Senate Democrats on Tuesday tried to embarrass President Trump’s nominee for Federal Reserve governor at a confirmation hearing by confronting him with comments he made during the recession about the possibility of higher inflation, after inflation has run below the Fed’s target for five years.
“Why were you so wrong so many times?” Sen. Sherrod Brown, D-Ohio, at one point challenged the nominee, Carnegie Mellon professor Marvin Goodfriend.
To make the case against Goodfriend for a spot on the Fed’s Board of Governors with a vote on monetary policy, Democrats dug up comments that Goodfriend made during 2011 and 2012 as an academic and commentator that suggested that he would be in favor of the Fed withdrawing monetary stimulus in order to avoid uncontrolled inflation.
In particular, Democrats cited a 2011 interview with the Wall Street Journal in which he said that “higher trend inflation and inflation scares” could result if the Fed didn’t soon raise short-term interest rates, then set at zero. Several also mentioned a 2012 television interview in which he said that getting unemployment down to 7 percent would be a “Herculean” task for the Fed. Since then, unemployment has fallen to 4.1 percent.
“These wrong predictions are not outliers for you,” said Sen. Elizabeth Warren, D-Mass. She noted that the difference between the 8 percent unemployment rate of 2012 and the 4.1 percent rate of today is millions of workers, many of whom she argued might not have jobs today if the Fed had tightened money back in 2012.
“American families are very lucky you weren’t on the Fed board during the last several years,” Warren added.
Goodfriend, who struggled at points with the Democrats’ hostile questions, acknowledged to Warren that he was wrong about inflation in 2011.
On the other points, though, he tried to defend his statements as academic and focused on maintaining the Fed’s commitment to long-run price stability.
“The key to getting [the] unemployment rate down over the past 40 years in the U.S. has been credibility for low long-run inflation,” he said. The Fed’s credibility, he argued, is what allowed it to lower unemployment via monetary stimulus. If it weren’t for that credibility, the stimulus might have simply raised inflation without cutting unemployment.
If confirmed, Goodfriend would be one of up to seven governors at the Fed, although only four would likely be in place at the time he would join. Trump has nominated another governor, Jerome Powell, to chair the Fed. Current chairwoman Janet Yellen’s term ends Feb. 3.
