Stephen Moore is a Terrible Choice for the Fed
Only the best people, dontcha know.
Via the NYT: Trump Taps Fed Critic Stephen Moore for Board Seat.
President Trump said on Friday that he had offered a position on the Federal Reserve’s Board of Governors to Stephen Moore, a conservative economic adviser who has become an outspoken critic of the Fed’s interest rate policy.
Mr. Moore has blamed the Fed’s rate increases over the past year for slowing economic growth and recently began calling on the central bank to begin cutting rates. An economist at the conservative Heritage Foundation, Mr. Moore helped draft Mr. Trump’s tax proposals in the 2016 campaign and has served as an informal adviser ever since.
Mr. Moore, who has a master’s degree in economics, was the founder of the conservative Club for Growth and a past member of The Wall Street Journal’s editorial board.
The problem this this? Moore is a hack. As Jonathan Chait bluntly put it: Trump Nominates Famous Idiot Stephen Moore to Federal Reserve Board.
I first started writing about Moore in 1997. Four years before, President Clinton had raised the top tax rate to 39.6 percent, and supply-siders had insisted this would without question cause tax revenues to drop. This prediction was a necessary corollary of supply-side economic theory, which holds that tax revenue moves in the opposite direction of the top tax rate. The prediction was spectacularly wrong — revenue not only rose, it rose much, much faster than even the most optimistic advocates of Clinton’s plan had predicted.
In the years since, I have continued following his career, and he has shown no intellectual growth at all. 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.[…]In 2010, Moore was still predicting hyperinflation and urging his audience to buy gold. Even by 2015, Moore was still urging the Federal Reserve to raise interest rates. ”We’ve had seven years of zero interest rates and the lousiest recovery in 75 years,” he said, “So that’s one reason a lot of us feel like it’s time to get off the zero interest rate policy.”
That last bit is amusing and speaks to the hackery, as now he wants the Fed to cut rates.
A more polite, but no less worrying, tone is set by The Economist: Why Stephen Moore is unfit for the Fed:
Mr Moore is certainly not alone in thinking the Fed erred by raising interest rates last year. The Fed itself has become more doveish since then. Last December the board reckoned 2019 would see two interest rate rises. On March 20th they revised that down to none. A bigger concern is the winding path Mr Moore has taken to arrive at his conclusions. It raises serious doubts about his judgment and ability to provide politically neutral advice.
During the Obama administration he railed at the Fed for keeping interest rates too low, and also urged it to shrink the size of its balance sheet. But then he became an advisor to the Trump administration’s election campaign (he recently published a book entitled, “Trumponomics” with Arthur Laffer, an economist). And suddenly he turned from monetary policy hawk to dove. It appears his instincts are informed less by sound principles of economic policy than by whatever he thinks most likely to please Mr Trump.
Mr Moore’s nomination therefore appears to signal a worrying turn in Mr Trump’s approach to the Fed. His previous nominees to its ranks have all been mainstream picks. His last nominee to the Board, Nellie Liang, an economist at the Brookings Institution, was strongly endorsed by the Fed’s chairman, Jerome Powell. By contrast, Mr Moore holds some views that amount to a rejection of mainstream macroeconomics.
Or, if one prefers, Bloomberg: Stephen Moore Is the Wrong Person for the Fed Board.
Moore has been a think tank researcher and pundit for most of his career, having worked at the conservative Heritage Foundation and the libertarian Cato Institute. He served as chief economist for the former, though he is not a trained academic economist (he has a Master’s in economics from George Mason University). He has co-founded multiple right-leaning lobbying groups, such as the Club for Growth and the Free Enterprise Fund, as well as serving on the Wall Street Journal’s editorial board. At every stage, he has advocated tirelessly for conservative policies — tax cuts, lower government spending and deregulation.
Moore has made a career of what law professor James Kwak calls “economism” — a mix of simplistic economic models, convenient assumptions and rhetoric designed to make it appear as if economics provides scientific support for conservative policy priorities. There are many examples where wishful thinking appears to have distorted his assessments of economic conditions.
In 2015, for example, he claimed that tax cuts in North Carolina had caused a decline in the unemployment rate. But as Paul Krugman quickly pointed out, the reduction in unemployment was no greater than in the country as a whole, and was in large part driven by workers dropping out the labor force.
In 2012, Moore claimed that federal workers were paid 50 percent more than comparable private-sector workers, because their wages are 2 percent higher and their benefits are 48 percent higher. This, of course, is a math error — the pay difference is not the sum of the differences in wages and benefits, but their weighted average, and is thus much smaller than Moore argued.
As a commentator, Moore has regularly made dubious economic claims, such as the assertion that 2015 saw the “strongest economy in 20 years” (the late 1990s would beg to differ) or that the deficit was $1 trillion in 2017 (it was slightly more than half of that). When writing about the effects of state-level tax cuts on employment in 2014, Moore overstated recent job gains in low-tax states and understated the gains in high-tax states. He has also made a number of unfounded claims regarding the outcomes of the Affordable Care Act.
One of Moore’s biggest departures from the economic consensus is his belief that tax cuts mostly or completely pay for themselves, through increased economic growth. This belief, sometimes cited by advocates of supply-side economics, is shared by almost no academic economists…
It goes on and on and on.
He is not an economist, he is an ideologue and a pundit. He is not fit for the position to which Trump wishes to nominate him. But, of course, Trump’s approach to complex issues is far more driven by pundits than experts.
President Donald Trump decided to choose Federal Reserve skeptic Stephen Moore for the central bank’s board after a discussion about a column in which Moore argued the Fed is stifling economic growth, a senior administration official told CNBC on Friday.
Earlier this week, Trump spoke to National Economic Council Director Larry Kudlow. The president had seen a column in The Wall Street Journal, co-written by Moore, with the headline: “The Fed Is a Threat to Growth.” In it, Moore argued that the “last major obstacle to staying on this path [of economic growth] is the deflationary monetary policy of the Federal Reserve.”
Trump asked his top economic advisor whether he had seen the column. Kudlow replied that he had and “liked it a lot.”
“Why isn’t [Moore] the Fed chairman?” Trump asked rhetorically.
After Kudlow answered that the Fed board had two openings, the president asked his advisor to talk to Moore about one of the posts. Kudlow asked whether Moore was interested, and he said he was. Trump offered Moore the Fed board job, which will not become official until he goes through a vetting process.
Sounds like an excellent, dare I say tremendous, process for selecting a person for such an important position.
If you need more, Vox has an explainer: Stephen Moore, the Trump loyalist nominated to the Fed, explained.