

Enter the Fed and Chairman Powell as the perfect scapegoats.

It has been almost a black letter law of populism in America that the Federal Reserve is characterized as the source of bad things happening. 

Former Rep. Ron Paul (R-Texas), an avowed populist gadfly, wrote a book titled “End The Fed.” In it, all unfortunate things relative to economic failures in our country were attributed to the Federal Reserve. 

Numerous populist members of Congress from both parties have asserted the need to gain more control over the Fed through auditing the Open Market Committee, which essentially controls how we create dollars and thus has a primary influence on the rate of inflation.

All nations that have allowed their elected officials to directly influence the printing of money have ended with massive inflation that has led to desperate economic conditions for their people.

Nothing is more destructive to the economic health of a nation than to have people who need to get reelected influencing the people who print money.

But this is what the president and his economic advisers are trying to assert as they attack the Fed and its chairman.

Should the Fed cut rates in order to pump up an economy that has a potential to slow down?  Did the Fed make a mistake in December by raising rates and predicting it would raise rates further?

These are legitimate questions.  

But they should not be dealt with by having the president and his people use the Fed as a convenient target to divert attention from the administration in the event of an economic slowdown as it heads into the election.

It is unlikely that the Fed will truly be to blame if a slowdown occurs next year. 

Their decisions have been fairly transparent and are based on the facts to the extent they can predict them. Their long-held purposes remain to keep inflation in check and employment strong.


If the economy weakens, it will be due to many factors — not least the fact that the longest economic expansion in our country’s history may simply be catching up with itself and the business cycle.

Thus, even if a slowdown does occur, it would not excuse the president and his lackeys’ attempts to vilify the Fed and undermine its independence. 

If this attitude and approach continues from the administration, then the American people should consider its effect at the next election.

Inflation is unquestionably the most destructive force in a market economy. It hurts everyday economic activity as well as people’s savings and earnings.

Politicians are the accelerant of this destructive force when they seek inappropriate influence over the printing of money. This leads to rampant inflation.

Easy money coupled with a massive expansion in a nation’s debts are the primary causes of out-of-control inflation.

Ironically, the president and his economic advisers support both of these activities.

When they are looking around for someone to blame for a possible economic slowdown, they do not need to seek out the Fed to blame. They only need to look in the mirror.

Judd Gregg (R) is a former governor and three-term senator from New Hampshire who served as chairman and ranking member of the Senate Budget Committee, and as ranking member of the Senate Appropriations Foreign Operations subcommittee.